BEQ 4013

CONSTRUCTION LAW AND

MANAGEMENT II
Sem 1, 2024/2025

Lecturer : Dayang Afiqah Abang Mohamad Shibli

Fakulti Alam Bina
UNIMAS
Arbitration

• Introduction
• Purpose and Benefits of Arbitration
• Arbitration Agreement
• Arbitral Tribunal
• Arbitration Process
• Enforcement of Arbitral Awards
• Arbitration in Construction Industry
Introduction
What is Arbitration?

Arbitration is a method of dispute resolution where parties agree to

resolve their disagreements outside of traditional court systems. It
involves submitting their dispute to an impartial third party or a panel of
arbitrators, known as the arbitral tribunal. The decision rendered by the
arbitrator(s) is usually binding and serves as a resolution to the dispute.

Arbitration in Malaysia is governed primarily by the Arbitration Act 2005,

which is based on the UNCITRAL Model Law on International Commercial
Arbitration.
Principles of Arbitration

Party Autonomy : Stresses the importance of parties’ freedom to

determine the arbitration process, including the selection of
arbitrators and applicable rules.

Fairness and Impartiality : Arbitrators must be fair, impartial, and

independent in their decision-making, ensuring a just resolution.

Finality and Binding Nature : Emphasizes that arbitral awards are

generally final and binding, subject to limited review by courts.
Purpose and Benefits of
Arbitration
Alternative to Litigation :

Provides an alternative to resolving disputes without going through the

formal court process, potentially saving time and money.

Confidentiality :

Offers a private and confidential forum for resolving disputes, which can
be crucial for sensitive matters.
Flexibility :

Allows parties to customize the arbitration process, including selecting

the arbitrators, the language of proceedings, and the rules governing
the process.

Expertise and Specialization :

Grants parties the ability to select arbitrators with specific expertise in

the subject matter of the dispute, ensuring a decision by
knowledgeable individuals.
Arbitration Agreement
Definition and Purpose
● An arbitration agreement is a contractual provision between parties
agreeing to resolve disputes through arbitration rather than
resorting to traditional litigation.

● It outlines the commitment of parties to opt for arbitration as the

chosen method for resolving potential disputes arising from their
contractual relationship.
Essential Components

Clear Intent to Arbitrate : The agreement must explicitly express the

parties' intention to resolve disputes through arbitration, highlighting
their willingness to forego litigation.
Scope and Coverage : Clearly define the disputes subject to arbitration.
Specify whether all disputes or only certain types fall within the scope of
arbitration.
Form and Inclusion : The agreement can be a standalone document or a
clause within a broader contract. It should be properly incorporated into
the main contract and explicitly agreed upon by the involved parties.
Requirements for Validity
In Writing : Generally, arbitration agreements must be in writing to be
enforceable. This can be in the form of a separate contract, an exchange
of emails, or an arbitration clause within a larger contract.

Mutual Consent : The agreement should reflect the mutual consent of

all parties involved. It's essential that each party willingly agrees to
resolve disputes via arbitration.
Considerations and Best Practices

Clear and Unambiguous Language : Use clear and

unambiguous language to avoid potential
misunderstandings or ambiguities regarding the
arbitration process.
Choice of Arbitration Rules : Specify the rules that will
govern the arbitration proceedings, whether it's
institutional rules (e.g. AIAC) or ad hoc rules.
Selection of Seat and Governing Law : Define the seat
of arbitration (the legal place where the arbitration is
conducted) and the governing law that applies to the
arbitration agreement itself.
Arbitral Tribunal
Definition
● The arbitral tribunal refers to either a single arbitrator or
a panel of arbitrators appointed to adjudicate on
disputes submitted for resolution through arbitration.

● In some cases, especially in simpler or less complex

disputes, a sole arbitrator is appointed to hear and
decide on the matter.

● For complex disputes or as agreed by the parties, a panel

of three arbitrators might be appointed, typically
consisting of a chairperson and two co-arbitrators.
Selection and Appointment

● Mutual Agreement : Parties often mutually agree

upon the appointment of arbitrators, as laid out in

the arbitration agreement or through subsequent
mutual consent.

● Default Appointment Procedure : In the absence

of an agreement or if parties fail to agree on

arbitrators, arbitration laws or agreed-upon rules
might outline the default appointment procedure.
Qualifications and Expertise

• Impartiality and Independence : Arbitrators

must maintain impartiality and independence
throughout the arbitration process, ensuring
fairness and unbiased decision-making.

• Expertise : They often possess expertise in the

subject matter of the dispute, such as legal,
technical, commercial, or industry-specific
knowledge.
Powers and Responsibilities

• Decision-Making Authority : The arbitral

tribunal has the authority to hear evidence,
make determinations, and render awards based
on the submissions and arguments presented.

• Procedural Control : It manages procedural

aspects, including conducting hearings,
receiving evidence, setting timelines, and
ensuring the fair conduct of proceedings.
Role in the Arbitration Process

• Facilitate Resolution : The tribunal’s primary

role is to facilitate a fair, efficient, and informed
resolution of disputes in line with the arbitration
agreement and relevant laws.

• Rendering Awards : Ultimately, the tribunal is

responsible for rendering awards, which are the
final decisions on the disputes submitted.
Arbitration Process
 1. Agreement to Arbitrate

Parties involved in a dispute agree to resolve their issues through arbitration. This
agreement can be part of a contract or a separate agreement.

2. Selection of Arbitrators

Both parties agree on the selection of one or multiple arbitrators. These individuals are
neutral, chosen for their expertise in the subject matter of the dispute.

3. Preliminary Hearing

The arbitration process often begins with a preliminary hearing where the arbitrator(s) and
parties discuss procedural matters, the timetable for the arbitration, and other logistics.
 4. Exchange of Information / Evidence

Each party presents its case by exchanging relevant documents and evidence. This phase is
similar to the discovery phase in litigation but is often more streamlined.

5. Arbitration Hearing

The formal hearing takes place where both parties present their arguments, evidence, and
witnesses before the arbitrator(s). The process can be less formal than a court trial but
allows for presenting testimony, cross-examination, and legal arguments.
 6. Arbitral Award

After considering all evidence and arguments, the arbitrator(s) render a decision known as
the arbitral award. This award is final and binding on the parties. It includes the decision on
the dispute and, in some cases, may include the reasoning behind the decision.

7. Enforcement of Award

The arbitral award is enforceable in court. Courts generally uphold arbitral awards, and they
have limited grounds to overturn or refuse enforcement.
Enforcement of
Arbitral Awards
1. Application for Enforcement

The party seeking enforcement submits an application or

petition to the relevant court, accompanied by the original
arbitral award and necessary supporting documentation.

2. Court Review

The court reviews the submitted documents to ensure the

validity and compliance of the award with the requirements
stipulated by national laws.
3. Limited Grounds for Refusal

Courts have limited discretion to refuse enforcement. Commonly

accepted grounds for refusal include issues such as invalid arbitration
agreements, due process violations, or contravention of public policy.

4. Enforcement Order or Judgment

Upon satisfying the court’s requirements, the court issues an

enforcement order or judgment, validating the arbitral award and
making it legally binding on the parties.
Arbitration
within the
Construction
Industry?
 Arbitration within the Construction Industry

Arbitration in the construction industry is a widely

used method for resolving disputes that arise during
the course of construction projects. Given the
complexity, timelines, and financial stakes involved in
construction, arbitration offers a structured and
efficient alternative to litigation.
Nature of Construction Disputes

Complexity : Construction projects involve multiple

stakeholders, intricate contracts, and technical
specifications, leading to various potential points of
disagreement.

Time Sensitivity : Timely resolution of disputes is crucial

to avoid project delays and financial losses.
Why Arbitration in Construction Disputes?

Confidentiality : Arbitration offers confidentiality, which

is crucial in preserving business relationships and trade
secrets.
Expertise : Parties can select arbitrators with expertise in
construction, engineering, or relevant technical fields.
Efficiency : Compared to court litigation, arbitration
tends to be more efficient, often resolving disputes faster.
Flexibility : Parties have more control over the
arbitration process, tailoring it to suit the specific needs
of construction disputes.
Common Construction Disputes Subject to
Arbitration

1. Payment Issues : Disputes related to progress

payments, variations, or final account settlements.

2. Contract Interpretation : Conflicts arising from

interpreting contractual terms, specifications, or scope
of work.

3. Delays and Time Overruns : Claims due to project

delays, disruptions, or extension of time.
Common Construction Disputes Subject to
Arbitration

4. Defective Work or Quality Disputes : Disagreements

regarding the quality of workmanship, defects, or non-
compliance with specifications.

5. Termination and Breach of Contract : Disputes arising

from contract terminations or breaches.
Special Consideration in Construction Arbitration

Document Management : Construction arbitration

involves voluminous documentation. Efficient
management of documents is crucial.

Technical Expertise : Technical aspects and industry

standards play a significant role, often requiring expert
assessment and understanding.
 THANK YOU

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