Key changes - Draft AIAC Arbitration Rules 2021

Key Contacts:
Ashok-Kumar-web.jpg Loshini-web.jpg
Ashok Kumar
Mahadev Ranai
Loshini Ramarmuty

On 20 June 2021, the AIAC announced the public consultation process for the AIAC Arbitration Rules 2021 and made available the draft AIAC Arbitration Rules 2021 (“Draft 2021 Rules”). The amendments to the AIAC Arbitration Rules 2018 (“2018 Rules”) are designed to enhance efficiency and reflect the standards and practices in international arbitration.
A summary of the key proposed changes is set out below.
Merging of UNCITRAL Arbitration Rules and AIAC Arbitration Rules
The 2018 Rules consist of the AIAC Arbitration Rules in Part 1, the UNCITRAL Arbitration Rules (as revised in 2013) (“UNCITRAL Arbitration Rules”) in Part 2 and Schedules in Part 3. In the event of conflict between Part 1 and Part 2, the provisions in Part 1 shall prevail.1 With this format, the AIAC Arbitration Rules were more basic as it was supplemented by the more detailed UNCITRAL Arbitration Rules.
In the Draft 2021 Rules, there are only two parts consisting of the AIAC Arbitration Rules in Part 1 and Schedules in Part 2. This is a welcome change as the AIAC Arbitration Rules are merged with the UNCITRAL Arbitration Rules resulting in a comprehensive uniform set of rules.
Consolidation of disputes (Rule 9)
The Draft 2021 Rules have introduced detailed and more sophisticated provisions on the procedure for the appointment of the Arbitral Tribunal where there are multiple parties as claimant and respondent. Where a sole arbitrator is to be appointed, the parties can either agree to the sole arbitrator or, a request can be made to the Director of the AIAC (“Director”) to appoint the sole arbitrator where there is no agreement.2 Where two or more arbitrators are to be appointed, there are detailed rules on nomination and appointment of the arbitrators for both even and odd numbered Arbitral Tribunal, enabling parties to attempt to agree on the arbitrators.3
Where two or more arbitrators are to be appointed and parties are unable to agree on a joint nomination, the Director shall constitute the entire Arbitral Tribunal and any nominated arbitrators shall be excluded from consideration and appointed arbitrators shall be released unless otherwise agreed by the parties.4
The introduction of these rules will encourage parties to seek to resolve disputes between parties arising from a variety of related contracts in the same set of arbitration proceedings. Although this is done quite often in court proceedings, it is not as straightforward to carry out in arbitration proceedings as the process is consensual in nature. In order to facilitate multi-party appointments, parties to multi-party contracts or related contracts should also consider drafting the arbitration agreement in each contract in a compatible manner. 
Fast Track Procedure (Rule 8)
The Fast Track Procedure governs the expedited conduct of arbitral proceedings in arbitration administered by the AIAC. A party may submit the request for Fast Track Procedure in three instances. Firstly, where it has been agreed between parties that the Fast Track Procedure or any edition of the AIAC Fast Track Arbitration Rules are to be adopted5; secondly, where the amount in dispute is less than USD500,000.00 (international arbitration) or RM2,000,000.00 (domestic arbitration); and thirdly, in the case of an exceptional urgency.6 In relation to the second and third instances, the Director shall decide on the same having regard to all relevant circumstances.7
The arbitration under Fast Track Procedure is to be heard by a sole arbitrator and proceed as a documents-only arbitration unless otherwise agreed by the parties or determined by the Arbitral Tribunal.8 The fees of the Arbitral Tribunal shall be fixed by the Director and the AIAC shall request a deposit to cover 100% of the estimated costs.9
Timelines for the response to notice of arbitration, appointment of sole arbitrator, challenge to appointment of arbitrators, case management meeting and delivery of first Procedural Order are expressly provided in the Draft 2021 Rules and are shorter as compared to the standard arbitral proceedings and comparable to statutory adjudication proceedings.10 Stricter timelines are also set out for service of pleadings and proceedings are to be closed no later than 90 days from the delivery of the first Procedural Order by the Arbitral Tribunal (even where oral hearings are allowed).11 The Final Award is to be submitted by the Arbitral Tribunal to the AIAC for technical review within 90 days from the date when the proceedings are declared closed.12 Where there is repeated non-compliance to the rules by a party, the Arbitral Tribunal may, after consulting the AIAC and the parties, order that the proceedings are no longer be done in accordance to the Fast Track Procedure.13
With the incorporation of the Fast Track Procedure and the application of the remainder of the AIAC Arbitration Rules to a fast track arbitration14, it appears that the AIAC Fast Track Arbitration Rules (effective as of 9 March 2018) may no longer be needed.
The Fast Track Procedure compels parties to proceed expeditiously as speed is achieved by imposing strict deadlines on both the parties and the Arbitral Tribunal. This allows parties to receive the award within months which is a sharp contrast to the time usually taken for a standard arbitration. 
Summary Determinations (Rule 19)
Similar to summary judgment proceedings in court, the Draft 2021 Rules have introduced summary determinations to allow any party to submit a request to dismiss, in whole or in part, a claim, counterclaim or defence where such claim is manifestly without merit or falls outside the jurisdiction of the Arbitral Tribunal.15 Any such application has to be made within 30 days after filing of the statement of defence and counterclaim16 and the other party has 15 days to respond to the same.17 The Arbitral Tribunal shall within 45 days of its receipt of the final submission make a decision to allow or dismiss the request, in whole or in part.18 This time limit can be extended by the Director at the request of the Arbitral Tribunal, after consulting Parties19. Pending the outcome of the summary determination process, the Arbitral Tribunal can, after consulting the parties, decide the extent to which the proceedings are to continue.20
The decision of the Arbitral Tribunal shall take the form of an Award and the rules relating to technical review and manner of delivery of Award apply to this decision as it would to a standard arbitral award.21
The summary determination procedure in the Draft 2021 Rules - like its SIAC and ICC counterparts, seeks to promote flexibility and efficiency in the arbitration process by giving parties an opportunity of early dismissal of manifestly unmeritorious claims or claims falling outside the jurisdiction of the Arbitral Tribunal. This in turn, will hopefully reduce the drawback in arbitration of lengthy time and excessive costs.
Joinder and consolidation (Rules 21 and 22)
Joinder (Rule 21)
Whilst joinder of parties is already available under Rule 9 of 2018 Rules, the Draft 2021 Rules seek to provide further clarity. In particular, the time for request for joinder after constitution of the Arbitral Tribunal has been clarified in that the request may be made prior to the filing of the statement of defence and counterclaim.22 This request may be made in two instances. Firstly, where the parties have consented including the additional party, and secondly, where the additional party is prima facie bound by the arbitration agreement that gives rise to the arbitral proceedings.23 In deciding whether to allow a joinder request, the considerations by the Director or Arbitral Tribunal after consulting all the parties including the additional party, are similar to and include the two instances set out above when allowing a party to make a request for joinder.24
In the 2018 Rules, the parties irrevocably waive their rights to challenge the validity and/or enforcement of the award on the basis of a decision to join or not to join an additional party.25 This waiver has been removed from the Draft 2021 Rules. The rules on joinder have also been revised to protect the Arbitral Tribunal’s power to decide any question as to its jurisdiction arising from its decision whether to allow or dismiss the request for joinder.26
Consolidation of proceedings (Rule 22)
Similar to joinder of parties, rules governing consolidation of proceedings are available under Rule 10 of the 2018 Rules. The main revisions in the Draft 2021 Rules are:
  • The agreement of the parties for the request to consolidate is to be in writing.27 This requirement for the agreement to be in writing is not specified in the 2018 Rules.
  • The particulars that are to be included in the consolidation request are now spelled out, and these include the case reference number of the relevant arbitrations to be consolidated, copy of the document in which the arbitration agreement is contained or in respect of which the dispute referred to arbitration arises from, and any relevant communication between parties relating to the intended consolidation.28
  • The circumstances to be considered by the Director in allowing the consolidation request include the stage of the arbitration proceedings and whether arbitrator has been nominated or appointed, whether the rights and reliefs claimed are in respect of, or arise out of, the same transaction or series of related transactions, compatibility of the arbitration agreements, any prejudice to the parties, and the efficiency of the proceedings.29
  • Where the consolidation request has been allowed, and the parties are unable to agree on the arbitrators to be appointed, the Director shall reconstitute the entire Arbitral Tribunal and release and exclude arbitrators previously nominated or appointed. In such case, the Director shall determine a reasonable sum for any fees and expenses payable to any arbitrators released.30
  • Similar to joinder, the parties irrevocable waiver of their rights to challenge the validity and/or enforcement of the award on the basis of a decision to consolidate or not to consolidate has been removed from the Draft 2021 Rules.31
  • The Director’s decision to allow a consolidation request shall not affect the validity of any act done or order made by any arbitrator who is released from the arbitral proceedings pursuant to Rule 22.8.32
The revisions in the Draft 2021 Rules pertaining to joinder and consolidation of proceedings have made the process clearer which would encourage and facilitate parties’ use of these procedures.
Confidentiality (Rule 44)
The rules relating to confidentiality have been amplified in the Draft 2021 Rules as compared to the 2018 Rules. In the Draft 2021 Rules, waiver of confidentiality by agreement of the parties has been introduced.33 The obligation to maintain confidentiality has been extended to specifically cover  the Director, any tribunal secretary, any witness or expert appointed by the Arbitral Tribunal, and all those that parties involve in the arbitration, including any authorised representative, witness of fact, expert and service provider.34
In the event of any non-compliance with the undertaking as to confidentiality, the Arbitral Tribunal is empowered to take appropriate measures, including issuing order for costs or damages against the relevant party.35
The Draft 2021 Rules have also introduced publication of the Award with the express consent of the parties, subject to the redaction of all references to the parties’ names and other identifying information.36 This initiative by the AIAC to publish awards will be beneficial as it enables arbitration practitioners to familiarise themselves by reviewing past rulings on application of the AIAC arbitration rules and substantive legal challenges. This will also create more certainty and uniformity in the application of the arbitration rules.
Closure of Proceedings (Rule 32)
With the aim of providing more clarity to closure of proceedings, the Draft 2021 Rules include requirements for closure of proceedings in respect of each award where the arbitral proceedings are bifurcated and separate awards are to be issued for the bifurcated issues.37 Similarly, where there are multiple parties, and the Arbitral Tribunal intends to issue several awards, the Arbitral Tribunal shall declare the closure of proceedings in respect of each final award.38
The declaration and the date of the closure of proceedings shall be notified in writing to the parties and to the AIAC, following which no further evidence or submissions in respect of the matters to be decided in the Final Award shall be allowed.39 In exceptional circumstances, the Arbitral Tribunal may re-open the arbitral proceedings at the request of the parties or on its own initiative, following a consultation with the Director.40 Consistent with the UNCITRAL Arbitration Rules, the details of exceptional circumstances have not been listed.41 It would be interesting to see whether exceptional circumstances would include discovery of new evidence.
The Draft 2021 Rules is an attempt to address some of the shortcomings or procedural lacunae in the Rules and will certainly be an impetus to improve the efficiency of arbitrations administered by the  AIAC.  
Article by Ashok Kumar Mahadev Ranai (Partner) and Loshini Ramarmuty (Partner) of the Construction Litigation, Arbitration and Adjudication Practice of Skrine.

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such.

1 Rule 1.3 of the 2018 Rules.
2 Rule 9.7(a).
3 Rule 9.7 (b).
4 Rule 9.7 (c).
5 The AIAC has published its Fast Track Arbitration Rules (effective as of 9.3.2018) which contain the rules governing a fast track arbitration.
6 Rule 8.2.
7 Rule 8.3.
8 Rule 8.5.
9 Rules 8.6 and 8.7(a).
10 Rule 8.8.
11 Rules 8.8(k) and (l).
12 Rule 8.8(m).
13 Rule 8.10.
14 Rule 8.12.
15 Rule 19.1.
16 Rule 19.2.
17 Rule 19.4.
18 Rule 19.5.
19 Rule 19.6.
20 Rule 19.7.
21 Rule 19.8.
22 Rule 21.1.
23 Rule 21.1.
24 Rule 21.6.
25 Rule 9.
26 Rule 21.7.
27 Rule 22.1(a).
28 Rule 22.3.
29 Rule 22.5.
30 Rule 22.9.
31 Rule 5 of the AIAC 2018 Rules.
32 Rule 22.10.
33 Rule 44.1.
34 Rules 44.3 and 44.4.
35 Rules 44.5.
36 Rule 44.6.
37 Rule 32.2.
38 Rule 32.3.
39 Rule 32.4.
40 Rule 32.5.
41 Article 31(2) of the UNCITRAL Arbitration Rules.