PEMBINAAN JAYA ZIRA SDN BHD v SUNGAI LUI CONSTRUCTION & DEVELOPMENT SDN BHD

Case Significance

Confirms that the setting-aside jurisdiction under the Arbitration Act 2005 is not an appeal on the merits, so that dissatisfaction with an arbitrator's findings will not justify setting aside an award, which is instead enforced.

This High Court decision at Kuala Lumpur, in the Construction Court, concerns an application to set aside a final arbitration award, heard together with the successful party's application to enforce it. The paying party in a construction arbitration sought, by originating summons, to set aside the arbitrator's final award on various grounds, while the party in whose favour the award had been made applied to enforce the award as a judgment of the court under section 38 of the Arbitration Act 2005.

The court framed its analysis around the narrow scope for judicial interference with an arbitral award. Under the Arbitration Act 2005 the courts give effect to the parties' autonomy in choosing arbitration and exercise minimal curial intervention, disturbing an award only on the limited statutory grounds and not by re-examining the arbitrator's conclusions on the merits. It drew on the Federal Court's treatment of this principle in Government of India v Cairn Energy India Pty Ltd, and the well-known observation that a party which refers a dispute to an arbitrator must take the consequences even of the arbitrator's error of law, since the choice of arbitrator, and of arbitration itself, was the party's own.

Examining the setting-aside grounds, the court found that they came down to the applicant's unhappiness with the arbitrator's findings and with the merits of the decision, rather than to any recognised vitiating defect in the award. Because a challenge to the merits is not a permissible basis for setting aside an award, the court dismissed the setting-aside application with costs, and, that application having failed, allowed the corresponding enforcement of the award. The judgment is a useful statement that the setting-aside jurisdiction under the Arbitration Act 2005 is not an appeal on the merits, and that dissatisfaction with an arbitrator's findings will not justify interference with the award.