LAW 481

MALAYSIAN LEGAL SYTEM 2

TOPIC
ALTERNATIVE DISPUTE RESOLUTION (ADR)

PREPARED BY
SHAFAATUL UZMA BINTI IDROS
(2016853572)
l
LECTURER NAME:
EN. ZULKIFLI BIN AWANG
ALTERNATIVE DISPUTE RESOLUTION IN MALAYSIA

Over the last few decades the perceived shortcomings of litigation and also arbitration
have resulted in attempts to find other quick means to resolve construction disputes. Mackie et
al. (2000) observe that ADR was first developed in the United States in early 1980s as a result
of dissatisfaction with the delays, costs and inadequacies of the litigation process. However, it
only began to receive consideration in the late 1980s and early 1990s.

Since then, its development as a process to resolve civil disputes relatively

inexpensive and quickly has gained momentum and is now widely practiced in the
construction industries in many countries, especially in Canada, United Kingdom and
Australia (Mackie et al., 2000; Holtham et al., 1999). The acronym ADR has also been
defined as Additional Dispute Resolution and Assisted Dispute Resolution. With time, it also
stands for Appropriate Dispute Resolution and Amicable Dispute Resolution to reflect these
desired outcomes (Mackie et al., 2000; Cheung, 2006).

The realisation of ADR as a process that complements both litigation and arbitration has
meant that the processes are constantly expanding to include new techniques which offer no
limits to the types of dispute resolution processes that can be utilised. The main attraction of
ADR is often the consensual process, but this also means that it will not be successful unless the
parties each have a genuine desire to reach a settlement (Holtham et al., 1999).

Even though the most common ADR methods do not provide assurance of a resolution,
in practice most of these methods lead to a final settlement (Mackie et al., 2000). The key to a
settlement process is that the parties and those assisting in the process understand and agree to
the same process. The reasons for resorting to ADR include time savings, less costly discovery,
more effective case management, confidentiality, and facilitation of early, direct communication
and understanding among the parties of the essential issues on each side of the dispute,
preservation of ongoing party relations, savings in trial expenses, and providing qualified neutral
experts to hear complex matters (Treacy, 1995).

Traditionally, arbitration being the forum sought in the construction industry (Battersby,
2003). The ADR processes differ in their formality and placement of decision-making power.
Some methods are non-binding and allow the parties to have control at all times over the
outcome of the dispute, participate in the development of an agreeable settlement in the
presence of a neutral third party and withdraw from the process at any point. (Pna-Mora et al.,
2003).

Other methods may become binding where all powers lies with the neutral third party
which is mandatory and have a formal structure that require strict adherence to the rules and
implementation (Uff, 2005a). ADR methods include arbitration, mediation, conciliation, early
neutral evaluation, expert determination and mini trial as well as other hybrid methods such as
med-arbitration and dispute adjudication/review board. Brown and Marriot (1999) have
identified eighteen main dispute resolution methods ranging from processes which offer the least
control, which is litigation, to those that offer the greatest control, that is, negotiation.

The Alternative Dispute Resolution Methods

1. Mediation

Mediation is a much different type of ADR proceeding. Unlike arbitration, it does

not involve an adversarial hearing, and there is no decision-making official
present. Instead, the parties involved in the dispute are brought together in one
location, and a neutral facilitator acts as a go-between. The job of the mediator is
to help the parties reach a voluntary settlement of the case.

For litigants and attorneys who have become antagonistic toward each other over
the course of the litigation, or who have unrealistic expectations concerning the
outcome of the case, mediation may be their only chance to avoid having to go to
trial.

A typical mediation begins with everyone meeting in the same room, and each
party giving a short presentation to the mediator. The purpose of the presentation
is to give an overview of the facts and impress upon the mediator the relative
strength of that partys case. The parties then split up into two rooms.
The mediator goes back and forth between the rooms, personally relaying the
parties settlement offers and responses. Parties can share information with the
mediator in confidence, and the mediator will give the parties his or her own
thoughts about the case. In the end, the goal is for the parties to agree on how the
case should be resolved.

Malaysian Mediation Bureau (MMC) The Bar Council, Malaysia has established a
Malaysian Mediation Centre (MMC) which was officially opened on 5th November
1999. It provides mediation services for the settlement of disputes. The Bar Council
has sought the help of the judiciary to encourage litigants to consider mediation
before turning to the courts. The Council had also asked judges to consider
incorporating mediation into the pre-trial process at the case management stage

Malaysia, a country with multitude of faiths and religions has been a host for the
practice of mediation amongst its recipients. In Islam, mediation is an
indispensable condition and is represented by the word shafaa, whilst in
Hinduism, the mediation process is reflective in the text of its scriptures as well in
the concept of the panchayat. So, great was the emphasis of harmony and the
resolution of dispute in an amicable manner to Confucius that a proverb was
couched to express his dissatisfaction to the adversarial process in death avoid
process, in life avoid law courts.

Mediation is also evidenced in the rural areas of Malaysia by the determination of

dispute by the penghulu. The Penghulu, is the chief or head of the village who
is asked to preside over a dispute, in the capacity of a middleman. Despite
evidence of mediation in early Malaysian history, the practice of mediation in its
conceptualized form is still at its embryonic stages.

2. Adjudication

In adjudication, the adjudicator acts as a third neutral party who is

appointed to resolve a dispute within a certain time limit. The decision
of the adjudicator is binding but not necessarily final as it could later be
reviewed by either arbitration, court proceedings or by settlement
agreement between the parties.

In large international contracts, adjudication is usually referred to as

dispute adjudication board or dispute review board which may consists of
one or more adjudicators (Natkunasingam & Sabaratnam, 1998). In the
UK, certain standard forms of contract have encouraged adjudication as an
alternative dispute resolution earlier on, but its scope has now been greatly
extended by an underpinning Act that provides that any party to a contract
is entitled to adjudication.

In Malaysia, there are two regimes governing arbitration, namely the

Arbitration Act 1952 and the new Arbitration Act 2005, which came
into effect on the 14th of March 2006.

Arbitration Act 1952 The Act applies to both domestic and international
arbitration. The Act is in pari materia with the English Arbitration Act of
1950. The other relevant legislation include the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards Act 1985.
Malaysia is a party to the Convention on the Recognition and Enforcement
of Foreign Arbitral Awards (the New York Convention). The New York
Convention has the force of law in Malaysia by virtue of the Convention
on the Recognition and Enforcement of Foreign Awards Act
1985 (the New York Convention Act).

Adjudication concept which primarily involves a third party making a

decision during the currency of the project pending the completion of
the works of termination of the contract is a good concept as it enables
parties to have a binding decision until they can litigate or arbitrate
their substantive dispute. In this area the construction industry has
taken the initiative.
 The various standard forms in construction contracts used in Malaysia
tend to have a clause that enables the Superintending Officer to make a
temporary decision binding on the parties until the works are
completed. Besides that, an adjudication is in place the parties can
thereafter focus the energies to completing the works. More often than
not once, there is a successful completion most of the intermediate
grievances are forgotten.

3. Arbitration

Arbitration is much like a trial, in that the parties can call witnesses,
present evidence, and argue the merits of their case to a neutral
decision maker. In many jurisdictions, civil litigants whose claims do
not exceed a certain dollar amount may be ordered to attend arbitration
by the court, in an effort to keep the courts docket clear for more
substantial lawsuits.

Local court rules may also allow litigants to elect for their case to be
sent to arbitration regardless of the dollar amount at stake. In doing so,
the parties can agree that the results of the arbitration will be binding or
non-binding. In non-binding arbitration, the loser can afterwards
request a new trial in the civil court.

The court will appoint a well-established attorney in the local area to

perform the duties of arbitrator. This person will act as a judge at the
arbitration hearing, listening to the evidence and rendering a decision.
Parties may be given some amount of say in the arbitrator selection
process. At a minimum, they will be allowed to strike potential
arbitrators with whom they have had prior dealings.

Once a case is sent to arbitration, a conference will be held either by

telephone, or in person at the arbitrators office. Much like a pre-trial
 conference in civil court, this is the opportunity for the parties to give
the arbitrator an overview of what the case is about, and to discuss any
evidentiary issues in advance of the arbitration hearing.

On the day of the hearing, the parties will meet in a conference room at
the arbitrators office or in an empty room at the courthouse. Each side
will present its case over the course of several hours. Afterward, the
arbitrator can render a decision immediately, or take the matter under
advisement and issue a written decision in the following weeks.

Conciliation

The use of conciliation is at its infancy in Malaysia as with most countries in the
South East Asia Region where the term conciliation simply implies a non-binding
process where a neutral person attempts to facilitate and find an acceptable
solution to a dispute between the parties.

Although conciliation has been used in Malaysia for some time in the settlement
of disputes in relation to family law and employment the concept of its use for
the settlement of construction disputes is still considered foreign.

The Industrial Relations Act 1967 and the Law Reform (Marriage and Divorce
Act 1976 both refer to conciliation as recognised means to settle disputes.
Conciliation is being promoted by some quarters within Malaysia namely the
Chartered Institute of Arbitrators, the Malaysian Institute of Arbitrators and the
KLRCA who have published rules for conciliation.

At this point we should consider what conciliation really means. Conciliation is

a form of alternative dispute resolution (ADR) process whereby the parties to a
dispute agree to utilise the services of a conciliator, who then meets with each of
the parties separately in an attempt to resolve their differences. Conciliation
differs from arbitration in that the conciliation process, of itself, has no legal
standing, and differs from mediation in that the parties seldom, if ever actually
face each other across the table in the presence of a conciliator.

A conciliator usually has no authority to require the presentation of evidence or call

witnesses; indeed, the conciliator usually writes no decision and makes no award.
However, if the conciliator is successful in negotiating an understanding between the
parties, then that understanding is almost always recorded in writing, often with the
assistance of the respective parties legal advisors, and signed by the parties, at which
time it becomes a legally binding agreement between the parties.

Conciliation can be carried out by a conciliator appointed by the parties, being

someone that both parties respect and consider able to bring about a resolution of
the dispute. Alternatively the parties may prefer to use a professional conciliator,
being someone trained in the conciliation process, and best able to assist the
parties towards a resolution. Where the parties cannot reach agreement on the
conciliator but have agreed the process in accordance with
the KLRCA_Conciliation_Rules_2011 the Director of the KLRCA will appoint
one.

The Conciliator may choose to attempt to resolve the dispute between the parties
using a number of methods the choice of which will be of his choice but at all
times he should act impartially.
A common method is termed as shuttle diplomacy, whereby the parties to the
dispute are placed in separate rooms and the conciliator goes from one room to
the other trying to find common ground in order to bring about a resolution of the
dispute.
A variation of that method is where the conciliator asks the parties to
independently list their objectives and the outcomes they desire from the
conciliation. The conciliator then discusses with the parties their respective lists,
requiring them to priorities the items. Thereafter he encourages them to give on
the objectives one at a time from the least important upwards, thus reducing the
number of issues actually in dispute.

In Malaysia the KLRAC provide dispute resolution services in respect of

conciliation. As noted above they have published rules in respect of conciliation
and these are based on the UNCITRAL Conciliation Rules 1980 amended.