The Court of Appeal in the case of Ken Grouting Sdn Bhd v RKT Nusantara Sdn Bhd  2 CLJ 173 has held that an arbitration rule specifying the timeline for delivery of an arbitral award is a jurisdictional provision rather than merely a procedural one. This case marks the first time that the Court of Appeal had made a decision on this point of law.
The appellant, Ken Grouting Sdn Bhd and the respondent, RKT Nusantara were parties to a building contract based on the PAM Standard Form 1998. The arbitration agreement contained in the building contract adopted the PAM Arbitration Rules (2003 Edition) (“PAM Rules”). A dispute arose between the parties, which resulted in the commencement of arbitration proceedings.
Article 21.3 of the PAM Rules stipulates that the arbitrator shall deliver the award not later than three months from the receipt of the last closing statement of the parties. Additionally, Article 21.3 expressly provides that if the arbitrator considers that more time is required for the preparation of his award, the timeframe for the delivery of the award may be extended by way of notification to the parties. In essence, this provision allows the arbitrator to unilaterally extend time for the delivery of the award upon notification to the parties.
In the present case, pursuant to Article 21.3 of the PAM Rules, the deadline for the arbitrator to deliver the award was on 26 April 2016. However, the arbitrator only delivered his award about 11 months later, on 10 March 2017. The arbitrator had not issued any notification to the parties to extend the timeline for the delivery of the award. Prior to the delivery of the award on 10 March 2017, neither of the parties had raised any objections that the deadline for the delivery of the award had passed. The first objection was only raised by the respondent about two weeks after the delivery of the award.
Thereafter, the respondent applied to set aside the award pursuant Section 37(1)(a)(vi) of the Arbitration Act 2005 (“the Act”) on the basis that, due to the late delivery of the award, the arbitral procedure was not in accordance with the agreement of the parties.
Findings of the Court
The Court of Appeal held that rules of arbitration which stipulate that an award must be delivered by a certain date are time-sensitive and affect the mandate of the arbitrator. The arbitrator's jurisdiction springs from his mandate and once the mandate ceases, the arbitrator's jurisdiction ceases as well. Consequently, a provision specifying the timeline for the delivery of the arbitral award is not merely procedural in nature and it is mandatory for an arbitrator to comply with the same.
Even if the rules of arbitration allow the arbitrator to unilaterally extend the time to deliver the award upon notification to the parties, this does not ipso facto render the provision to be merely procedural. The arbitrator is still required to provide the specified notification to the parties.
Consequently, the Court of Appeal determined that an arbitrator's failure to deliver the award by the deadline and failure to extend time pursuant to the arbitration rules results in a cessation of the arbitrator's mandate and jurisdiction. Any tardy award is therefore made without mandate or authority and may be set aside pursuant to Section 37(1)(a)(vi) of the Act.
Such an award is a nullity and remains so unless an order is obtained under Section 46 of the Act, which allows the High Court to extend the time for the making of an award. However, the court may not extend time on its own volition under Section 46. The parties or the arbitrator have to make an application for the purposes of this provision.
Finally, the Court of Appeal held that there was no general burden or positive duty on the parties to raise any objection after the deadline for delivery of the award had passed. Given that the arbitrator's mandate and jurisdiction ceases after the deadline for the delivery of the award, the failure of a party to raise an objection cannot amount to a waiver.
The Court of Appeal's decision has highlighted the importance for arbitrators to deliver their awards within the specified timeframes and, where applicable, to follow the appropriate procedure to extend time for the delivery of the award.
For parties on the receiving end of a tardy arbitral award, recourse is available by way of an application under Section 46 of the Act for an extension of time for the making of the award, or by way of an application to set aside the award pursuant to Section 37(1)(a)(vi). In relation to the latter, a party's failure to raise an objection before the late delivery of award will not preclude a setting aside application.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.