1. General
1.1 Prevalence of Arbitration
Arbitration is a frequently used and broadly accepted method of dispute resolution in Malta for both general and sector-specific commercial disputes. It is particularly prevalent in certain sectors such as construction, maritime and information technology, where most domestic parties engaged in international contracts have recourse to institutional or ad hoc international arbitrations as the preferred method of dispute resolution. Arbitration clauses also feature regularly on a more generic level across various other industries. Institutional arbitration clauses are increasingly featuring in commercial contracts governed by Maltese law or involving a Maltabased entity.
There has been a discernible uptake in the use of international arbitration in relation to contracts involving public and private entities, shipping, insurance, as well as financial services disputes. Various factors, such as the geographical location, legal framework and cost-to-quality ratio, may incentivise parties to resort to arbitration as opposed to court litigation in Malta.
The principal advantages of arbitration in Malta are the flexibility of procedure, the value added brought by arbitrators, as well as the relative ease of the enforceability of awards. With some notable exceptions in judgments that are widely regarded as outliers, the jurisdiction is generally supportive of arbitration, and the courts have extensive powers of support (including interim relief) for both domestic and international arbitrations having their seat in Malta.
On a purely domestic level, litigation remains the predominant method of dispute resolution in Malta amongst local market players. Litigation costs in Malta are generally low and, in domestic disputes, arbitration, despite a discernible upward trend, has not yet managed to break through as the prevalent method of dispute resolution.
1.2 Key Industries
The use of arbitration in Malta has been increasing steadily. In particular, due to the increased number of large-scale infrastructure projects, the construction industry has seen a significant increase in arbitration, especially since International Federation of Consulting Engineers (FIDIC) contracts have become the prevalent construction contract in Malta for medium-to-large-scale developments. Accordingly, a number of claims have been arbitrated. Arbitration clauses are increasingly being incorporated in contracts which are the subject of public procurement processes with public authorities, clearly indicating to the market the preference for disputes being referred to arbitration.
Moreover, a marked increase in arbitrations relating to areas which were hitherto the exclusive domain of the Maltese courts has been witnessed. This includes shareholder disputes and certain intellectual property disputes, largely due to the flexibility afforded by arbitration as well as an expert's focus on the subject matter.
1.3 Arbitration Institutions
The Malta Arbitration Centre (MAC, or the "Centre") is the principal institution that oversees the conduct of domestic arbitrations and an everincreasing number of international arbitrations having Malta as their seat of arbitration. It is run by a publicly appointed board of governors that is responsible for the policy and general administration of the affairs and business of the Centre and has its own secretariat. The MAC offers basic facilities for the conduct of arbitration and may act as the default appointing authority with a choice of arbitrator(s) from panels of professionals practising different areas of law.
Malta is also regularly designated as the seat of ad hoc international arbitrations, as well as the seat of institutional arbitrations under the rules of leading arbitration institutions, most commonly, the International Chamber of Commerce (ICC) and the London Court of International Arbitration (LCIA).
No new institutions have been established in Malta in 2023-24.
1.4 National Courts
The Superior Courts (First Hall of the Civil Courts and the Court of Appeal) are vested with the powers to stay arbitration proceedings, grant interim relief, hear procedural challenges and make recognition orders. The specific division of powers and jurisdiction of the particular courts depend on the nature of the relief sought. The courts are regulated by the Arbitration Act (Chapter 387 of the Laws of Malta) (the "Act") and the Code of Organisation and Civil Procedure (Chapter 12 of the Laws of Malta) (the "Code of Organisation and Civil Procedure"), and will be addressed in more detail in subsequent sections of this chapter.
2. Governing Legislation
2.1 Governing Law
The Act and the Arbitration Rules (Subsidiary Legislation 387.01) (the "Rules") are the principal legislative instruments regulating arbitration in Malta. The Act is modelled on the 1985 UNCITRAL Model Law, and the Rules are likewise modelled on the UNCITRAL Arbitration Rules 1976 (revised in 2010). The Act also incorporates the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the "New York Convention"), the Geneva Protocol on Arbitration Clauses of 1923 (the "Geneva Protocol"), the Convention on the Execution of Foreign Arbitral Awards 1927 (the "Geneva Convention"), and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States 1965 (the "Washington Convention").
The 1985 Model Law is annexed to the Act as the First Schedule of the Act and forms an integral part thereof in its entirety.
The Act has not yet been amended to reflect the later versions of the UNCITRAL Model Law. Expected initiatives on this front have not yet marterialised.
2.2 Changes to National Law
Until an amendment in August 2020, the MAC was the designated court for recognition and enforcement purposes under the New York Convention. The decisions of the chairperson of the Centre were final and could not be appealed against, although nothing barred a party from subsequently bringing fresh proceedings for recognition and enforcement if recognition proceedings were initially not accepted by the chairperson.
One significant feature of the 2020 amendment was the introduction of a right of appeal before the Court of Appeal against a decision by the chairperson of the MAC on the registration of a foreign award. An appeal by an aggrieved party must be filed within 20 days from the date on which the determination of the chairperson of the MAC on the registration of the foreign award is communicated to the parties. Such appeals are to be lodged with the Court of Appeal in its inferior jurisdiction. Through this substantial amendment, the recognition court is effectively no longer just the MAC but there is a second instance proceeding in front of the Court of Appeal. Notwithstanding the inclusion of a second tier, there has been a marked increase in the efficiency of the process leading to the recognition of foreign arbitral awards in Malta over the past few years. However, the two-tier process will, in the longer term, delay the process of exequatur of international awards, although it is expected to produce a greater level of consistency and predictability of outcome.
3. The Arbitration Agreement
3.1 Enforceability
In so far as the formal requirements of an arbitration agreement are concerned, Maltese arbitration law follows the UNCITRAL Model Law and the New York Convention, which are reproduced in the First Schedule and Part III of the Second Schedule respectively, both forming part of the Act. An arbitration agreement must be in writing and may be drawn up in the form of an arbitration clause in a contract or in the form of a separate agreement. Domestic law requires that an arbitration agreement be made in writing as provided under Article 7(2) of the UNCITRAL Model Law.
For the purposes of Maltese law, an agreement is considered to have been made in writing solely in the following circumstances:
- if it is contained in a document that is transferred from one party to the other party or by a third party to both parties, provided no objection was raised within 30 days from receipt thereof;
- if reference is made in a written contract to a document containing an arbitration clause, in so far as that reference operates to make such clause part of the contract; or
- through the issuance of a bill of lading, provided the latter contains an express reference to an arbitration clause in a charter party, in which case the bill of lading is – in and of itself – deemed to constitute a written arbitration agreement.
The Model Law further elaborates in this respect, and confirms that the "in writing" requirement is also satisfied if it is contained in:
- a document signed by the parties;
- an exchange of telecommunication which provide for a record of the agreement; or
- an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other.
Naturally, the references in the 1985 UNCITRAL Model Law and the 1958 New York Convention to an instrument "in writing" have to be interpreted in the light of more recent laws establishing equivalence between traditional written instruments and electronic communications.
3.2 Arbitrability
Over the past few years, there has been an increase in the scope of the types of disputes that are considered by arbitration tribunals and the courts of law as "arbitrable", both in terms of subjective and objective arbitrability. The general provision contained in Article 15 of the Act (under the part dedicated to domestic arbitration, but equally applicable to international commercial arbitration having Malta as its seat) states that disputes concerning questions of personal civil status are not capable of settlement by arbitra- tion. Equally, most public law matters are generally regarded as not arbitrable.
However, even in traditionally non-arbitrable areas of law like disputes concerning personal status, purely patrimonial or monetary claims arising from such traditionally not arbitrable disputes can still be referred to arbitration, including disputes relating to the division of property between spouses and damages arising out of intellectual property disputes, or public law disputes.
3.3 National Courts' Approach
As a signatory of the New York Convention and having modelled the Act on the UNCITRAL Model Law, Malta is a jurisdiction which supports the arbitration process.
National courts are less likely to interfere with international arbitrations that have Malta as their seat of arbitration than they are with domestic arbitrations, where they still exercise residual powers. In general, and with some notable exceptions in recent judgments, Maltese courts look with disfavour on parties attempting to circumvent or frustrate arbitration proceedings through court actions. When this happens, the Maltese courts have generally (with some notable exceptions in a limited number of judgments, which are largely recognised by the legal profession to be outliers) shown themselves to be supportive of arbitration and unsympathetic to such claims, and tend to recognise the arbitrator's jurisdiction to rule on its competence.
There is no significant case law to report in the last year on the approach taken by the Maltese courts on matters relating to the applicable law to the arbitration agreement. Typically, the arbitration agreement will be deemed to be governed by the law of contract. Recently, Maltese courts have refused to lift local precautionary measures in support of pending recognition and execution proceedings of an international arbitration award in Malta, despite the existence of security in another member state of the European Union in support of foreign exequatur proceedings of that same award. Maltese courts have also stayed proceedings in favour of a valid arbitration clause invoked in litigation which involved, apart from the signatories to the arbitration clause, a non-signatory party in litigation.
On a more general note, arbitration agreements are, for the most part, immediately recognised and enforced by the courts, and the courts regularly stay proceedings in favour of arbitration proceedings when they are faced with what appears to be a valid arbitration agreement.
When the court seised so stays proceedings in favour of the arbitral jurisdiction, it does not automatically decline all residual jurisdiction, but merely stays until the arbitration tribunal ascertains jurisdiction on the matter and proceeds with the decision on the case.
3.4 Validity
In terms of Article 16 of the UNCITRAL Model Law and Article 32 of the Act (modelled on Article 16 of the UNCITRAL Model Law), an arbitral clause shall be considered valid even if the rest of the contract in which it is included is determined to be invalid. This applies to both domestic and international arbitrations. There can be little doubt that Maltese courts may consider an arbitral clause to be valid even if the rest of the contract in which it is contained is invalid in full application of the doctrine of separability that is contained in statutory provisions.
4. The Arbitral Tribunal
4.1 Limits on Selection
In accordance with the Model Law, the Act allows the parties to an arbitration agreement the faculty of determining any matters relating to the choice, as well as the number, of arbitrators. Failing a determination, the default number of arbitrators is three. This is except for those cases where the disputed amount is under approximately EUR12,000, in which cases there will be only one arbitrator. In addition, the MAC (the chairperson of the Centre being established as the default appointing authority) has set up various specialised panels for domestic, as well as international, arbitration which may be resorted to in order to appoint accredited arbitrators. To name a few, these panels include:
- the Maritime Panel;
- the General/Civil Commercial Panel;
- the Banking, Finance, Accounting and Taxation Panel;
- the Building Construction Panel; and
- the Medical Panel. .
There is no law forcing either the parties or the default appointing authority to restrict their choice of arbitrators from the said panels.
4.2 Default Procedures
In default of any agreement on the procedure for the appointment of arbitrators, the Act provides that, in the case of an arbitration with three arbitrators, each party will appoint one arbitrator, with the two party-nominated arbitrators then appointing the third arbitrator, who shall act as the chairperson of the arbitration tribunal. However, if a party fails to appoint an arbitrator within 30 days of receipt of notification of the appointment of an arbitrator by the other party, or if the two arbitrators fail to agree on the third arbitrator within 30 days of their appointment, the appointment shall be made, upon the request of a party, by the chairperson of the MAC.
In an arbitration with a sole arbitrator, where the parties fail to agree on the choice of arbitrator within 30 days after receipt by a party of a proposal, that arbitrator shall be appointed, upon request of a party, by the chairperson of the MAC. In the context of international arbitration, the MAC chairperson fills the role of default appointing authority and the functions mentioned in Articles 11(3), 11(4), 13(3) and 14 of the UNCITRAL Model Law. Therefore, if there is no agreement as to the method for the appointment of arbitrators, the parties do not agree on the arbitrator(s), any of the parties fail to act as required under the agreed appointment procedure, an arbitrator becomes unable to perform their functions or fails to act or their office terminates, or an arbitrator is successfully challenged, the chairperson shall appoint the arbitrator(s) at the request of one of the parties.
Default procedures for selecting arbitrators in multiparty arbitrations are contemplated in Article 21A of the Act. These procedures mimic the default procedures explained above, with the difference that the multiple claimants or multiple respondents are to make a joint nomination and to jointly reach an agreement with the other party on the choice of the arbitrator(s).
4.3 Court Intervention
Outside the parameters of the procedures for challenge or removal of arbitrators described in
4.4 Challenge and Removal of Arbitrators, there is no room for court intervention in the selection of arbitrators. This excludes the possibility of extraordinary remedies including constitutional challenges on matters like due process, which are exceptional and outside the scope of the current review.
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