A DEVELOPER faces claims from house buyers for late delivery of property. A landlord does not return rental deposit to a tenant due to damaged property.

These are cases of civil disputes that may end up in court. Or not. There are three main methods of solving disputes – in court, using alternative dispute resolution (ADR, which includes mediation) and arbitration.

Arbitration is often confused with mediation, which is based on persuading people to come to an agreement through avenues such as the marriage tribunal or banking tribunal.

It involves a neutral mediator finding middle ground between the positions of the parties with the aim of getting a negotiated solution acceptable to all parties.

Decisions from mediation, however, are not binding. Arbitration is legal-based and is solved based on contracts.

It appeals to the commercial sector for a few reasons: courts may face backlogged cases; use of Bahasa Melayu in court, which may deter foreigners; a court judge may not have specialised knowledge in a certain field; and confidentiality in arbitration, as cases are not reported in the media.

“Arbitration has existed since time memorial. It came about from two people agreeing to get a third party to settle a dispute, and it’s normally done in accordance to some established rules or law,” explained Sundra Rajoo, a chartered arbitrator.

“Then, as the world became more organised, the courts (as an independent structure) came in,” he said. Another advantage of arbitration is that parties can choose the arbitrator. There are now about 50 arbitrators in Malaysia.

“Arbitration really took off after the 1997 financial crisis when businesses slowed down and a lot of contracts failed,” said Sundra, who holds a master’s degree in Construction Law and Arbitration (from Leeds Metropolitan University) and a bachelor's degree in Housing, Building and Planning (USM).

“It is a worldwide trend for commercial contracts to be drafted with arbitration clauses, particularly when there are foreign parties involved,” said Sundra, 49.

All international contracts, added Sundra, who has over 15 years experience in the industry specialising in construction law, are arbitration clauses, including contracts between governments.

One disadvantage in arbitration is the cost factor. Parties to arbitration or one of them will ultimately have to bear the cost of the arbitrator and other costs such as room rental.

Joinder difficulties may also arise because when two or more parties are involved in a dispute, there is no statutory power in arbitration where all parties may be joined, as in litigation, in a consolidated action.

Arbitrators may also delay writing the award even after all other requirements have been fulfilled. Parties may then have to apply to the court to revoke the authority of the arbitrator to restart the hearing process.

However, after an arbitrator makes a decision, it is supposed to be binding and final. The winner would then take the award to court, which then converts it to a High Court judgment.

If a party disagrees on the decision, they can ask the court to remit or set aside the award. To “remit” means the court sends back the decision to the arbitrator to reconsider certain points of the award.

To “set aside” means the courts says the award was null and void, as if the arbitration never started. Courts are reluctant to do that due to the time and costs involved to restart the arbitration.

“Generally, the courts respect arbitrators' awards and do not set aside a decision unless something was terribly wrong,” Sundra said.

“Because of that, there's a finality in arbitration that you normally do not get in other forms of adjudication.”  Sundra, who is the president of the Society of Construction Law (Wilayah Persekutuan and Selangor), stressed that integrity is vital in arbitration. “All other skills are not important if there's a whiff of integrity problems.”

In Malaysia, he said, there are many retired judges who make good arbitrators. Currently, Sundra is the country representative of the Dispute Review Board Foundation based in Seattle, United States.

In 2002, he won the Cedric Barclay Price of the Chartered Institute of Arbitrators, United Kingdom. In 1999, when the Chartered Institute of Arbitrators, UK first conferred the title to two Malaysians he was one of the recipients.

Sundra has written a book on arbitration titled Law, Practice and Procedure of Arbitration (2003). He also wrote The Malaysian Standard Form of Building Contract (The PAM 1998 Form) (second edition 1999) and an article on arbitration for Halsbury’s Laws of Malaysia (2002).

Sundra was also invited by the Malaysian Bar Council to sit on a committee involved in the drafting of the new arbitration legislation as part of arbitration law reform in Malaysia.

Currently, much of the law on arbitration in Malaysia is summarised in the Arbitration Act 1952, which was modelled after the English Arbitration Act 1950.

The draft legislation has been submitted to the Attorney-General’s chambers and is being considered for enactment.

“With the new Act, Malaysia will be the centre of arbitration,” said Sundra, who described the current laws as outdated.

The draft legislation is based on the United Nations Commission on International Trade Law’s (UNCITRAL) model law on international commercial arbitration. Model law is a uniform set of laws created as a suggested pattern for various lawmakers in different countries to consider adopting as part of their domestic legislation.

Over 30 countries have adopted UNCITRAL’s model law but Malaysia hasn’t done it yet.

Sundra said the arbitration community here hopes the government will adopt it soon.

“Due to globalisation, the world is moving towards model law. Now, we have to bring it to the local level,” he said.