Mahadev Shankar JCA:

Our decision to dismiss this appeal was unanimous. Its subject matter is of some importance to the independence and inviolability of arbitrations conducted in the Regional Centre for Arbitration at Kuala Lumpur (the Centre) under the United Nations Commission on International Trade Law Arbitration Rules 1976 and the Rules of the Centre (the Rules).

In the court below Sarawak Shell Berhad (Shell) sought to stymie the arbitration proceedings commenced by the respondents by contending quite simply that s. 34(1) of the Arbitration Act 1952 (the Act) did not deprive the High Court of its power to make orders under s. 25(2) of the Act . Shell asserted that since the respondents had accused it of fraud the trial judge was obliged to exercise his powers aforesaid. In rejecting this claim the trial judge held that s. 34(1) of the Act made any reference to s. 25(2) of the Act impermissible.

Before us Mr. Cecil Abraham of counsel for Shell sought to dilute the effect of s. 34(1) of the Act by submitting that it could only apply to "any arbitration held" under the Rules. In the present case he asserted that the arbitration had not quite got off the ground and could not therefore be regarded as an arbitration "held" under the Rules.

This point was not presented in that fashion in the court below. Nevertheless we permitted Mr. Abraham to proceed because we did not feel that the respondents would be in any way prejudiced and that the wider interests of the administration of justice made it desirable that we deal with this purported "refinement" of s. 34(1) of the Act once and for all.

The relevant contract was a very complex one which all parties had entered into at arms length. Clause 28(6) is set out here with the necessary emphasis:

The COMPANY and the CONTRACTOR hereby agree that any dispute which may arise in connection with the activities contemplated in the CONTRACT on the application, implementation, validity, breach or termination of the CONTRACT or any provision thereof (whether resulting from a claim in contract, tort or otherwise) shall be finally and exclusively settled in accordance with the UNCITRAL (United Nations Commission on International Trade Law) Arbitration Rules as applied by the Regional Centre of Arbitration at Kuala Lumpur, Malaysia. The place of arbitration shall be the Regional Centre for Commercial Arbitration, Kuala Lumpur.

The number of arbiters shall be three (3) and the third arbitrator shall always be a suitably qualified and experienced lawyer.

The parties contracted to have all their disputes connected with the contract conducted not by a court but by arbitrators in accordance with the Rules.

The first shot was fired by the respondents by their letter to Shell dated the 15 March 1996. Its subject matter was a valuation of the contract. The last paragraph reads:

The ratio of Preliminaries to that of Measured Works and additions is 31.7%, this is compared to 51.35% in our tender. The valuation without claims is RM308,188,408 therefore claims represents 11% of the Contract Value. Given the circumstances under which we fulfilled our obligations under the contract, the valuation being requested is fair and reasonable. You will note that we have excluded damages resulting from the company's conspiracy with our subcontractors, the loss of other contracts through the damage to our credibility and the detrimental relationship with our subcontractors due to delayed payment. We reserve our right to seek damages in the event that we are unable to reach an equitable and timely agreement on the attached valuation.

Shell denied the allegations of conspiracy by its letter dated 30th April 1996 claiming the remarks were defamatory and insisted they be withdrawn.

The respondents persisted by their letter dated 14 May 1996. The material portion reads:

As the subject matter is in the points of claim in both the arbitration between PEF JV and SSB also between McConnell Dowell and PEF