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2020 MarsdenLR 2772
HIGH COURT (SHAH ALAM)
TEE GEOK HOCK, J
Envac Scandinavia AB – Plaintiff
Versus
Muhibbah Engineering (M) Bhd – Defendant
ORIGINATING SUMMONS NO BA-24NCC(ARB)-2-01 OF 2020
Norliza Rasoo Khan (Vanessa Victor with her) (Liza Khan & Sankey) for the plaintiff.
Sathya Kumardas (Aarthi Jeyarajah with her) (Shearn Delamore & Co) for the defendant.
A Malaysian court may enforce a foreign arbitral award subject to terms ensuring compliance with foreign tax laws, thereby upholding public policy against tax evasion.
Headnote:(A) Arbitration Act 2005 - Sections 38 and 39 - Enforcement of foreign arbitral award - Plaintiff sought recognition and enforcement of an award requiring Defendant to pay a withheld amount due to Qatari tax - Defendant objected, citing non-compliance with Qatari tax laws - Court held enforcement could be conditional upon obtaining a Letter of No Objection from the Qatari tax authority to avoid contravening public policy. (Paras 7, 86, 97)
(B) Public Policy - The Court must ensure any enforcement order does not risk evasion of foreign tax law, thus upholding Malaysian public policy. (Paras 94, 102)
Facts of the case:
Plaintiff, a foreign company, claimed QAR 888,665 withheld by Defendant, a Malaysian entity, citing an arbitral award. Defendant contended that release without tax clearance would violate Qatari law, invoking public policy. (Paras 5, 80)
Findings of Court:
The Court found that maintaining the integrity of public policy is essential; enforcement must include terms to ensure compliance with Qatari tax laws to avoid legal issues. (Paras 93, 94)
Issues: Whether the Court could recognize and enforce a foreign arbitral award without risking violation of public policy related to foreign tax laws. (Paras 87, 95)
Ratio Decidendi: The Court emphasized that while it respects arbitration outcomes, it cannot condone processes that could undermine the legal frameworks of foreign jurisdictions, necessitating term-based enforcement to comply with local laws. (Paras 92, 94)
Result: Court granted enforcement of the award conditioned on obtaining a Letter of No Objection from the Qatari authority. (Paras 97, 101)
| Table of Content |
|---|
| 1. recognition of foreign arbitral award process (Para 1 , 2 , 4 , 5 , 6) |
| 2. plaintiff's legal grounds and public policy implications (Para 8 , 9 , 10) |
| 3. defendant's counterarguments and procedural clarity (Para 12 , 14 , 16) |
| 4. judicial interpretation and minimal intervention in arbitration law (Para 17 , 33 , 49) |
| 5. conflict with public policy in enforcement of foreign arbitral awards (Para 74 , 76 , 95) |
| 6. conditional enforcement of the arbitral award (Para 96 , 97 , 98) |
[1]This Originating Summons (the “OS”) dated 8 January 2020 was filed by the Plaintiff for an order to recognize and enforce a foreign arbitral award dated 11 January 2019 (“the Award”) that orders the Defendant to pay to the Plaintiff an amount of QAR 5,157,612 – QAR2,838,023 = QAR2,319,589, which included withholding tax of QAR888,665.
[2]The Defendant has, before the filing of this Originating Summons (“OS”), paid the substantial part of the awarded sum to the Plaintiff but has taken the position that the Plaintiff has to obtain a Letter of No Objection from the Qatar Revenue Authority before the Defendant is obliged to release to the Plaintiff the balance QAR888,665.00, which represents the withheld amount on account of Qatar withholding tax. The Defendant objects to the OS on the ground that the enforcement of the balance withheld amount (being the Qatar withholding tax) of the Arbitral Award is illegal, an abuse of court process and would therefore be against the Malaysian public policy.
[3]The parties have filed and exchanged the following cause papers in connection with this case:-
3.1the Originating Summons dated 8 January 2020;
3.2the Affidavit in Support of the OS affirmed by Patrick Haraldsson on 20 December 2019(“the Plaintiff’s’ Affidavit”);
3.3the Defendant’s Affidavit in Reply affirmed by Cheong Lai Keong on 18 May 2020 (“the Defendant’s Affidavit in Reply”);
3.4the Plaintiff’s Affidavit in Reply affirmed by Patrick Haraldsson on 9June 2020 (“the Plaintiff’s Affidavit in Reply”);
3.5the Defendant’s Further in Affidavit in Reply affirmed by Cheong Lai Keong on 26 June 2020 (“the Defendant’s 2nd Affidavit in Reply”); and
3.6the Plaintiff’s 2nd Affidavit in Reply affirmed by Patrick Haraldsson on 2 July 2020 (“the Plaintiff’s 2nd Affidavit in Reply”).
BACKGROUND FACTS
[4]The undisputed background facts of this matter are as follows:-
4.1The Plaintiff is a company incorporated under the laws of Sweden and carries out the business of automated waste collection systems.
4.2The Defendant is a public limited company registered under the laws of Malaysia and carries on the business of oil and gas, marine, infrastructure, civil and structural engineering contract works.
4.3On 23 June 2008, the Defendant and the Government of the State of Qatar, represented by the New Doha International Airport Steering Committee, entered into a Main Contract No. 25045-000-FC1-C000-00021 (“the Main Contract”) with respect to the Catering Facility for the New Doha International Airport. [see pages 17 – 266 of Exhibit C of the Plaintiff’s Affidavit affirmed by Patrick Haraldsson on 20 December 2019].
4.4By a Subcontract Document No. 25045-000-FC1-AEFS-00040 with an effective date of 5 June 2008 (the “Subcontract”), the Plaintiff was engaged to carry out works in relation to the Vacuum Waste System relating to the Catering Facility under the Main Contract. [see pages 268 – 405 of Exhibit C of the Plaintiff’s Affidavit affirmed by Patrick Haraldsson on 20 December 2019].
4.5Clause GC-33 of the Subcontract contained a dispute resolution provision between the parties, which provides that the parties shall proceed with arbitration as per the General Condition contained in the Main Contract if the Contractor’s final determination is not accepted by Subcontractor. The Subcontract is to be read together with the Main Contract and incorporates the dispute resolution mechanism by reference. [see page 283 of Exhibit C of the Plaintiff’s Affidavit affirmed by Patrick Haraldsson on 20 De
