Azalina calls for controls on ‘rogue arbitrators’ and litigation funds
The minister says the global arbitration system must be reformed with an oversight mechanism to hold arbitrators to strict ethical standards.
PETALING JAYA: Azalina Othman Said has called for reforms to the international arbitration system to prevent sovereign nations being crippled by rogue arbitrators and litigation funds abusing the system.
Azalina said an oversight mechanism was vital to ensure arbitrators are held to strict ethical standards and prevent the appointment of rogue arbitrators.
She also called for the regulation of litigation funding, a system by which private equity interests provide funds for legal suits hoping for a massive return from the outcome.
Azalina, who is law and institutional reform minister, made the calls following legal claims pursued by a group calling themselves heirs of the defunct Sulu sultanate.
The lack of a monitoring mechanism has led to the arbitration process being abused to threaten sovereign countries, she said in a statement quoted by Bernama.
Azalina said an oversight mechanism was vital to ensure arbitrators are held to strict ethical standards and prevent the appointment of rogue arbitrators.
“In the Sulu case, there was no element of professionalism and ethical conduct as the arbitration process was not agreed upon by both parties involved (the Sulu group and the Malaysian government),” she was quoted as saying.
“And the award order was issued illegally because of the prior annulment of the arbitrator’s appointment by the Spanish court.”
She said the Sulu claim was moved in arbitration from Spain to France and the group had also pursued their claims in the Netherlands and Luxembourg.
“Hypothetically, the claimants could continue forum shopping indefinitely in as many countries (party to the New York Convention) as they choose until they reach an outcome which they find satisfactory,” she said.
“They are able to pursue this as they are funded by a litigation fund with seemingly deep pockets and investors backing their pursuit, hoping that the claimants win, in order to pocket a percentage of commission from the award.
The pursuit could be endless,” she said.
Azalina said no country should be held at ransom by conspirators because of the failure of arbitrators to be held to a strict standard of ethics.
“A strict code of ethics for arbitrators will cut any sham arbitration – that could go so far as to try to cripple sovereign nations – at its knees”.
Azalina said as in the Sulu case, the process was open to abuse
The Sulu claim hinges on an 18th century agreement to cede a large part of northern Borneo (now Sabah) by which Malaysia made annual payments of RM5,300 to the descendants of the Sulu sultan.
The payments were discontinued after an armed group landed in Lahad Datu in 2013 to pursue a claim of sovereignty over Sabah.
Earlier this month, Malaysia won a legal battle in France that is likely to result in the cancellation of an arbitration award in favour of the Sulu group, which would require Malaysia to make a settlement of about US$15 billion over the group’s territorial claims.
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