A PARTY to a civil dispute who has obtained a judgment – this includes an arbitration award – will have to enforce the judgment. Without enforcement, the party cannot obtain the spoils of victory, so to speak.

Without enforcement, the judgment becomes effectively worthless and a meaningless piece of paper.

The party in whose favour the judgment (judgment creditor) may seek to enforce the judgment obtained in one country in another country. This occurs because the other party (the judgment debtor) may reside in that other country, or more importantly there are assets in the country where the judgment is sought to be enforced to satisfy the judgment sum.

It is therefore important that the judgments of one country – so-called foreign judgments – are enforceable in, and by the courts of, another.

The law and applicable principles on enforcement of foreign judgments and international arbitral awards are similar in most, if not all, jurisdictions.

Take Malaysia as an example.

Foreign judgments and international arbitration awards are enforceable in Malaysia. There are two main regimes of enforcement of foreign judgments and arbitration awards:

(a) Enforcement under statute

(b) Enforcement at common law 

The judgments of a limited number of courts of foreign jurisdiction and international arbitration awards may be enforced through the statutory regime under two main legislation, namely the Reciprocal Enforcement of Judgments Act 1958 and Arbitration Act 2015.

If a foreign judgment is not entitled to be enforced through the statutory regime, it is still possible to seek to enforce it by what is known as action at common law.

It is said that a foreign judgment creates a fresh obligation to pay the judgment sum. This gives rise to a cause of action against the judgment debtor. The judgment creditor is therefore entitled to commence a fresh action against the judgment debtor in Malaysia. 

The Malaysian courts have assisted, and will continue to assist, foreign judgment creditors to enforce judgments in their favour against parties in Malaysia over whom the courts exercise jurisdiction so they may obtain the spoils of victory. 

As a respected member of the international community, Malaysia is committed to ensuring that its regimes for the enforcement of foreign judgments are effective, efficient and accessible. 

That said, the Sulu heirs will have to apply to the court in which the award is sought to be enforced – the domestic court – to recognise the award. 

The application is typically referred to as an arbitration claim and is an application for permission to enforce the award in the same manner as a judgment or an order of the domestic court. 

Now, the law typically affords grounds for refusing recognition and enforcement of an award. Irrespective of the state in which it was made, an award may be refused recognition and enforcement at the request of the party against whom it is made.  

Take the New York Convention (the Convention) as an example. 

Article V of the Convention sets out the limited and exhaustive grounds on which recognition and enforcement of an arbitral award may be refused by a domestic court. These include: 

(a) The incapacity of a party or invalidity of the arbitration agreement – Article V(1)(a); 

(b) The violation of due process – Article V(1)(b);

(c) Arbitral tribunal exceeding its authority – Article V(1)(c);

(d) The improper constitution of the arbitral tribunal or procedural irregularities – Article V(1)(d); and

(e) When an award has not yet become binding or has been set aside or suspended – Article V(1)(e). 

It may be noted that domestic courts have generally construed the grounds for refusal under Article V of the Convention narrowly and parties resisting enforcement have been largely unsuccessful in proving grounds for refusal. 

Domestic courts have also consistently found that the Convention does not allow the refusal of recognition and enforcement of an award on grounds other than those listed in Article V of the Convention. 

Be that as it may, Article V(1) of the Convention clearly sets out that recognition and enforcement of an award “may be refused” if one or more of the grounds for non-recognition or enforcement listed above is present.

Thus, the Convention grants domestic courts the discretion to refuse recognition and enforcement of an award on the grounds listed in Article V of the Convention.

When the judgment debtor is a state, it may raise the defence of state incapacity or sovereign immunity against the enforcement of arbitral awards.

These are complex issues. Nonetheless, the domestic court will have to decide whether the foreign state is immune from enforcement of the award.

Thus, when states refuse to honour arbitral awards resulting from international arbitration proceedings, it is because sovereign states or entities may not be fully subject to arbitration claims unlike private entities.

Have the Sulu heirs proceeded to apply to recognise and enforce the award in any of the signatory states to the Convention?

It is grossly irresponsible to call Malaysia a “rogue” nation, unwilling to abide by its duties and responsibility as a signatory of the Convention, when Sulu descendants have not proceeded to apply to enforce the award to which the Malaysian government may rightly raise the defence of state incapacity or sovereign immunity.

We need to be Malaysians without affiliations on this. – March 12, 2022.

* Hafiz Hassan reads The Malaysian Insight.