Malaysia should continue to focus on Islamic finance arbitration - Sultan Nazrin

He said the Asian International Arbitration Centre (AIAC) would do well to gather a pool of experts in this area to become the preferred hub in Asia, specialising in Islamic finance arbitration as well as in disputes within halal industries.

"Islamic arbitration provides a unique path to amicable dispute resolution for businesses.

"By providing a confidential means of settling disputes and maintaining the mutual goodwill of the parties, it helps to promote more stable business relationships," he said in his keynote address at the Fourth Asia Alternative Dispute Resolution (ADR) Week 2022 Conference of the AIAC at the centre here today.

Sultan Nazrin said steps could be taken to train those with specialisation in shariah, fiqh, and muamalat as Islamic arbitrators and this would enable disputes to be resolved without the need to involve a shariah council or expert.

This would make Islamic arbitration more attractive and "easier" than litigation, he added.

Sultan Nazrin said to enable this, incentives and career paths must be formulated so that graduates of shariah can pursue a career as Islamic arbitrators so that talent and human resources can be developed in the field of Islamic arbitration.

He said measures can also be introduced in relation to conventional arbitration, to ensure that Malaysia continues "to build our capacity more broadly in all areas relevant to ADR."

Schools, colleges, and universities could incorporate negotiation-based ADR as part of their curriculum while training institutions can also be mobilised to share skills and help to develop effective ADR practitioners, he added.

According to Sultan Nazrin, the judiciary has and continues to play an important role in promoting Malaysia as an arbitration-friendly jurisdiction and the judiciary has consistently taken a pro-arbitration stance in recent years.

"In numerous cases, the courts have upheld arbitration agreements despite minor flaws, supporting the choice of the parties to resolve their issues in this way," he added.

He said arbitration was initially conceived as a tool to lighten the burden of the courts and it started as a regulatory system for settling commercial disputes pertaining to contracts and international commercial transactions.

"Arbitration mechanisms have since evolved from this original rule-based compliance, to provide greater flexibility.

"This has enabled ADR to cope with the increasing complexity of the cases it deals with, many of which now involve multiple stakeholders and claims," Sultan Nazrin said.

As a result, he noted, the sector has grown to become an independent and much-preferred method for dispute resolution and the type of disputes being referred to arbitration are also changing.

"These are no longer limited to contractual issues in construction contracts, cross-border transactions, trade and investment, and financial technology.

"They now encompass more complex multilateral non-contractual claims related to sovereignty and territory, expropriation of property, and international human rights," he noted.

Sultan Nazrin said dynamic regulatory frameworks are thus required in order to cater to the complex and evolving nature of both the contracts and the non-contractual claims that are now dealt with through ADR.

The AIAC is well-positioned to serve as a compass in charting through this new and challenging terrain, he said.