1. Li Li Chong, Skills for Lawyers, LL.M in European Law 2011-2012
Alternative dispute resolution (ADR) in Malaysia
by Li Li Chong,
in conformity with the requirements for the ‘Skills for Lawyers’ Module for the LL.M in European Law program,
Universiteit Gent under Professor Avi Schneebalg
“In death avoid hell, in life avoid law courts”1
Introduction –the PAST SETTING and a general understanding of the Malaysian culture and tradition
Malaysia is a unique country blessed with people of multicultural and ethnic diversity who live harmoniously and
generally known to be of ‘non-confrontational’ type of people. Despite the racial and religious differences that define
the society, and even way before the English colonised Malaysia and introduced litigation in our judiciary system, the
Malayans (as it then was) had its own informal dispute resolution mechanism- through making ‘compromises’, a
simple act of ‘giving and taking’. For most people, they would solve the matter among themselves, where as those
whose problems maybe slightly complicated would turn to the chief of the village known as the ‘Penghulu’, who will
play the role of a middleman to conciliate over that dispute. However, for disputes of higher gravity and complexity,
people would turn to ‘judges’ who were the chief of the state(s) (there are 13 states in Malaysia), the sultan himself
using Islamic law, unwritten tradition and customary practices. In a nutshell, Malayans solved their disputes through
‘non-aggressive, and peaceful’ dispute settlement measures and continued business as usual after their amicable
solution2s. This was a noticeable fact even way before adversarial process was introduced and replicated from the
British crown’s system in our judiciary. Below is a brief and simplified illustration of the ADRs that are available in
Malaysia3.
Traditional/the past setting Brief summary of today’s current setting of ADR in Malaysia
Pre-British style judiciary system
The aim is to return to the traditional method of dispute resolution, in the future setting
ILLUSTRATION OF THE ‘JOURNEY’ OF ADR IN MALAYSIA
Despite evidence of mediation and conciliation being the preferred method of resolving dispute before the British
introduced litigation, today, the concept of mediation is not yet very popular. It would appear that after litigation was
1
Confucius proverb that reflects the emphasis for harmony and resolution of dispute in an amicable manner.
2
However, the ‘non-confrontational’ nature of Malaysians also had its downside, as some would not even pursue the dispute and keep silent about it,
much to their own detriment, as they would rather not put themselves through the hassle of solving a particular dispute. In some situations, Malaysians
will not pursue the matter far as a fear that doing so will severe their relationships.
3
The illustration is not a complete illustration of all the ADRs available in Malaysia, but for purposes of brevity and in the interest of keeping to the word
limit, this essay will only zoom more into mediation as an ADR in Malaysia.
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2. Li Li Chong, Skills for Lawyers, LL.M in European Law 2011-2012
introduced, most people were more inclined to bring their disputes to the court to get it solved. This is perhaps
attributable to Malaysians being more keen in obtaining legally enforceable judgments. However, this came at the
expense of cost and time, owing to various procedural abuses4 in court coupled with other factors, most people end
up paying a lot for lawyers fees and having to wait years to be vindicated. For those who had the sources to do so,
they resorted to arbitration, which would offer a ‘semi-judicial’ nature of enforcement, and would not take as long as
the courts. Nevertheless, this would not be the answer for many of those who lacked the funds to settle their
disputes via arbitration5. For the purposes of this essay, focus will be stressed more on mediation as a preferred
dispute resolution method.
PRESENT SETTING : Statutory mediation
Various quarters saw that an effective, fast and cheap dispute resolution mechanism was not available for the vast
majority of Malaysians who did not have enough funds to have recourse to justice via the court or arbitration. Hence,
the Ministry in-charge of Consumer claims6 and the Central Bank of Malaysia who is the supervisory authority for the
financial services providers decided to solve this by introducing mediation as a dispute resolution method for the
general public to have a recourse to remedy for free. The Financial Mediation Bureau (FMB) for instance, is funded by
the Association of banks and insurance companies. This allows the general public users to enjoy this mediation
services at no charge, and proves much faster and fairer in most situations. The mediators often try to reach a win-
win situation for both the aggrieved customer as well as the financial institution in the fairest manner, and in some
cases, the hard-letter law and literal interpretation of contractual provisions prevent the court from achieving the
most equitable results, as judges who are persuaded by English cases, tend to limit their ‘interference’ with what has
been stipulated in the agreement no matter how ‘unreasonable’ it may turn out to be at the end of the day7. The
FMB, being very much inspired by the Financial Ombudsman system existing in the United Kingdom, tries as much as
possible to achieve the fairest outcome for the parties involved. Initially, this concept was not very popular, but upon
seeing that customers do get their voices of grievance heard and received compensation for it, the FMB is now over-
loaded with complaints by the general public. However, prior to resorting to the FMB, the aggrieved parties must first
prove that they have exhausted all other possible ways of obtaining a fair answer from the financial services
providers’ customer relations services.
On the other hand, this has also been accepted well by the financial services providers, as for some of them, it is a
question of protecting their good reputation with the general public and maintaining their good records with the
central bank. Besides providing mediation services, the FMB also promotes its use to the general public and giving
more consumer awareness programs to educate Malaysian users; not only their rights as users, but also their
responsibilities and obligations as users8. As for the general consumer protection matter, there is now a formal
Consumer Tribunals where consumers can have a redress. Remedies given by the tribunal ranges from compensation
to being notified to the relevant authorities which, acts as an effective way of enforcement, despite not being legally-
binding.
4
Sometimes the parties would not show up in court, purposefully causing a delay in the trial. This contributed towards backlog in court cases in Malaysia.
5
The development of arbitration has been more robust especially with the coming into effect of the Arbitration Act 2005.
6
In fact, as it is, there are several ministries in the government that encourages disputes to firstly be solved in i.e. housing tribunal, industrial
relations tribunal which are presided by experts in those areas.
7
http://www.fmb.org.my/index.htm. For the purpose of clarity, the FMB only provides its mediation services for ‘consumer-to-business’ dispute
– i.e. between users and the financial services providers. Disputes between ‘business-to-business’ –i.e. between banks and other businesses or
other banks still predominantly is resolved in courts or via arbitration.
8
This is especially prevalent in insurance matters, whereby various claims have been rejected on non-disclosure reasons, which were not even realised by
some customers, who had not been made aware of such a duty to do so. Hence, Malaysian users are also more exposed through consumer awareness
programs on their rights and responsibilities to ensure that the system accords fair treatment to both consumers as well as the service providers on the
other end.
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3. Li Li Chong, Skills for Lawyers, LL.M in European Law 2011-2012
In the above two examples, mediation poses as a quick and effective way for people to get their grievances addressed
fairly, as there is a reputational risk at stake with their respective authorities, hence there is a moral deterrent
element which holds the service providers/businesses from acting in mala fide, or to blatantly ignore or defy the
outcome of mediation. Nevertheless, it is not as straight-forward as that between private parties which we will see in
turn.
The Malaysian Mediation Centre9 (MMC)
The MMC was established by the Malaysian Bar Council to cater for all types of civil, commercial and matrimonial
disputes and is accessible to all parties10 with the objective of promoting mediation as an effective means of ADR.
Unlike the FMB which has the financial limit on claims11, there is no monetary limit on the claims that come within the
jurisdiction of MMC and its scope of practice is unlimited12. Even though the MMC boost the advantage of protecting
confidentiality and providing utmost quality of mediation13, it is still not used to the extent as hoped by the Bar
Council. Hence, it has been recently proposed that Mediation should be incorporated into the Rule of the High Court
at the stage of case management to further encourage more referral of cases to the MMC, which use is yet to be
fully-exploited14.
FUTURE SETTING : The move towards ‘Court-annexed’ mediation15
Lately, the judiciary system in Malaysia went through a drastic system ‘overhaul’ to further improve and fasten case
resolution in court. The huge backlog in court cases have been identified as a top-priority problem and in the aim of
resolving this, the Chief Justice explored mediation as a viable way to encourage parties to mediate instead of going
to trial. In the long-run, the aim is to identify areas which would be beneficial to subject them to exhaust their dispute
resolution via mediation first, and if the differences are truly impossible to reconcile, as a last resort, they may turn to
the court. However, at the moment, Malaysia is undergoing an informal process of ‘trial and error’ to decide what
type of disputes are best resolved through mediation16. In order to achieve this, at the initiative of the Chief Justice,
Malaysian judges are recently encouraged to be more exposed to the practice of mediation through mediation
trainings and seminars for the judiciary to then be able to reach out to litigants to employ mediation for dispute
settlement17.
Although mediation in other parts of the world need not necessarily need legally-trained individuals to mediate, in
Malaysia, as this is in the context of ‘court-annexed mediation’, which is what you do to mediate after you have filed
in court; mediation in Malaysia is at large handled by lawyers. However, occasionally in tribunals that deals with more
9
http://www.malaysianbar.org.my/malaysian_mediation_centre_mmc.html
10
If mediation proves to be an effective channel for dispute resolution and garners sufficient support in Malaysia, there maybe a case of extending
mediation practice to other industries in the country too. However, this would depend on how the public reacts to the practice direction that has been
recently initiated by the Chief Justice into the judiciary system.
11
http://www.fmb.org.my/pc02.services.htm
12
Dato’ Cecil Abraham, ‘Alternative Dispute Resolution in Malaysia’, article accessible at http://www.aseanlawassociation.org/9GAdocs/w4_Malaysia.pdf
(last accessed 20 March 2012)
13
This is due to the fact that mediators will have to be accredited first, and must be properly trained. In addition to that, in order to qualify as a mediator,
the lawyer will have to be a practicing lawyer for at least 7 years.
14
Khutubul Zaman Bukhari, ‘Arbitration and Mediation in Malaysia’, article accessible at http://www.aseanlawassociation.org/docs/w4_malaysia.pdf (last
accessed 20 March 2012)
15
For purposes of clarity, this term is sometimes interchangeably referred to as ‘court-assisted’ mediation in other jurisdictions, and also various Malaysian
sources.
16
Shaila Koshy, ‘Opt for mediation’, article accessible at http://thestar.com.my/news/story.asp?file=/2010/2/14/nation/5677641&sec=nation (last
accessed 20 March 2012)
17
Shaila Koshy, ‘The case for mediation’, article accessible at http://thestar.com.my/news/story.asp?file=/2010/2/14/focus/5645878&sec=focus (last
accessed 20 March 2012)
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4. Li Li Chong, Skills for Lawyers, LL.M in European Law 2011-2012
specific technical issues such as housing and industrial relations matters; legally qualified mediators will be assisted by
technical experts.
CONCLUDING REMARKS –the case for mediation –return to peaceful, non-adversarial Asian tradition and values
“You cannot get blood from a stone but you can get some juice from a turnip if it is squeezed the right way”18
As it is the case like most law schools worldwide, Malaysian law students spend a lot of time learning how to litigate
but is exposed very little to the methods and importance of how to mediate. Realising this trend, the pioneer leading
university in Malaysia exposes its final year law students and LLM students19 to a 40-hour of mediation workshop by
mediation experts from Canada, Australia and the UK. Although Malaysia is benchmarking best practices of mediation
in Australia20 and Canada, Malaysia cannot directly ‘duplicate’ their systems, as the current intention is to experiment
first what fits best in the local legal culture in Malaysia. However, there are several instances which has been
identified as feasible and appropriate to be resolved via court-annexed mediation, such as21 –
a) Cases involving neighbourhood and community issues;
b) Issues of management, pay and dismissals in the workplace;
c) Small claims below RM25,000;
d) Tort and negligence claims; or
e) Cases which does not involve complicated issues of law such as construction and delivery contracts.
Consequently, we may see a change in appetite from adversarial litigation towards mediation, in line with the Asian
cultural traditional inclination towards peaceful manner of resolution. I am convinced that eventually once
Malaysians are more aware and realise the benefits of mediation, they will be encouraged to resort to it. All they
need is a ‘gentle push’ vis-à-vis the positive signal sent out by the judiciary and law schools in Malaysia to help
achieve the vision of making mediation more widely-used again. Given the success seen in the statutory mediation
method as described above, and more success stories of how mediation has been able to solve long-standing
disputes22 –such positive evidence in itself can be an impetus for change and help fasten the momentum towards
making mediation as the more viable and preferred way forward.
REFERENCES
1. Dato’ Cecil Abraham, ‘Alternative Dispute Resolution in Malaysia’, article accessible at
http://www.aseanlawassociation.org/9GAdocs/w4_Malaysia.pdf (last accessed 28 March 2012)
2. Khutubul Zaman Bukhari, ‘Arbitration and Mediation in Malaysia’, article accessible at
http://www.aseanlawassociation.org/docs/w4_malaysia.pdf (last accessed 28 March 2012)
3. Shaila Koshy, ‘The case for mediation’, article accessible at
http://thestar.com.my/news/story.asp?file=/2010/2/14/focus/5645878&sec=focus (last accessed 31 March 2012)
4. Shaila Koshy, ‘Opt for mediation’, article accessible at
http://thestar.com.my/news/story.asp?file=/2010/2/14/nation/5677641&sec=nation (last accessed 31 March 2012)
18
The word of wisdom of Justice Farley of the Ontario Supreme Court
19
It is noteworthy that the ADR course has been taught in the University of Malaya from 1999 to date by practicing experts, local and international guest
experts alike from time to time.
20
Malaysia often benchmark against other Commonwealth countries for best practices to adopt it in our system. Particularly for mediation, Malaysia
recognizes that mediation has been successful in Australia in many types of cases such as contract/commercial/ medical malpractise, motor vehicle,
negligence, real property, trust and fiduciary duties as well as wrongful dismissal cases.
21
These has been identified in line with various developments in Malaysia, and various quarters’ intention to make mediation mandatory such as in
industrial cases.
22
Shaila Koshy, ‘The case for mediation’, article accessible at http://thestar.com.my/news/story.asp?file=/2010/2/14/focus/5645878&sec=focus (last
accessed 20 March 2012)
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