The principle of ‘stare decisis’ in arbitration. A review of the High Court’s decision in Datuk Bandar Kuala Lumpur v Sri Tinggi Sdn Bhd and another application [2025] 10 MLJ 410
The principle of stare decisis is a Latin phrase which means simply “to stand by things decided”. In our judicial system, stare decisis refers to as judicial precedent. To legal practitioners. This is not a new concept in our courts.
The question is whether an arbitrator can refuse to make reference to case laws decided by the courts when coming to a decision in an arbitration?
The judgment of Nadzarin Wok Nordin J sitting in the High Court in the case of Datuk Bandar Kuala Lumpur v Sri Tinggi Sdn Bhd and another application [2025] 10 MLJ 410, makes clear the Malaysian courts’ approach on an arbitrator’s decision to disregard case laws in deciding on a dispute before him.
Background facts
This judgment arose from setting aside and enforcement applications of an arbitral award. Datuk Bandar Kuala Lumpur (“DBKL”), the employer of a project, appointed Sri Tinggi Sdn Bhd (“STSB”) as the contractor to carry out construction works. Disputes arose between them.
Pursuant to an arbitration clause, parties referred those disputes to arbitration.
The arbitrator held, contrary to various case laws that were brought to his attention, that clause 44 in the conditions of contract was to be read together with clause 43. In doing so, the arbitrator had disregarded established Malaysian case laws and the principle of stare decisis.
Pertinently, the arbitrator had in his award found that “The legal principle of stare decisis is only applicable to Court proceedings and not Arbitration. There is no similar principle of stare decisis in Arbitration due to the private and confidential nature of its proceedings.”. Clearly, he was of the view that the principle of stare decisis had no bearing on arbitration proceedings, and that case law was not binding on him.
Analysis and findings
The court found that the principle of stare decisis does, in fact, apply to arbitration proceedings as well as to court proceedings.
Briefly, the reasoning for this finding was as follows: –
- Reference was made to the Federal Court case of Kerajaan Malaysia & Ors v Tay Chai Huat [2012] 3 MLJ 149 where a precedent was defined as a judicial decision to serve future determinations in similar or analogous cases. A precedent serves to provide consistency and predictability in the law.
- The judgment delivered by Lim Chong Fong J in UDA Land Sdn Bhd v Puncak Sepakat Sdn Bhd [2020] MJU 892 was cited for the proposition that an arbitrator, being an inferior tribunal, is similarly bound by the principle of stare decisis.
- As the arbitrator had wrongly decided that the principle of stare decisis did not apply to arbitration proceedings, the arbitral award goes against public policy.
- Although the phrase “public policy” is not defined in the Arbitration Act 2005, it does appear multiple times. Clearly showing that in arbitration proceedings, the interest of the public ought to be taken into account.
- Therefore, his Lordship held that laws under the courts’ jurisdiction must include common law that has been developed through court cases and must be applied in deciding cases before inferior tribunals including arbitration proceedings.
It is trite law that judicial precedent applies in arbitration proceedings. That a failure to observe the principle of stare decisis is a ground to set aside an arbitral award on public policy grounds is an apt reminder that the domestic courts will step in to keep arbitral tribunals in check. In the present instance, the arbitral tribunal is reminded that a failure to observe the principle of stare decisis is not a mere error on a legal principle, but a matter that strikes at public policy and which renders an award liable to be set aside.
By:
Corrine Law Hui Yee
Associate, Gan Partnership