NULL AND VOID, INOPERATIVE OR INCAPABLE OF BEING PERFORMED

OF AN ARBITRATION AGREEMENT

GOH HWEH TZE

UNIVERSITI TEKNOLOGI MALAYSIA

NULL AND VOID, INOPERATIVE OR INCAPABLE OF BEING PERFORMED

OF AN ARBITRATION AGREEMENT

GOH HWEH TZE

A project report submitted in partial fulfillment of the

requirements for the award of the degree of

Master of Science in Construction Contract Management.

Faculty of Built Environment

Universiti Teknologi Malaysia

August 2016

iii

DEDICATION

Special thanks to my parents, my sisters and brothers, my supervisor and friends

for their endless helps, support and understandings

Thanks for Everything.

iv

ACKNOWLEDGEMENT

First of all, I would like to take this opportunity to express my deepest gratitude

to my supervisor Assoc. Prof. Sr Dr. Maizon Bte Hashim for her advice, assist and

guidance. The supervision and support that she gave truly help the progression and

smoothness of this research.

Thanks also to all the lecturers in course of Master of Science (Construction

Contract Management), Assoc. Prof. Sr Dr. Maizon Bte Hashim, En. Jamaludin

Yaakob, Dr Norazam Othman, Dr. Nur Emma Mustaffa, Dr Muzani Bin Mustapa for

their patient and kind advice during the process of completing the master project.

Furthermore, I would like to forward my appreciation to my family for their

care, moral support and understanding. Last but not least, I want to thank my friends

who direct or indirectly assist me in completing this study.

Thank you very much.

v

ABSTRACT

The parties must have a written arbitration agreement before referring their

dispute to arbitration. The party might refuse to refer their dispute to arbitration on the

ground that the arbitration agreement is “null and void, inoperative or incapable of

being performed”. This research is conducted to identify the circumstances that the

arbitration agreement is “null and void, inoperative or incapable of being performed”.

Thus, this research investigated eleven cases from Malayan Law Journal where the

courts held that the arbitration agreement is “null and void, inoperative or incapable of

being performed”. This can be a guideline for the parties who want to resolve their

dispute by arbitration. The methodology of this study is based on documentary analysis

with the assistance of Nvivo 11. From the analysis, there are five circumstances which

led to the arbitration agreement to be “null and void”. First, the agreement does not

have a clear wording to refer arbitration clause in another document. Second, there is

no acceptance by a party on the arbitration agreement. Third, the parties in dispute are

not the parties in the arbitration agreement. Fourth, the agreement does not show

intention to refer arbitration clause in another document. Fifth, the dispute does not

within the scope of the arbitration agreement. Besides, there are two circumstances

which led to the arbitration agreement to be “inoperative”. First, the party fails to

comply with the time frame stipulated in the arbitration agreement. Second, the

arbitration agreement incorporated the permissive word and there is another clause

which conflicts with the arbitration clause.

vi

ABSTRAK

Pihak-pihak mesti mempunyai perjanjian timbang tara bertulis sebelum

merujuk pertikaian mereka kepada timbangtara. Pihak itu mungkin enggan untuk

merujuk pertikaian mereka kepada timbang tara atas alasan bahawa perjanjian timbang

tara itu "batal dan tidak sah, tidak berkuat kuasa dan tidak berupaya untuk

dilaksanakan". Kajian ini dibuat untuk mengenal pasti keadaan perjanjian timbang tara

itu "batal dan tidak sah, tidak berkuat kuasa dan tidak berupaya untuk dilaksanakan".

Oleh itu, kajian ini menyiasat sebelas kes dari Malayan Law Journal yang mahkamah

memutuskan perjanjian timbang tara itu "batal dan tidak sah, tidak berkuat kuasa dan

tidak berupaya untuk dilaksanakan". Kajian ini boleh menjadi satu garis panduan bagi

pihak-pihak yang ingin menyelesaikan pertikaian mereka melalui timbang tara.

Metodologi kajian ini adalah berdasarkan analisis dokumentari dengan bantuan Nvivo

11. Dari analisis, terdapat lima keadaan menunjukkan bahawa perjanjian timbang tara

adalah "batal dan tidak sah". Pertama, perjanjian itu tidak mempunyai kata-kata yang

jelas merujuk fasal timbang tara dalam dokumen lain. Kedua, tidak ada penerimaan

kepada perjanjian timbang tara. Ketiga, pihak-pihak yang bersengketa bukan pihak-

pihak dalam perjanjian timbang tara. Keempat, perjanjian itu tidak menunjukkan niat

untuk merujuk fasal timbang tara dalam dokumen lain. Kelima, pertikaian itu tidak

dalam skop perjanjian timbang tara. Selain itu, terdapat dua keadaan menunjukkan

bahawa perjanjian timbang tara itu "tidak berkuat kuasa". Pertama, parti itu tidak

mematuhi tempoh masa yang ditetapkan dalam perjanjian timbang tara. Kedua,

perjanjian timbang tara itu mempunyai perkataan permisif dan ada klausa lain yang

bercanggah dengan fasal timbang tara .

vii

TABLE OF CONTENTS

CHAPTER TITLE PAGE

DECLARATION ii

DEDICATION iii

ACKNOWLEDGEMENTS iv

ABSTRACT v

ABSTRAK vi

TABLE OF CONTENTS vii

LIST OF TABLES x

LIST OF FIGURES xi

LIST OF ABBREVIATIONS xii

LIST OF CASES xiii

1 INTRODUCTION

1.1 Background of Study 1

1.2 Statement of Problem 3

1.3 Research Questions 8

1.4 Research Objective 8

1.5 Scope of Research 9

1.6 Significance of Research 9

1.7 Research Methodology 10

1.8 Chapter Organisation 14

1.9 Conclusion 16

viii

2 LITERATURE REVIEW

2.1 Introduction 17

2.2 Definition of Agreement 18

2.3 Definition of Arbitration 18

2.4 Arbitration Agreement 21

2.5 Circumstance that The Arbitration Agreement is

“Null and Void, Inoperative and Incapable of being

Performed” 23

2.6 Oral Arbitration Agreement 30

2.7 Written Arbitration Agreement 31

2.8 Importance of an Arbitration Agreement 34

2.9 Elements of an Arbitration Agreement 36

2.9.1 The Parties to the Arbitration 37

2.9.2 Clear Intention to Arbitrate 38

2.9.3 Scope of an Arbitration Agreement 40

2.9.4 Connect Arbitration to a Legal System 41

2.10 Incorporation of an Arbitration Clause by Reference 41

2.10.1 Basic Requirement for Incorporation of

An Arbitration Clause 42

2.11 Preliminary Considerations When Drafting an

Arbitration Agreement 44

2.12 Defective Arbitration Agreement 47

2.12.1 Causes and Effects of a Defective Arbitration

Agreement 51

2.13 Conclusion 58

3 RESEARCH METHODOLOGY

3.1 Introduction 60

3.2 Initial Stage – Preliminary Study 61

3.3 Second Stage – Literature Review 61

3.4 Third Stage – Data Collection 62

3.5 Fourth Stage – Data Analysis 62

ix

3.6 Fifth Stage – Writing Up 63

3.7 Conclusion 63

4 DATA ANALYSIS AND FINDINGS

4.1 Introduction 64

4.2 Circumstances that the Arbitration Agreement

is Considered “Null and Void, Inoperative and

Incapable of Being Performed” 65

4.2.1 Circumstances That the Arbitration Agreement

is “Null and Void” 65

4.2.2 Circumstances That the Arbitration Agreement

is Inoperative 85

4.3 Conclusion 95

5 CONCLUSION AND RECOMMENDATION

5.1 Introduction 106

5.2 Summary of Findings 107

5.3 Problems Encountered during Research 115

5.4 Future Research 115

5.5 Conclusion 116

REFERENCE 117

x

LIST OF TABLES

TABLE NO. TITLE PAGE

4.1 Summary of Cases 97

4.2 Summary of the Circumstances that the arbitration

Agreement Is “Null and Void, Inoperative or

Incapable of Being Performed” in Law Cases 101

xi

LIST OF FIGURES

FIGURE NO. TITLE PAGE

1.1 Research Methodology Flow Chart 13

xii

LIST OF ABBREVIATIONS

ABBREVIATIONS FULL NAME

DAB Dispute Adjudication Board

ICC International Chamber of Commerce

KBK Kejuruterean Bintai Kindenko Sdn. Bhd.

SIAC Singapore International Arbitration Centre

xiii

LIST OF CASES

NO. CASES PAGE

1. Anzen Limited and others v Hermes One Limited

[2016] UKPC 1 46

2 Arenson v. Arenson [1977] AC 405 20

3 Assar Senari Holdings Sdn Bhd v Teratai Sanjung

Holdings (M) Sdn Bhd [2011] MLJU 834 21

4 Aughton Ltd v MF Kent Services Ltd.

(1991)57 BLR 1 44

5 Ayer Hitam Tin Dredging Malaysia Bhd v YC Chin

Enterprises Sdn Bhd [1994] 2 MLJ 754 38

6 Best Re (L) Ltd v Ace Jerneh Insurance Bhd

[2015] 5 MLJ 513 43, 79, 111

7 Chuan Hup Agencies Pte Ltd v Global Minerals

(Sarawak) Sdn Bhd [1990] 1 MLJ 305 3

8 CLLS Power System Sdn Bhd v Sara Timur Sdn Bhd

[2015] 11 MLJ 485 82, 99, 105,

111

9 Dato' Teong Teck Kim & Ors V Dato' Teong Teck Leng

[1996] 1 MLJ 178 35

10 David Wilson Homes Ltd v Survey Services Ltd

and others [2001] 1 A11 ER 449 52

11 Doleman & Sons v Osset Corp [1912] 3 KB 257. 30

xiv

12 Duta Wajar Sdn Bhd v Pasukhas Construction Sdn Bhd

& Anor (2012) 4 CLJ 344 39, 69, 98,

104, 109

13 Ericsson AB v EADS Defence & Security Systems Ltd.

[2009] EWHC 2598 (TCC) 45, 47

14 Gatoil International Incorporated v National Iranian

Oil Company [1990] Lexis Citation 3088 4, 24, 25,

56

15 Golden Ocean Group Ltd v Humpuss Intermoda

Transportasi Tbk Ltd and another [2013] EWHC 1240 24, 85, 86

16 HKL Group Co Ltd v Rizq International Holdings Pte Ltd

[2013] SGHCR 5 48, 53

17 Insigma Technology Co. Ltd. v Alstom Technology Ltd.

(2009) SGCA 24 49

18 Indutech S.p.A. v. Algocentro Armazéns Gerais Ltda.

SEC 978 33, 69

19 Juara Serata Sdn Bhd v Alpharich Sdn Bhd

[2015] 6 MLJ 773 86, 87, 100,

105, 113

20 Kanematsu USA Inc. v. Advanced Telecommunications

Systems do Brasil Ltda. SEC 885 33, 69

21 Lembaga Pelabuhan Kelang v Kuala Dimensi Sdn Bhd

[2011] 2 MLJ 606 6, 46, 90,

98, 103, 114

22 Lucky-Goldstar International (HK) Ltd v Ng Moo

Kee Engineering Ltd [1993] 1 HKC 404 5, 6, 7

24, 25, 27

29, 55, 85

86

23 Mersing Construction and Engineering Sdn Bhd v

Kejuruteraan Bintai Kindenko Sdn Bhd & Ors

[2011] 3 MLJ 264 41, 43, 66,

97, 103, 108

xv

24 Majlis Perbandaran Alor Gajah v Sunrise

Teamtrade Sdn Bhd [2014] 7 MLJ 570 6

25 Modern Buildings v Limmer [1975] 1 WLR 1281 42

26 Paczy v Haendler & Natermann

[1981] 1 Lloyds Rep 302 25

27 Pershowa Leasing (M) Sdn Bhd v Kin Shipping

Line Sdn Bhd & Ors [1988] 1 MLJ 540 84, 97, 101

108

28 PLB-KH Bina Sdn Bhd v Hunza Trading Sdn Bhd

[2014] MLJU 1427 72, 95, 100

112

29 Plexus Cotton Ltd. v. Santana Têxtil S/A SEC 967 33, 69

30 Rightmove Sdn Bhd v YWP Construction Sdn Bhd

& Anor [2015] 7MLJ 687 5

31 Rhone Mediterranee Compagnia Francese v. Lauro

82-3523 23, 65, 107

32 Sime Engineering Sdn Bhd v Ahmad Zaki Resources

Berhad & Others [2011] MLJU 370 6, 28, 91, 93,

98, 103, 114,

115

33 Société Bomar Oil N.V. v Entreprise tunisienne

d'activités pétrolières (ETAP) 87-15.094 43, 66, 108

34 Suncast Sdn Bhd v Padang Indah Sdn Bhd

[1999] MLJU 31 72, 73, 97

101, 109

35 TNB Fuel Services Sdn Bhd v China National Coal

Group Corp [2013] MLJU 483 35

36 Total Safe Sdn Bhd v Tenaga Nasional Berhad Anor

TNB Generation Sdn Bhd [2009] MLJU 1247 72, 75, 97

102, 109

37 Travelport Global Distribution System B.V

v Bellview Airlines Limited 2012 WL 3925856 29

xvi

38 Vitol BV v Compagnie Europeene des Petroles

[1988] 1 Lloyds’s Rep 574 39

39 Westbury Tubular (M) Sdn Bhd v Ahmad

Zaki Sdn Bhd [2001] 5 CLJ 67 46, 51

40 Y& Y Property Development Sdn Bhd v

CityLite Letrik Sdn Bhd [2015] 9 MLJ 411 74, 99, 104

109, 111

41 ZAQ Construction Sdn Bhd & Anor v Putrajaya.

Holdings Sdn Bhd [2014] 10 MLJ 633 25, 29

42 Zhejiang Province Garment Import and Export Co

v Siemssen & Co [1993] ADRLJ 183. 37

CHAPTER 1

INTRODUCTION

CHAPTER 1

INTRODUCTION

1.1 Background of Study

Disputes in business are inevitable and this situation is similarly applied in the

construction industry. Construction industry is high risk in nature. This is because

construction industry involved a lot of parties, information and monies. This situation

results in a complex and dynamic project environment. Besides, projects are usually

long-term transactions. Hence, it is impossible for the parties involved to solve every

detail and forecast every possibility or contingency at the beginning of the project.

Consequently, disputes will easily occur in the construction industry. Disputes can arise

within this sector for all sorts of reasons and it can be resolved by several possible ways.

Construction disputes are generally resolved by litigation or arbitration or

adjudication. There is some standard forms in Malaysia provide arbitration as dispute

resolution mechanisms. There are clause 47.3 for CIDB (2000), clause 34.5 form PAM

2006 and clause 66 for PWD 203(Rev.1/2010). In clause 66.1 under PWD 203A (Rev.1/

2010), once dispute occurs, the first means of resolving it is the officer named in

2

Appendix. If the dispute is not resolved by the officer named in Appendix, such dispute

shall be referred to arbitration1.

Arbitration is an alternative dispute resolution where the contractual parties

agree to find a neutral third person to listen and make a decision or award from the facts

(Sundra Rajoo, 2016)2. The common features of an arbitration are consensual process,

enforceable agreement, private and confidential, final and binding award and cross

application of laws and rules. The first arbitration act in Malaysia was Arbitration Act

1952 and later substituted by Arbitration Act 2005. This change is needed to follow the

requirements of the user and the new decade.

In certain situation, a party may not refer the dispute to arbitration, but choose

to refer to court. Based on section 10 under the Arbitration Act 2005, another party may

apply for a stay of proceedings to court. The Court is bounded by Arbitration Act 2005

to grant for the stay. “Null and void, inoperative or incapable of being performed” is

one of the conditions that the court would consider when making a decision for the stay.

1 PWD 203A (Revision 2010), Clause 66.3. 2 Sundra Rajoo, 2016. International Commercial Arbitration - Basic Concepts and Introduction to

Practice and Procedure, Kuala Lumpur: KLRCA.

3

1.2 Statement of Problem

Malaysian Arbitration Act 2005 was a long-awaited and would bring changes

to the arbitration practice in Malaysia. Arbitration Act 2005 come into operation on

15th March 2006. Parliament intended to encourage the parties to resolve their disputes

through arbitration as well as to control the Court’s participation in reviewing and

setting aside arbitral decisions. Until now this Act is still in its infancy as the

jurisprudence surrounding it is still developing (Ashok Kumar Mahadev Ranai, 2011)3.

As it developed, there were various explanations of the provisions and diverse

approaches taken by the courts (Ashok Kumar Mahadev Ranai, 2011)4. One of the

reasons for these different approaches is due to the courts being unfamiliar with the

arbitration process and the UNCITRAL Model Law (Ashok Kumar Mahadev Ranai,

2011).

The parties must have consent to arbitration and such consent is expressed

through an arbitration agreement. However, when a dispute arises, a contractual party

may refer the dispute to court. Another contractual party may subsequently apply for a

stay of proceedings to court in order to resolve the disputes in arbitration. In this

circumstance, the applicant who applies for the stay of proceeding is needed to find

evidence to show that the arbitration contract is valid5 while the respondent needs to

prove that the arbitration is “null and void, inoperative or incapable of being performed”.

The contractual parties cannot refer their disputes to arbitration if the arbitration

agreement is “null and void, inoperative or incapable of being performed”. This can be

shown in the Articles of New York Convention and UNCITRAL Model Law. Article

II (3) of New York Convention demonstrated that a seized court shall refer the dispute

3 Ashok Kumar Mahadev Ranai. 5 Years since the Enactment of Arbitration Act 2005 and the

Arbitration (Amendment) Bill 2011. Berita Timbangtara. 2011. PP11580/04/2010 (023947): 23-28. 4 Ibid. 5 Chuan Hup Agencies Pte Ltd v Global Minerals (Sarawak) Sdn Bhd [1990] 1 MLJ 305

4

subject to an arbitration clause to arbitration “unless it finds that the said agreement is

null and void, inoperative or incapable of being performed” and Article 8 of

UNCITRAL Model law stipulated that:

“A court before which an action is brought in a matter which is the

subject of an arbitration agreement shall, if a party so requests not later

than when submitting his first statement on the substance of the dispute,

refer the parties to arbitration unless it finds that the agreement is null

and void, inoperative or incapable of being performed.”6

However, both New York Convention Article II (3) and UNCITRAL Model

law Article 8 do not clarify how the court could find the arbitration agreement invalid

(Emmanuel Gaillard & Yas Banifatemi, 2002; Zheng, 2014).7 This is because New

York Convention and UNCITRAL Model law do not provide rules to decide the

validity of an arbitration agreement (Zheng, 2014).8 Bingham; Taylor LJJ in the case

of Gatoil International Incorporated v National Iranian Oil Company9 also agreed that

the meaning of inoperative is not clear. The learned judge said:

“…Arbitration agreements are not to be enforced if they are null and void

-- a point which may appear obvious; nor are they to be enforced if the

arbitration agreement is "inoperative". The meaning of that expression

may not be entirely clear, although Mustill & Boyd suggest some

examples on page 464 of Commercial Arbitration.”10

6 Article 8 of UNCITRAL Model Law 7 Emmanuel Gaillard & Yas Banifatemi, 2002. Negative Effect of Competence-Competence: The Rule

of Priority in Favour of the Arbitrators. Int'l Arb. Rep., 17(1), p. 27.

Zheng, S. T., 2014. Jurisdiction and Arbitration Agreement in International Commercial Law. New

York: Routledge, see also Emmanuel Gaillard & Yas Banifatemi, 2002. Negative Effect of

Competence-Competence: The Rule of Priority in Favour of the Arbitrators. Int'l Arb. Rep., 1(17),

p.27. 8 Ibid. 9 [1990] Lexis Citation 3088 10 Ibid.

5

In Malaysia, there is a similar provision as stated in Section 10 (1) of Arbitration

Act 2005, the court shall allow a stay unless the arbitration agreement is “null and void,

inoperative or incapable of being performed”. “Null and void, inoperative or incapable

of being performed” of an arbitration agreement is a condition that affects the court’s

decision regarding the stay of proceeding. If the arbitration agreement “null and void,

inoperative or incapable of being performed” the court would not grant for stay of

proceeding. As a result, the disputes needed to solve by the court rather than an

arbitrator. But the Arbitration Act 2005 also does not clarify how the court could find

the arbitration agreement “null and void, inoperative or incapable of being performed”.

However, it is difficult to identify the invalidity of the arbitration agreement.

The arbitration clause is considered as defective arbitration clause when the venue is

unclear (Surya Prakash; Albin, 2012).11 However, there is not necessary that the unclear

venue in an arbitration clause will cause the arbitration agreement to become “null and

void, inoperative or incapable to be performed”. This can be shown in the case of Lucky-

Goldstar International (HK) Ltd v Ng Moo Kee Engineering Ltd,12 although the place

of arbitration was unclear, the Court considered the arbitration clause valid since the

arbitration clause gives clear intention of the parties to arbitrate.

Besides, in the case of Rightmove Sdn Bhd v YWP Construction Sdn Bhd &

Anor,13 the defendant had fulfilled the pre-condition in Section 10(1) of Arbitration Act

2005 and apply a stay. The plaintiff could only challenge if he could show that the

arbitration agreement was “null and void, inoperative or incapable of being performed”.

However, the plaintiff failed to show that the arbitration agreement was invalid and the

Court finally granted a stay of proceeding.

11 Surya Prakash; Albin, G. T., 2012. Critical Issues In International Commercial Arbitration, Bhopal:

Centre For Business And Commercial Laws (CBCL). 12 [1993] 1 HKC 404 13 [2015] 7MLJ 687.

6

It seems that it was difficult to prove that the arbitration agreement is “null and

void, inoperative or incapable of being performed”. However, in Malaysia, there are

cases held that the arbitration agreement is “null and void, inoperative or incapable of

being performed” because the arbitration clause has used permissive word “may”. This

can be seemed in the case Lembaga Pelabuhan Kelang v Kuala Dimensi Sdn Bhd14 and

Sime Engineering Sdn Bhd v Ahmad Zaki Resources Berhad & Others.15

However, even the arbitration clause contains the permissive word “may”, the

court might decide the arbitration clause is valid. This can be shown in High Court case

of Majlis Perbandaran Alor Gajah v Sunrise Teamtrade Sdn Bhd16 had held that the

permissive word “may” in an arbitration clause have a mandatory effect and the

arbitration agreement will not become “null and void, inoperative or incapable of being

performed”.

Kaplan J in the case of Lucky-Goldstar International (HK) Ltd v Ng Moo Kee

Engineering Ltd17 stated that the disputes might happen because of the poor drafting of

the arbitration agreement. Kaplan J also highlighted that many contracts have the

difficulty in drafting an arbitration clause. Kaplan J said

“This not the first case with which I have had to deal where the arbitration

clause has left something to be desired. Many contract drafters seem to

have difficulty in the fairly simple task of drafting an arbitration clause

or even replicating a standard form clause. Arbitral institutions and

associations go to the trouble of drafting standard form arbitration clauses

14 [2011] 2 MLJ 606. 15 [2011] MLJU 370. 16 [2014] 7 MLJ 570 17 [1993] 1 HKC 404.

7

and disseminating them for the benefit of users, yet in far too high a

percentage of cases, something goes wrong.”18

This would cause both parties waste a lot of time and money. Kaplan J in the

case of Lucky-Goldstar International (HK) Ltd c Ng Moo Kee Engineering Ltd 19 also

stated that “A badly drafted clause leads to disputes and wasted costs, both of which

are anathema to the arbitral process.”20

To sum up, the arbitration agreement is important in enforcing the arbitration.

Basically, arbitration not enforceable unless the parties have an arbitration agreement

(Stephenson, Arbitration For Contractors, 1987).21 Therefore, an arbitration agreement

is vital since there cannot be a valid arbitral process without an arbitration agreement

(Seriki, 2015). 22

18 Ibid., at page 408. 19 Ibid. 20 Ibid., at page 409. 21 Stephenson, D. A., 1987. Arbitration For Contractors. 2nd ed. London: International Thompson

Organisation. 22 Seriki, H., 2015. Injunction Relief And International Arbitration. New York: Informa Law. ,pp. 1.

8

1.3 Research Questions

From the problem statement, some questions can be found. Those questions are

listed as follows:

(a) What are the circumstances that the arbitration agreement is “null and void,

inoperative or incapable of being performed”?

(b) What is defective arbitration clause?

(c) In what situation an arbitration clause will become defective?

There are some other questions that can be asked related to the issue, but for the

purpose of this study, the main focus is only on question no.1 i.e. What are the

circumstances that the arbitration agreement is “null and void, inoperative or incapable

of being performed”?

1.4 Research Objective

From the problem statement, the research objective of this research is to identify

the circumstances that the arbitration agreement is “null and void, inoperative or

incapable of being performed”.

9

1.5 Scope of Research

This research is limited to the cases related to the discussion of “null and void,

inoperative or incapable of being performed” of arbitration agreement recorded in

Malaysian Law Journal. Significant cases that the court held the arbitration agreement

is “null and void, inoperative or incapable of being performed” would be collected for

the purpose of case analysis. There is no time frame limitation as to the data collection.

This is because the issue of “null and void, inoperative or incapable of being performed”

of arbitration agreement can be raised from both Arbitration Act 1952 and Arbitration

Act 2005.

1.6 Significance of the Research

Arbitration is one of the preferred dispute resolutions in the construction

industry. There are standard forms of contract that are adopted in Malaysia for example,

the PAM 2006 Form and PWD 203A (Rev. 2010) provide the provision for arbitration

as dispute resolution.

Understanding which conditions that an arbitration agreement is classified as

“null and void, inoperative or incapable of being performed” is important when both

parties having different opinions on the method to resolve the dispute. Both the

contracting parties would want to know the circumstances that the arbitration agreement

is “null and void, inoperative or incapable of being performed”. Whether the application

is granted or refused is important for the parties to know which kind of step amount to

“null and void, inoperative or incapable of being performed” of arbitration agreement

as per Arbitration Act 2005 section 10(1).

10

Furthermore, it can be a guideline for the court to identify the circumstances

that the arbitration agreement is “null and void, inoperative or incapable of being

performed”.

Finally, this research can use as a reference for students which study on the

subject of arbitration. This research will increase the knowledge of students in the

arbitration.

1.7 Research Methodology

Research Methodology is essential to attain objective of study. It is vital to

ensure work schedule is followed closely throughout this study. According to Naoum

(2007), research design and methodology explain about how the problem addressed in

the study will be investigated and the tools applied in studying the problem. Figure 1.1

shows the stages that had been used by the researcher to complete this study.

Stage 1: Development of Research Proposal

The main purposes for this stage is to determine the research area, issues, scope

and significance of the study. Besides, the from the reading of literature materials such

as articles, reports and books, discussing with supervisor and friends and referring other

current dissertations and journal, the researcher can also determine the topic and

subsequently write up a research proposal.

11

Stage 2: Development of Theory Framework (Literature Review)

Literature review is an importance process to develop theory for this research.

At this stage, the researcher has read various types of materials to appraise and analyse

the knowledge, suggestions and theories that had been developed by other researchers.

These materials are including books from library of UTM (Perpustakaan Sultanah

Zanariah Universiti Teknologi Malaysia), online articles and law cases from database

provided by UTM, articles from others website and previous dissertations.

Stage 3: Data Collection

For data collection, law cases are collected as primary data. The primary data

are the cases laws which the arbitration agreement had been held as “null and void,

inoperative or incapable of being performed”. The main sources for the primary data of

the research were abstracted from the Malayan Law Journal (MLJ) via the Lexis-

Malaysia website through the Perpustakaan Sultanah Zanariah, Universiti Teknologi

Malaysia subscriber. The primary data were based on the court cases that had been

decided in the Malaysian Court judicial throughout the year. There is no timeframe

limitation for the court case selection. The law cases would be collected for the purpose

of case analysis on the next stage.

Stage 4 Data Analysis

Documentary analysis of the relevant case law was the main activity to be

completed in the data analysis stage. The case law had been carefully reviewed, with

special attention paid to the facts of the case, the issues and the judicial interpretation

by the courts through their judgements.

12

Stage 5: Writing Up

At this stage, all the results of analysis are write up in the report in the structure

and format in accordance to the manual provided by UTM (UTM Thesis Manual 2015).

13

Figure 1.1 Research Methodology Flow Chart

z

l

A

A

_

_ _ _ _ _a

PROCESS METHOD

Stage 1:

Develop

Research

Proposal

- Determine Issues and Problem

- Determine Research Topic

- Determine Research Question

- Determine Research objective

Literature Review

- Reading books, journals

dand reports

- Discuss with supervisor and

acolleagues

- Looking at other examples

dof recent research projects.

Stage 2:

Develop

Theory

-Literature review

Literature Review

-Reading books, journals,

thesis, report and

newspapers, internet

resources

Stage 3:

Data

Collection

- Determine the key word to search for the

cases:

-“void or null or inoperative or incapable of

being performed and arbitration agreement”

-Cases law is collect by using

the key word

Stage 4:

Data

Analysis

- The collected data will be analysed to achieve

objective of the study

- The cases related to

discussion of null and void,

inoperative or incapable of

being performed of

arbitration agreement would

be analysed and interpret

Stage 5:

Writing Up

- Structure and writing up the research

- Identify the format for thesis

- Check the references

- UTM Thesis Manual 2015

14

1.8 Chapter Organisation

This research involves 5 chapters as follow:

Chapter 1: Introduction

Chapter 1 provides an overview of the background of the study, problem

statement, research question, research objective, scope and significance of the research.

Chapter 2: Literature Review

This chapter provides comprehensive background information about the

research to the readers. Chapter 2 contains theories and definitions for arbitration,

arbitration agreement and “null and void, inoperative or incapable of being performed.

The circumstances that the arbitration agreement is “null and void, inoperative or

incapable of being performed” are discussed in this section. Besides, this chapter also

explains about the elements of arbitration agreement, the importance of arbitration

agreement, incorporation arbitration clause by reference and defective arbitration

agreement.

Chapter 3 Research Methodology

Chapter 3 provides an overview of how the research is planned to be conducted.

This chapter explains in details regarding the research methodology used and the

methods used to collect data. Method used to analyse data are described in this section.

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Chapter 4 Data Analysis

This chapter shows the findings and discussion in accordance with the data

collected. All the data collected are analysed by using Nvivo 11.

Chapter 5 Conclusion and Recommendation

Chapter 4 involves the summary outcome of the study, limitations of the study

and recommendation for future research.

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1.9 Conclusion

In conclusion, if an arbitration agreement is “null and void, inoperative or

incapable of being performed”, the court will not grant a stay of proceeding. However,

there are some cases as discussed in problem statement shown that there are people still

confused with which circumstances that an arbitration agreement can be considered

“null and void, inoperative or incapable of being performed”. Hence, it is important to

identify in which circumstance that the arbitration agreement can be considered as “null

and void, inoperative and incapable to be performed”.

There are five stages in order to achieve the objective which including the

development of research proposal, development of theory framework, data collection,

data analysis and writing up.

The following chapter will discuss the development of theory framework

(literature review) which comprising the definition, and concept or theory about the

“null and void, inoperative or incapable of being performed” of an arbitration

agreement.

CHAPTER 2

LITERATURE REVIEW

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