This case concerns the jurisdiction of arbitral tribunals to grant pre-award interest, where it involves arbitrations commenced prior to the amendment to the Arbitration Act 2005 in 2018, which empowered arbitral tribunals to award pre-award interests. 

 

In this case, Toshiba Corporation (“Toshiba”) claimed for a breach of warranties by Yong Ah Huat (“Yong”) for misrepresenting certain outstanding receivables at the time of the share sale agreement. The matter was referred to arbitration, where Toshiba claimed for the overvaluation of the sale shares in the sum of RM26.8 million, or alternatively for loss of the receivables in the sum of RM3.3 million.

 

After a full hearing, the arbitral tribunal rejected Toshiba’s overvaluation claim, but awarded damages for the loss of receivables. To this end, the arbitral tribunal awarded both pre- and post-award interest against Yong on the sum of RM 3.3 million (“Award”).

 

In this respect, it should be noted that the imposition of the pre-award interest was unusual because the Arbitration Act 2005 had only been amended to allow pre-award interests during the pendency of the arbitration, namely after the arbitration was commenced by Toshiba but prior to the delivery of the Award.

 

As such, Yong opposed the registration of the Award on various grounds, which included that the arbitral tribunal lacked the jurisdiction to grant the pre-award interest against him.

 

The High Court, in agreeing with this, held that the amendment to S33(6) of the Arbitration Act 2005 could not be applied to have retrospective effect stretching back to the date the arbitration was commenced. Since a party’s claim crystalises at the time it is submitted to arbitration, the Tribunal’s subsequent imposition of the pre-award interest on Yong had unfairly introduced a new liability, which was non-existent at the time of submission. As such, Yong’s vested rights (i.e.the right from being exempted from pre-award interest) ought to be protected, and not removed by imposing a further liability. 

 

Upon appeal, the Court of Appeal agreed with the High Court, and affirmed its refusal to register part of the Award relating to the pre-award interest. 

 

Alvin Tang acted for Yong Ah Huat.