Telekom Malaysia Bhd v Obnet Sdn Bhd [2024] MLJU 2661

Federal Court (Putrajaya)

Validity – Oral pronouncements by an arbitral tribunal

(2)  Obnet appointed Telekom Malaysia Bhd to build the network infrastructure via a Metro Ethernet Services Agreement in 2007.

(3)  The SELNET Agreements and the Metro-E Agreement were terminated in 2009 due to disputes.

(4)  Obnet initiated arbitration against Telekom, alleging misuse of confidential information. Telekom counterclaimed.

(5)  The Arbitrator decided to bifurcate the arbitration — first to determine liability, then quantum.

(6)  On 26 June 2020, the Arbitrator orally ruled in favour of both parties (Obnet’s claim and Telekom’s counterclaim) but refused to publish a written award at that stage.

(7)  Telekom challenged this in the High Court, arguing the oral decision was invalid without a written award. The High Court and Court of Appeal dismissed Telekom’s application.

(a) The Federal Court answered this question in the negative. The Court held —

‘The oral pronouncement made by the Arbitrator on liability is the final determination on liability. Henceforth, the Arbitrator must comply with the requirements of the AA 2005 and must publish a written Award.’ (para [48]).

(b) The Federal Court held that under sections 2 and 33 of the AA 2005, an Award must be-

(i)        A decision on the substance of the dispute,

(ii)        Made in writing, and

(iii)        Must state reasons, date, and seat of arbitration (paras [22]–[24], [33]).

(c)  An oral decision does not fulfil these statutory requirements. The Court explained –

‘Section 33(1) of the AA 2005 excludes the possibility of the Arbitrator making an oral award. An Award other than in the form prescribed in the section will necessarily be invalid.’ (para [37])

‘The AA 2005 does not recognise an oral award… Thus, a decision on matters which are the substance of the dispute must be an Award and that Award must be in writing and duly signed.’ (para [37]).

(d) The Court further emphasized that the bifurcation of proceedings does not absolve the Arbitrator from complying with statutory requirements –

‘The Arbitrator’s decision to bifurcate the proceedings does not in any manner absolve him from the provisions of the Act.’ (para [36])

(e)  In rejecting the contrary approach of the lower courts, the Federal Court held –

The High Court and Court of Appeal erred in holding that the Act does not prescribe a timeline for an award to be published and that the Arbitrator can publish an award on liability at the end of arbitral proceedings.” (para [44]).

(f)   Ultimately, the Court found –

‘Without a valid decision on liability, the parties to the dispute and the Arbitral Tribunal cannot proceed with the assessment of damages.’ (para [46]).

1. The Federal Court allowed Telekom’s appeal and ruled that the oral pronouncement on liability was invalid as it failed to comply with sections 2 and 33 of the Arbitration Act 2005. The arbitration proceedings on quantum are stayed until a written award on liability is issued. Obnet is restrained from continuing arbitration until compliance. Telekom was awarded RM150,000 in costs, and RM80,000 previously paid is to be refunded by Obnet.

1. Oral decisions on substantive issues in arbitration are not valid awards under Malaysian law.
2. A written award is mandatory under the Arbitration Act 2005 for enforceability and continuation of proceedings.
3. Arbitrators must strictly comply with the form and content requirements of awards, even in bifurcated proceedings.
4. Parties have the right to challenge non-compliant arbitral decisions, and courts will intervene to uphold statutory mandates.