The Asian International Arbitration Centre (“<span class="news-text_medium">AIAC</span>”) <span class="news-text_italic-underline">Arbitration Rules 2026</span> (the “<span class="news-text_medium">AIAC Rules</span>”) and Malaysia’s <span class="news-text_italic-underline">Arbitration (Amendment) Act 2024 [Act A1737]</span> (the “<span class="news-text_medium">Amendment Act</span>”) both came into force on 1 January 2026. The Amendment Act introduces changes to the <span class="news-text_italic-underline">Arbitration Act 2005 [Act 646]</span>, while the new AIAC Rules update and expand the institutional framework for arbitrations administered by the AIAC. Taken together, these measures form part of Malaysia’s broader efforts to strengthen the efficiency, transparency and competitiveness of its arbitration and alternative dispute resolution landscape.
The AIAC Rules introduce a number of new features to the institution’s arbitration offering. A new AIAC Court of Arbitration is established, which is intended to support the administration and oversight of arbitrations. The AIAC Rules also contain a standalone provision on third-party funding (rule 31), reflecting the growing acceptance of funding arrangements in arbitration. In addition, existing streamlined procedures have been expanded, including summary determination (rule 9) and emergency arbitration (rules 12–14). The AIAC Rules further incorporate updated fairness and case-management mechanisms (including expanded grounds and procedures relating to challenges/removal of arbitrators), and introduce procedural expectations intended to streamline counterclaims and early case definition. The AIAC Rules further promote the use of mediation, encouraging parties to consider mediation before, during, or after arbitration proceedings (rule 49).
At the legislative level, the Amendment Act introduces a series of amendments to the <span class="news-text_italic-underline">Arbitration Act 2005</span>. One of the most significant reforms is the creation of a comprehensive statutory framework governing third-party funding in arbitration, set out in sections 46A to 46I. This framework abolishes the common law doctrines of maintenance and champerty and expressly permits the use of third-party funding in both domestic and international arbitrations seated in Malaysia. It also introduces disclosure obligations in relation to funding arrangements (including the obligation to disclose the existence of the funding agreement and the identity of the third-party funder, and to notify relevant stakeholders upon termination).
The Amendment Act also makes a number of other important changes. A new section 9A is introduced, allowing parties to expressly agree on the law applicable to their arbitration agreement. In the absence of such agreement, the applicable law will be the law of the seat of arbitration. This provision closely mirrors section 6A of the English <span class="news-text_italic-underline">Arbitration Act 1996</span>, which was introduced by the <span class="news-text_italic-underline">Arbitration Act 2025</span>. In addition, section 38(1) of the Malaysian <span class="news-text_italic-underline">Arbitration Act 2005</span> has been amended to provide for the automatic recognition of arbitral awards, whether rendered in Malaysia or abroad, while requiring an application to the High Court of Malaysia for enforcement. Previously, court applications were required for both recognition and enforcement. Section 33 has also been amended to expressly permit the use of digital and electronic signatures on arbitral awards.
These reforms have been accompanied by wider Malaysian dispute-resolution legislative developments and market-practice changes referenced in recent practitioner commentary, including (among others) amendments affecting data protection governance, the passage of a cross-border insolvency framework, and reforms to Malaysian trust law, each of which may shape dispute strategy and enforcement planning for parties doing business in Malaysia.
These institutional and legislative developments collectively modernise Malaysia’s arbitration framework and align it more closely with international best practices, particularly in relation to third-party funding, procedural efficiency and digitalisation.
