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MANAGEMENT OF FOREIGN INVESTMENT DISPUTE IN MALAYSIA: A CRITICAL REVIEW FROM UNCTAD PERSPECTIVE
Abstract
In 2009, Malaysia lost the case of Salvors Sdn Bhd v. Malaysia, which resulted from a dispute over an investment agreement between Malaysia and the investor, a company owned and controlled by a British citizen. The investment agreement was to locate and salvage the wreck of the ship Diana off the coast of Melaka, a state of Malaysia. The dispute arose over the investor's additional claim of RM400,000, which the various Government departments refused to entertain. The matter was first taken to ad hoc arbitration, where Malaysia got the award in her favour. Later, the investor took it to the ICSID Tribunal at the World Bank, which reversed the judgment. There are a couple of reasons why Malaysia failed to effectively manage the dispute. First, there was no co-ordination between the federal government and the state government agencies. The former negotiated the agreement while the latter was involved at the level of implementation. This created a gap in the understanding of its provisions by the implementers at both levels of the government. For most of the time, the negotiators and implementers are not same. Second, there arose inconsistency and conflicts in the interpretation of rules, regulations and contracts. . For example, there was a conflict as to what type of artifacts would have been considered "related to Malaysian history and culture," which was not subject to the auction and which type of artifacts were considered recovered items and could have been sold. Then, another factor that led the parties to arbitration was the lack of any initiative to resolve the dispute by other alternative dispute resolution mechanisms, such as negotiation, conciliation/mediation, etc. This paper will critically review Malaysian approach to the management of investment dispute in general and of the Salvors Sdn Bhd case in particular. It will do so against dispute management model suggested by the United Nations Conference on Trade and Development (UNCTAD).
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