Arbitration Update: High Court Upholds Arbitral Award Against Jurisdiction and Public Policy Challenges

Introduction

On 21 January 2026, the High Court in MRCB Builders Sdn Bhd v Thien Hong Machinery (M) Sdn Bhd and another summon [2026] MLJU 263 dismissed an application to set aside an arbitral award and allowed its enforcement. The decision reinforces the Malaysian courts’ pro-arbitration stance, particularly in relation to jurisdictional objections, judicial estoppel, and the narrow scope of public policy challenges under section 37 of the Arbitration Act 2005 (“AA”). 

Brief facts

MRCB Builders Sdn Bhd (“MRCB”)  engaged Thien Hong Machinery (M) Sdn Bhd (“Thien Hong”) as a subcontractor to supply cranes for the Westin Desaru Resort project by entering into three machinery lease agreements, two of which contained arbitration clauses. Disputes subsequently arose over unpaid invoices issued by Thien Hong.

Thien Hong initially commenced Court proceedings, which MRCB successfully stayed in favour of arbitration under section 10 of AA. Following arbitration, the tribunal awarded Thien Hong approximately RM5.1 million and dismissed MRCB’s counterclaim for alleged overpayment.

MRCB subsequently applied to set aside the award on two principal grounds:

  • the tribunal lacked jurisdiction over 11 invoices issued after the expiry of the formal lease agreements, which MRCB contended arose from separate contracts; and
  • the award was contrary to public policy because it permits recovery for crane operations which were allegedly not at the project site, operated without valid certification, and operated after the expiry of the certification.

Jurisdiction — MRCB voluntarily submitted the entire dispute to arbitration

MRCB argued that the tribunal exceeded its jurisdiction by determining disputes relating to 11 invoices which allegedly fell outside the lease agreements containing arbitration clauses.  

The High Court rejected this argument and held that:

  • the 11 invoices formed part of the dispute referred to arbitration in the Shah Alam High Court stay proceedings; 
  • both parties had fully ventilated the issue during arbitration; 
  • the tribunal specifically invited further submissions on jurisdiction before making its decision; 
  • MRCB’s own position during the arbitration was that the 11 invoices formed part of the Lease Agreements, and in any event MRCB was estopped from denying jurisdiction after having referred the entire dispute to arbitration and participated fully in the proceedings;
  • the dispute therefore fell within the scope of the submission to arbitration; and
  • the arbitrator had not introduced issues outside the parties’ contemplation. 

Public policy and illegality

MRCB contended that the Award ought to be set aside pursuant to section 37(1)(b)(ii) of AA which provides that an award may be set aside by the High Court only if the High Court finds that the award is in conflict with the public policy of Malaysia. MRCB argued that the award offended public policy because certain cranes allegedly operated without valid certification, rendering the underlying claims unlawful. 

The High Court rejected this challenge, reaffirmed the Federal Court’s restrictive approach to public policy challenges in Jan De Nul (Malaysia) Sdn Bhd v Vincent Tan Chee Yioun [2019] 1 CLJ 1, and held that:

  • the complaints principally concerned the arbitrator’s findings of fact, which are not subject to appellate review by the Court; 
  • the arbitrator had already considered the evidence and found that MRCB knew of, permitted and benefitted from the crane operations; 
  • MRCB was complicit in the alleged regulatory non-compliance and did not suffer any damages arising from the operations; and 
  • the award did not reach the high threshold of  “patent injustice”, or “manifestly unlawful and unconscionable”, “substantial injustice”, “serious irregularity” and other similar serious flaws mentioned in Jan de Nul required to invoke the public policy ground under section 37 of AA.

Key takeaway

This decision underscores the Malaysian courts’ continued reluctance to interfere with arbitral awards absent clear excess of jurisdiction or serious breaches of public policy.

The case is significant in confirming that:

  • parties may be estopped from denying arbitral jurisdiction where they previously sought to refer disputes to arbitration; and
  • public policy challenges under section 37 AA remain narrowly construed and reserved for exceptional cases involving serious injustice or illegality.

This update is prepared by Lai Xuan Chi.

For more information, please reach out to your usual contact from our Arbitration Practice Group.

COPYRIGHT © 2026  SHEARN DELAMORE & CO. ALL RIGHTS RESERVED
THIS UPDATE IS ISSUED FOR THE INFORMATION OF THE CLIENTS OF THE FIRM AND COVERS LEGAL ISSUES IN A GENERAL WAY. 
THE CONTENTS ARE NOT INTENDED TO CONSTITUTE ANY ADVICE ON ANY SPECIFIC MATTER AND SHOULD NOT BE RELIED UPON AS A SUBSTITUTE FOR DETAILED LEGAL ADVICE ON SPECIFIC MATTERS OR TRANSACTIONS.
 

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