Can Arbitration Proceedings Be Stayed in Malaysia? Section 10 AA 2005 Explained

When a party to an arbitration agreement is sued in a Malaysian court, the immediate question is whether those court proceedings can, and should, be halted in favour of arbitration. The answer, under section 10 of the Arbitration Act 2005 (Act 646), is a firm yes: the court must grant a stay of proceedings Malaysia provided the statutory conditions are met and the applicant has not forfeited the right by taking steps in the litigation. This mandatory stay arbitration Malaysia mechanism reflects the country’s strong pro-arbitration policy and its alignment with the UNCITRAL Model Law.

Understanding exactly how and when to invoke section 10, and the traps that can destroy the right, is essential knowledge for any in-house counsel or dispute lawyer advising on an arbitration clause Malaysia dispute. This guide sets out the complete practitioner playbook: the legal test, timing rules, procedural steps, non-signatory issues and waiver pitfalls, all updated to reflect appellate developments through mid-2026.

Can Arbitration Proceedings Be Stayed?, The Short Answer

Yes. Under section 10 of the Arbitration Act 2005, a court is obliged to stay proceedings brought in breach of an arbitration agreement, provided the applicant satisfies two threshold requirements:

• A valid arbitration agreement exists that covers the dispute in question.
• The application is made before taking any other steps in the proceedings, meaning the applicant has not engaged with the court’s substantive process.

The stay is mandatory, not discretionary. A court may only refuse it if satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed. If you are a defendant who has just been served with a writ or originating summons and your contract contains an arbitration clause, your immediate priorities are:

• Do not file a defence or any interlocutory application that addresses the merits.
• Prepare an application under section 10 supported by an affidavit exhibiting the arbitration agreement.
• File and serve that application as soon as practicable, ideally before any case-management direction is entered.

Every day of delay, and every procedural step taken, increases the risk that the court will find the right to arbitrate has been waived.

Legal Framework, Section 10 Arbitration Act 2005 and Related Instruments

Exact Statutory Text

Section 10(1) of the Arbitration Act 2005 provides, in material part: “A court before which proceedings are brought in respect of a matter which is the subject of an arbitration agreement shall, where a party makes an application before taking any other steps in the proceedings, stay those proceedings and refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.” This language mirrors Article 8 of the UNCITRAL Model Law and was enacted to give courts no residual discretion once the preconditions are satisfied.

Rules of Court 2012, Procedural Link

The procedural machinery for a stay application is found in the Rules of Court 2012 (P.U. (A) 205/2012). A stay is sought by way of a notice of application (formerly enclosure-based summons-in-chambers) supported by an affidavit in support. The applicant must identify the specific arbitration agreement, confirm the scope of the dispute and demonstrate that no other step has been taken. Service of the sealed application on all parties follows the general rules on service of interlocutory applications under the Rules of Court 2012 stay of proceedings provisions.

Relevant Case Law Hierarchy

Malaysian courts operate a three-tier hierarchy, High Court, Court of Appeal and Federal Court, and the interpretation of section 10 Arbitration Act 2005 has been refined at every level. At the stay stage, Malaysian appellate courts have consistently held that the question of whether a valid arbitration agreement exists is a question of law that the court must determine, whereas the question of whether the dispute falls within the scope of that agreement may involve mixed questions of law and fact. Recent appellate guidance from 2024 through 2026 has further clarified what constitutes “taking steps” and how courts should approach optional arbitration clauses, issues that directly affect whether the mandatory stay is available.

Industry observers expect that these clarifications will make stay applications more predictable, but counsel must still attach the leading authorities to every application to assist the judge.

When a Stay Is Mandatory v. Discretionary, Core Tests

The critical feature of section 10 is that the stay is mandatory. Once the applicant demonstrates (a) the existence of an arbitration agreement covering the dispute and (b) that no other step has been taken, the court has no discretion to refuse. This marks a deliberate departure from earlier Malaysian law, which gave courts a broader discretion to refuse stays if they considered litigation more appropriate.

The only gateway to refusal lies in the three statutory exceptions. The court may decline the stay if it finds that the arbitration agreement is:

• Null and void, the agreement was never validly formed, for example because of incapacity, fraud vitiating consent or illegality at the root of the contract.
• Inoperative, the agreement once existed but has ceased to have effect, for instance because the parties subsequently agreed to litigate instead, or the arbitration clause was superseded by a later contract.
• Incapable of being performed, practical impossibility prevents the arbitration from proceeding, such as where the named arbitral institution no longer exists and the clause does not permit an alternative appointment mechanism.

The burden of proving one of these exceptions rests on the party opposing the stay. In practice, courts set a high threshold: mere allegations of fraud in the underlying contract, or arguments that the dispute is “too complex” for arbitration, are insufficient to defeat the mandatory stay arbitration Malaysia mechanism.

What the Court Decides at the Stay Stage

At the section 10 hearing the court does not decide the merits of the underlying dispute. Its inquiry is confined to the existence, validity and scope of the arbitration agreement. Malaysian appellate courts have emphasised that where the question is purely one of law, such as the construction of a clause, the court must resolve it. Where disputed facts bear on the existence or scope of the agreement, the court may examine affidavit evidence, but it should not conduct a full trial of the factual issues. This distinction matters tactically: if counsel can frame the issue as a straightforward legal question of clause construction, the stay hearing is likely to be shorter and the outcome more predictable.

Timing, “Before Taking Any Other Steps” and What Counts as a Step

The Rule and Why Timing Matters

Section 10 conditions the right to a stay on the applicant making the application before taking any other steps in the proceedings. This phrase imposes a strict timing discipline. Once a party takes a substantive step that signals acceptance of the court’s jurisdiction to determine the dispute, the right to a mandatory stay is lost. The question of what amounts to a “step” has generated substantial case law and is the single most common reason for stay applications to fail.

Common Actions, Will They Preclude a Stay?

Tactical Guidance

The safest course is to file the section 10 stay application as the first step after entering an appearance, before any case-management hearing, before filing any defence and before seeking any interlocutory relief that touches the merits. If urgent protective relief is needed (for example, a freezing order), counsel should seek it from an emergency arbitrator under the relevant institutional rules where possible, or, if court relief is unavoidable, expressly state in the application that the party reserves its right to apply for a stay and does not submit to the court’s jurisdiction on the merits. Preserving a written record of these reservations is vital.

Procedure, How to Apply for a Section 10 Stay of Proceedings Malaysia

Filing Requirements and Sample Timeline

The application is made by way of a notice of application (under the Rules of Court 2012) supported by an affidavit in support. The typical procedural timeline is as follows:

• Day 1–3: Receive the writ or originating summons. Enter appearance (memorandum of appearance), this alone is not a “step” and does not prejudice the right to a stay.
• Day 3–7: Prepare the notice of application for a stay under section 10, together with the supporting affidavit. File and seal the application at the court registry.
• Day 7–10: Serve the sealed application and supporting affidavit on all parties in accordance with the Rules of Court 2012.
• Day 14–28: The opposing party files an affidavit in reply. Hearing date is fixed, in most Malaysian High Courts, interlocutory applications can be heard within three to six weeks of filing.
• Hearing day: The court hears submissions, reviews affidavit evidence, and rules on whether the statutory conditions are met.

The entire process, from service of the writ to a stay order, can reasonably be completed within four to eight weeks in a well-managed case.

Affidavit Checklist, Evidence to Include

The affidavit in support of a section 10 stay application should exhibit and address the following:

• The arbitration agreement. Exhibit the full contract or, at minimum, the arbitration clause and any supplementary agreements referencing arbitration.
• Scope confirmation. Explain how the claims in the writ fall within the scope of the arbitration clause.
• No steps taken. State expressly that the applicant has not filed a defence, counterclaim or any interlocutory application addressing the merits.
• Timeline of events. Set out, chronologically, the date of service, date of appearance and date of the present application to demonstrate prompt action.
• Authority of signatory. If the arbitration agreement was signed by an agent or under a power of attorney, exhibit evidence of authority.
• Correspondence. Exhibit any pre-action correspondence invoking the arbitration clause or proposing arbitration, to reinforce the applicant’s consistent position.
• Leading authorities. Although not exhibited in the affidavit itself, the written submissions should attach key appellate decisions supporting the mandatory nature of the stay.

Hearing and Evidence

Stay applications under section 10 are typically decided on affidavit evidence alone. Oral evidence is rarely ordered at this stage, and courts are generally reluctant to permit cross-examination of deponents unless a critical factual dispute bears directly on the existence or validity of the arbitration agreement. Counsel should be aware, however, that if the opposing party raises serious allegations, such as forgery of the arbitration clause or that the signatory lacked authority, the court may direct limited oral evidence or a further round of affidavits. The practical implication is that the initial affidavit must be comprehensive: gaps in the evidence at the filing stage are difficult to remedy later without appearing to have taken further steps.

Non-Signatories, Joinder and Section 10

Principles Applying to Non-Parties

One of the more complex areas of section 10 practice concerns applications by or against non-signatories. The general rule under Malaysian law, consistent with international arbitration principles, is that an arbitration agreement binds only its parties. However, courts have recognised several exceptions under which a non-signatory may invoke or be bound by an arbitration clause:

• Agency. Where the signatory executed the arbitration agreement as agent for the non-signatory, and the agency relationship is established on the evidence.
• Assignment. Where the benefit and burden of a contract containing an arbitration clause have been validly assigned to the non-signatory.
• Estoppel. Where the non-signatory’s conduct, for example, performing obligations under the contract or directly benefiting from its terms, estops it from denying the existence of the arbitration agreement.
• Group of companies doctrine. Although applied cautiously in Malaysia, courts have considered whether the corporate structure and conduct of related entities justify extending the arbitration clause to a non-signatory affiliate.

How Courts Treat Non-Party Stay Applications

When a non-signatory applies for a stay under section 10, the court must first determine whether that party is entitled to rely on the arbitration agreement at all. This is a threshold question. The non-signatory bears the burden of proving, on the balance of probabilities, one of the recognised bases for extending the agreement. Early indications from recent appellate commentary suggest that Malaysian courts are willing to entertain non-signatory stay applications, particularly where assignment or agency is clearly documented, but will scrutinise the evidence carefully. Where the position is uncertain, a court may dismiss the non-signatory’s application without prejudice to the arbitral tribunal determining its own jurisdiction under the competence-competence principle.

Waiver, Conduct and Estoppel, When the Right to Arbitrate Is Lost

What Conduct Constitutes Waiver

Even where a valid arbitration agreement exists and the dispute falls within its scope, a party can lose the right to a mandatory stay if its conduct amounts to a waiver of the right to arbitrate. Malaysian courts have treated the following types of conduct as waiver:

• Filing a defence on the merits, the single most definitive act of waiver.
• Participating in discovery or interrogatories, requesting or responding to merits-related disclosure.
• Applying for summary judgment or striking out on the merits, engaging with the court’s adjudicative process.
• Agreeing to case-management directions, particularly directions that set a trial timetable or fix the scope of evidence.
• Unreasonable delay in applying for the stay, even where no single step is taken, prolonged inaction coupled with participation in procedural hearings may, in aggregate, amount to waiver.

How to Argue No Waiver Occurred

If a party has taken some procedural step but argues that it did not amount to waiver, the key considerations are: (a) whether the step was taken voluntarily or under compulsion of a court order, (b) whether the step addressed the merits of the dispute or was purely procedural or protective, and (c) whether the party expressly reserved its right to arbitrate in writing at the time of taking the step. Courts will examine the totality of the conduct.

The safest approach is to include a clear written reservation in every document filed, stating that the filing is without prejudice to the party’s right to apply for a stay under section 10 Arbitration Act 2005 and should not be treated as a submission to the court’s jurisdiction on the merits. Even with a reservation, however, filing a substantive defence is extremely difficult to explain away.

Practical Risks and Pitfalls, Anti-Suit Injunctions, Forum Conveniens and Enforcement

Beyond the core stay mechanism, counsel should be aware of several broader risks when applying to stay proceedings in Malaysia or when an arbitration clause straddles multiple jurisdictions.

Anti-suit injunctions. Where parallel proceedings are commenced in a foreign court in breach of a Malaysia-seated arbitration agreement, the arbitral tribunal, or, in appropriate cases, the Malaysian court, may grant an anti-suit injunction restraining the foreign proceedings. Conversely, if a Malaysian court action is commenced in breach of a foreign-seated arbitration agreement, the party seeking arbitration should apply for a section 10 stay in Malaysia rather than seeking an anti-suit injunction from the foreign-seated tribunal, as the Malaysian court will need to be satisfied under its own statute.

Forum non conveniens. Arguments that another forum is more convenient do not override a valid arbitration agreement. Under section 10, the test is binary, arbitration agreement yes or no, not a weighing of forum convenience.

Cross-border enforcement. Malaysia is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This means that a stay granted by a Malaysian court in favour of a foreign-seated arbitration carries downstream enforcement advantages: the resulting arbitral award will be enforceable in Malaysia under sections 38 and 39 of the Arbitration Act 2005. Counsel should factor enforcement pathways into the tactical decision to pursue or resist a stay.

Can Arbitration Proceedings Be Stayed?, Checklist and Model Language

Use the following checklist as an immediate action plan upon service of court proceedings where an arbitration clause exists:

• 1. Enter appearance only, file memorandum of appearance without a defence.
• 2. Identify and exhibit the arbitration clause and all related agreements.
• 3. Confirm the dispute falls within the scope of the clause.
• 4. Draft and file the notice of application under section 10 before any other step.
• 5. Prepare affidavit in support using the checklist above (clause, scope, timeline, no steps, authority).
• 6. Include an express reservation of arbitration rights in every document filed.
• 7. Serve the sealed application on all parties promptly.
• 8. Brief counsel on leading authorities, attach relevant appellate decisions to written submissions.

Model language, affidavit opening paragraph: “I, [name], the [position] of the Defendant, make oath and say that the subject matter of this action is governed by an arbitration agreement contained in Clause [X] of the [Agreement] dated [date]. The Defendant has not taken any step in these proceedings other than entering an appearance and now applies for a stay of all proceedings pursuant to section 10 of the Arbitration Act 2005.”

Model language, reservation clause (for any document filed): “This [document] is filed without prejudice to and under express reservation of the Defendant’s right to apply for a stay of proceedings under section 10 of the Arbitration Act 2005 and shall not be construed as a submission to the jurisdiction of this Honourable Court on the merits of the claim.”

Model language, application notice: “The Defendant applies for an order that all proceedings herein be stayed pursuant to section 10 of the Arbitration Act 2005 on the ground that the parties are bound by an arbitration agreement and the Defendant has not taken any step in the proceedings.”

Conclusion

The question of whether arbitration proceedings can be stayed in Malaysia has a clear statutory answer: section 10 of the Arbitration Act 2005 creates a mandatory stay that courts must grant when a valid arbitration agreement covers the dispute and the applicant has not taken any other step in the proceedings. The regime is pro-arbitration by design, and recent appellate developments from 2024 through 2026 have reinforced the strictness of the timing requirement and the narrowness of the statutory exceptions. For practitioners, the practical message is unambiguous, act immediately upon service, file the stay application as the first substantive step, exhibit the arbitration agreement comprehensively, and avoid any conduct that could be characterised as engagement with the litigation merits.

Counsel who follow this discipline will find the mandatory stay of proceedings Malaysia framework to be a powerful and reliable tool for enforcing the parties’ agreement to arbitrate.

Sources

1. Arbitration Act 2005 (Act 646), AIAC official PDF
2. Attorney-General’s Chambers, Laws of Malaysia, Act 646
3. Malaysia Judiciary, eJudgment Portal
4. Rules of Court 2012, Judiciary Library Catalogue
5. INSAF, Journal of the Malaysian Bar
6. AIAC, Amendments and Guidance Notes