Izad Kazran & Co.

A Game-Changing Decision for International Arbitration On 13 August 2025, Malaysia’s Federal Court delivered a watershed judgment that fundamentally clarifies how foreign arbitral awards can be enforced in Malaysia. The case of ING Bank N.V. & O.W. Bunker Far East (Singapore) Pte Ltd v Tumpuan Megah Development Sdn Bhd resolves a long-standing debate about whether award creditors have a choice between two enforcement routes, marking a significant victory for Malaysia’s pro-arbitration stance. The Journey from London to Kuala Lumpur: A Complex Cross-Border Dispute The Original Dispute The dispute concerned marine fuel supply contracts allegedly worth USD 937,353.24. ING Bank N.V. (Netherlands) and O.W. Bunker Far East (Singapore) claimed that Malaysian company Tumpuan Megah Development Sdn Bhd, based in Johor Bahru, failed to pay for fuel allegedly delivered to two vessels, Straits 1 and Dolphin 1. Tumpuan Megah denied any such contracts or deliveries, alleging fraud. From London Arbitration to English Courts The matter went to London Maritime Arbitrators Association (LMAA) arbitration in 2017, under contracts governed by English law and seated in London. On 4 February 2020, the tribunal ruled in favour of ING and O.W. Bunker, finding the contracts genuine and rejecting Tumpuan Megah’s fraud and set-off claims. On 22 December 2020, the English High Court converted the award into a judgment under section 66 of the UK Arbitration Act 1996. This judgment was obtained with Malaysian enforcement in mind. The Malaysian Enforcement Battle In March 2021, the creditors sought to enforce the English High Court judgment in Malaysia under the Reciprocal Enforcement of Judgments Act 1958 (REJA), rather than directly using the Malaysian Arbitration Act 2005 (MAA). Tumpuan Megah opposed, arguing this deprived it of defenses under the MAA and amounted to “judgment laundering.” The Federal Court’s Groundbreaking Holdings Dual Enforcement Routes Confirmed The Federal Court held that creditors may enforce foreign arbitral awards either: (a) directly under the MAA, or (b) through REJA if an award has been converted to a judgment in a reciprocal jurisdiction. The Federal Court held that it is not for an award debtor to dictate to an award creditor precisely how it is to enforce the arbitral award, particularly when there are two or more alternative modes of enforcement available. The Principle of Reciprocity Upheld The Federal Court affirmed that REJA preserves special enforcement relationships with Commonwealth nations such as the UK, which cannot be displaced by the general provisions of the MAA. Minimal Curial Review, Not Re-Trials The Court rejected full re-hearings in Malaysia. Fraud allegations going to the merits (intrinsic fraud) cannot be re-litigated; only jurisdictional (extrinsic fraud) challenges may be raised. Limited-in-Scope Merger Doctrine The Court adopted the “limited-in-scope merger” approach: within the UK, the award merges into the judgment, but internationally, the award and judgment remain separate. This allows enforcement under either regime. No “Judgment Laundering” Unlike cases where parties use third-country judgments as intermediaries, the London-to-Malaysia enforcement route was held legitimate, given the direct seat-to-reciprocal-jurisdiction link. REJA and the First Schedule Advantage A significant practical impact of the decision lies in the application of the First Schedule of REJA. This Schedule sets out the reciprocating countries whose judgments may be enforced in Malaysia, making enforcement faster, more efficient, and subject to narrower grounds of challenge compared to the MAA. The Federal Court’s endorsement makes clear that REJA is not only available but also encouraged where applicable, offering award creditors a more straightforward pathway to recognition and execution. Countries listed in the First Schedule of REJA include: United Kingdom (High Court in England; Court of Session in Scotland; High Court in Northern Ireland; Court of Chancery of the County Palatine of Lancaster; Court of Chancery of the County Palatine of Durham) Hong Kong SAR (The High Court) Singapore (The High Court) New Zealand (The High Court) Republic of Sri Lanka (High Court and District Courts) India (High Courts, excluding certain states and territories) Brunei Darussalam (The High Court) This list demonstrates the breadth of Malaysia’s reciprocal enforcement framework, particularly benefiting cross-border trade and investment with Commonwealth and regional partners. Key Takeaways for Arbitration Practice For Award Creditors: Strategic choice between MAA and REJA Faster, narrower challenge grounds under REJA Commonwealth reciprocity offers unique advantages For Award Debtors: Must challenge at the seat (London) within statutory deadlines Cannot seek a second full trial in Malaysia Limited defenses remain under REJA For the Arbitration Ecosystem: Reinforces finality of arbitral awards Strengthens Malaysia’s status as enforcement-friendly Creates predictability and alignment with international norms What This Means for Malaysia as an Arbitration Hub The decision strengthens Malaysia’s position in global arbitration: Pro-Arbitration Commitment – Demonstrates judicial restraint and respect for foreign awards. Multiple Gateways – Dual enforcement routes make Malaysia flexible and attractive. Commonwealth Advantage – REJA reinforces Malaysia’s reciprocal enforcement ties with the UK and other Commonwealth nations. Predictability and Certainty – Businesses now have clear expectations for enforcement outcomes. Wider Implications: Malaysia as ASEAN Chair As Malaysia assumes the Chairmanship of ASEAN in 2025, this ruling has timely significance beyond national borders: Boosts Regional Confidence – By clarifying enforcement rules, Malaysia assures ASEAN investors that cross-border arbitral awards will be respected and enforced efficiently. Strengthens ASEAN Integration – Predictable dispute resolution supports the ASEAN Economic Community (AEC), promoting smoother trade and investment flows. Positions Malaysia as Leader – The Federal Court’s approach balances international obligations under the New York Convention with Commonwealth reciprocity, offering a model for other ASEAN states navigating overlapping enforcement regimes. Signals to Global Investors – As ASEAN Chair, Malaysia can champion arbitration reform and enforcement certainty across the region, enhancing ASEAN’s attractiveness as a unified investment destination. Conclusion: A Milestone for Malaysia and the Region The Tumpuan Megah decision is more than a domestic legal development. It positions Malaysia as a mature, arbitration-friendly jurisdiction that offers dual enforcement pathways, safeguards against abuse of process, and judicial restraint in reviewing foreign arbitral awards. As Malaysia leads ASEAN in 2025, this judgment sends a strong signal: the country is not only open for business but ready to anchor regional confidence in international arbitration, a key pillar for ASEAN’s economic growth and integration. Our Managing Partner and Head of Dispute Resolution, Kho Sze Jia, together with Aleeya Elyana, Partner of Dispute Resolution, regularly act as counsel in arbitration proceedings and the enforcement of arbitral awards. Sze Jia also serves as an Arbitrator. Sze Jia can be contacted at [email protected] and Aleeya can be contacted at [email protected].

Kuala Lumpur, Malaysia – 3 June 2025 – Izad Kazran & Co (IKC) is pleased to announce the addition of Wilson Tan Wei Sheng, CPA (Australia), CA (MIA), as a new Partner under the firm’s newly established corporate structure, IKC Corporate Services Sdn. Bhd. (IKCorp). This strategic partnership marks a significant milestone in IKC’s evolution and expansion of comprehensive corporate and consultancy services. Wilson Tan brings over a decade of financial and strategic leadership experience across Southeast Asia to the partnership. “We are thrilled to welcome Wilson Tan to our partnership,” said Kho Sze Jia, the Managing Partner of IKC and Director of IKCorp. “His extensive expertise in financial management, corporate governance, and cross-border business operations aligns perfectly with our vision for IKCorp's future. This partnership positions us to deliver even more comprehensive solutions to our clients across the region.” The establishment of IKCorp represents a strategic evolution of IKC’s business structure, designed to provide integrated corporate, legal, and financial services under one roof. Staying true to IKC’s founding principle of being “An Asian Firm with local expertise, world class standards,” IKCorp is positioned to become the ultimate business partner for companies seeking comprehensive solutions. IKCorp’s Vision: Complete Confidence. Complete Services. IKCorp represents a paradigm shift in corporate services – where legal expertise, financial precision, and strategic business advisory converge under one unified platform. Our vision eliminates the need for clients to navigate multiple service providers across different disciplines. Whether you require legal counsel, financial management, or business strategy guidance, IKCorp delivers comprehensive solutions through our integrated team of specialists. This singular approach ensures seamless coordination, consistent quality standards, and unparalleled efficiency, allowing businesses to access world-class expertise across all corporate functions without ever looking elsewhere. Wilson Tan commented on his new role: “I am excited to join forces with Sze Jia and the IKC team in this new chapter. In my previous roles, I helped SMEs navigate complex financial landscapes across multiple jurisdictions, and I understand the challenges businesses face today. IKCorp’s comprehensive service offering – combining legal expertise with financial precision – creates a unique value proposition for our clients.” Comprehensive Services Portfolio Under the new partnership structure, IKCorp will offer an extensive range of services designed to address every aspect of business operations: Corporate Foundation Services: Complete company incorporation and registration, maintenance of statutory records, annual compliance filings, corporate governance advisory, and board meeting management. Financial Management Excellence: Full-spectrum accounting services including bookkeeping, management reporting, accounts payable/receivable management, and payroll administration, complemented by auditing and comprehensive tax services covering corporate tax planning, return preparation, SST compliance, and international tax advisory. Strategic Business Support: Outsourced Financial Controller services providing strategic financial planning, cash flow management, budget development, financial risk assessment, and investor relations support, alongside Financial Due Diligence services for mergers and acquisitions. Legal & Compliance Expertise: Contract drafting and review, commercial agreements, regulatory compliance advisory, debt collection services, and comprehensive Outsourced General Counsel services providing on-demand legal support, risk assessment, and strategic legal guidance. Specialized Advisory Services: Business advisory covering market entry strategy, process optimization, and corporate restructuring; specialized Offshore Business Advisory in Labuan including company formation, LFSA compliance, and international tax planning; Johor Special Financial Zone & Forest City Business Advisory; and cutting-edge ESG Advisory Services including sustainability strategy and climate risk assessment. Human Capital Solutions: Complete HR & Recruitment services including talent acquisition, contract management, Employer of Record services, and outsourced employee administration. Wilson Tan will leverage his professional qualifications as a Licensed Company Secretary, Certified Public Accountant (CPA Australia), and Chartered Accountant (MIA Malaysia), to lead the financial and corporate services divisions of IKCorp. Prior to joining IKCorp, Wilson Tan accumulated over eight years of experience in the fast-moving consumer goods (FMCG) industry, including holding senior roles at leading companies such as Nestlé Malaysia. He began his career as an external auditor with Ernst & Young. An entrepreneur at heart, Wilson later founded Oakleaf, an accounting firm that has since expanded beyond Malaysia. Under his leadership, Oakleaf has delivered sophisticated business structures and financial frameworks across international markets including Dubai, Hong Kong, Singapore, Vietnam, and Cambodia. The partnership is effective immediately. IKCorp is currently supported by Wong Poh Yee, Norzuliana Zulkifli, and Michelle Tai. IKCorp aims to expand to a team of 10 by the end of 2025. About IKCorp IKCorp is a comprehensive corporate services provider embodying the principle of being “An Asian Firm with local expertise, world class standards.” Through IKC Corporate Services Sdn. Bhd., the company serves as a strategic business partner, delivering integrated legal, financial, and business advisory solutions under one roof. From company incorporation to ongoing compliance, financial management to strategic planning, IKCorp handles every aspect of corporate operations, allowing businesses to focus on their core strengths while ensuring world-class standards in all corporate matters across Southeast Asia.   IKC Corporate Services Sdn. Bhd. A1-12-3, Arcoris Business Suites 10, Jalan Kiara 50480 Mont’ Kiara Kuala Lumpur, Malaysia Emails:           [email protected] Telephone:    +603 6419 1118  

Introduction Recent decisions by the Malaysian Federal Court have raised concerns about the enforcement of financial transactions, particularly in cases involving gambling debts, moneylending, and legitimate commercial arrangements like put option agreements. While these decisions clarify key legal principles, they also risk unfairly impacting genuine transactions if misapplied. This article explores these legal developments and provides practical steps for businesses to safeguard their interests. Clarifying Gambling Debts and Moneylending Transactions Dato' Ting Ching Lee v. Ting Siu Hua [2025] CLJU 361 In this case, the Federal Court ruled that credit facilities extended for gambling purposes are unenforceable, regardless of how they are structured. The court emphasised the importance of looking at the substance of the transaction rather than its form, aligning with the Singaporean approach in Star City Pty Ltd (formerly known as Sydney Harbour Casino Pty Ltd) v. Tan Hong Woon [2002] 1 SLR (R)). This decision reinforces Malaysia’s strong public policy stance against gambling debts. However, this ruling raises legitimate concerns about fairness — particularly in cases where a lender has acted in good faith, only to be left without any legal means of recovery. This could inadvertently push some creditors towards informal or even unlawful recovery methods, which is a serious concern for the financial and business community. Triple Zest Trading v. Applied Business Technologies [2023] 2 MLJ 374 In this case, the Court of Appeal limited recovery on a “friendly loan” where excessive interest disguised as “agreed profit” was deemed unenforceable. The Court of Appeal emphasised that financial arrangements must comply with the Moneylenders Act 1951. Put Option Agreements and Our Experience In Butterfly Capital Management Co Ltd v. Wang Hsiu Ying & Anor [2024] CLJU 2647, the High Court considered whether a put option agreement was a disguised moneylending transaction. We represented Butterfly in this case, where the defendant alleged that the put option agreement masked an illegal lending arrangement with excessive interest. Despite clear precedents recognising the validity of put option agreements, such as: Maju Holdings Sdn Bhd v Fortune Wealth (H-K) Ltd & Other Appeals [2004] 4 CLJ 282; Bank Muamalat Malaysia Berhad v Fan Kow Hin [2017] 1 LNS 447; Everegion Sdn Bhd v Puan Chan Cheong [2022] 1 LNS 89; MIDF Amanah Ventures Sdn Bhd v Lim Thiam Chye [2018] 9 MLJ 450; Perbadanan Nasional Berhad v Arif Awang [2011] 1 LNS 237; Bina Puri Holdings Berhad v Sulaiman Haji Abdul Razak [2015] LNS 1135; HLG Credit Sdn Bhd & Anor v Chan Teik Huat [2011] CLJU 556; Aseambankers Malaysia Berhad & Anor v Lim Cheng Pow [2011] 1 LNS 1487; the High Court in the Butterfly case rejected the put option agreement despite these precedents. This decision is troubling because it relies on Triple Zest and places genuine commercial arrangements at risk of being mischaracterised as unlawful. Despite the eventual resolution of the dispute at the Court of Appeal, the High Court ruling remains on record, creating uncertainty for businesses that rely on put option agreements as legitimate financial tools. A Practical Approach Forward Given these developments, businesses and lenders must take proactive steps to protect their interests: Robust Documentation: Clearly outline the commercial purpose behind financial arrangements. Detailed records that demonstrate the intent behind transactions will be critical in defending claims that they are disguised moneylending arrangements.   Independent Legal Advice: Encourage parties on both sides of a transaction to obtain independent legal advice. This helps to establish that the terms were agreed to freely and with full understanding.   Balanced Commercial Terms: Avoid terms that mimic excessive interest rates or resemble typical moneylending conditions, such as inflated repurchase prices or unduly short repayment timelines.   Transparency: Be upfront about transaction structures, especially in complex deals like put option agreements. Courts are more likely to uphold arrangements where parties can show genuine commercial intent rather than attempts to bypass legal restrictions. Conclusion The recent court rulings demonstrate Malaysia’s firm stance against illegal lending and gambling debts. However, they also risk harming legitimate financial arrangements if misinterpreted. The Butterfly case shows how a valid commercial deal can still be challenged, despite established precedents supporting put option agreements. Moving forward, businesses must ensure their transactions are well-structured, transparent, and properly documented to avoid unnecessary disputes. Clear intent and commercial logic must shine through, allowing courts to differentiate genuine business arrangements from disguised lending transactions. Our Managing Partner and Head of Dispute Resolution, Kho Sze Jia, acted for Butterfly. He was assisted by Wong Poh Yee. Our team can be reached at [email protected]