PART 1: The competence-competence principle in International Commercial Arbitration

As an introductory statement, pursuant to Section 18 of the Malaysian Arbitration Act 2005 which corresponds to Article 16 of the UNCITRAL Model Law, without any derogation. Section 18 covers ONLY three (3) issues; 

1. Issue of addressing the Arbitral Tribunal's power to make a determination as to its own jurisdiction to deal with the substantive claim in dispute
2. Issue of addressing the separability principle, pursuant to which an arbitration clause forms a part of a contract is to be treated as an independent and separate contract. 
3. Issue of addressing the court's power to review jurisdictional decisions rendered by arbitral tribunals in the preliminary phase of the proceedings.

1. ISSUE OF ARBITRAL TRIBUNAL HAS ITS OWN JURISDICTION TO DEAL MERITS 

According to Professor Dr. Sundra Rajoo in his book UNCITRAL Model Law & Arbitration Rules, Page 292; 

Section 18.1 of the Malaysian Arbitration Act 2005 provides for the doctrine of  'competence-competence' which is derived from the German term 'kompetenz-kompetenz'. These terms interchangeably to mean that the arbitral tribunal can rule on its own jurisdiction. It confirms the independence of the arbitration agreement from the content.

 The above quote can be understandable in certain ways;

1. An allegation that a contract is voidable does not give rise to a jurisdictional challenge.
2. An issue relating to the contract is not attributable to the arbitration clause.
3. s.18 is only concerned with the validity and operation of the arbitration clause and the scope of the subject matter of the dispute with respect to the arbitration agreement and the jurisdictional challenges that arise from them. 

Courts and the doctrine of 'competence-competence.

    The courts cannot intervene on the 'own jurisdiction' of the Arbitral tribunal. The courts are discouraged from determining jurisdictional objections before the arbitral tribunal has decided on it. In reality, the principle concludes that a party simply cannot delay arbitral proceedings by taking the dispute to the court.The courts must allow the Arbitral Tribunal in taking the first instance in deciding the jurisdiction.Thus, it can be concluded that the courts have limited themselves thereafter in interpreting the principle in light of the Arbitral Tribunal's ruling. However, the precedence of the power allocated to the arbitral tribunal does not mean that the court is deprived of its own jurisdiction. It is subject to High Court's power to determine jurisdiction by way of appeal under section 18.8 of AA 2005.

Party autonomy and the doctrine of 'competence-competence.

1. The parties' agreement is bound upon the Arbitral Tribunal on its determination of jurisdiction.

Case Laws 

1. Press Metal Sarawak Sdn Bhd v Etiqa Takaful Bhd [2016] 5 MLJ 417, FC [HELD]; s.18 should be read with s.8 and s.10, the parliament has given the Arbitral Tribunal much wider jurisdiction when there is a challenge from its own jurisdiction or competence, the scope of its authority, the existence or validity of the arbitration agreement. A challenge to the jurisdiction of an arbitrator must be made during the arbitral proceeding; no stay is allowed in pursuant to s.18.5 & any ruling after the tribunal can be appealed to High Court which will finally decide the matter. in pursuant to s.18.8.
2. Standard Chartered Bank Malaysia Bhd v City Properties Sdn Bhd [2008] 1 MLJ 233; [2008] 1 CLJ 496 [HELD]; When an Arbitral Tribunal decides an agreement is null and void, it "shall not ipso jure [def: by the law itself] entail the invalidity of the arbitration clause" since "an arbitration clause which forms the part of an agreement shall be treated as an agreement independent of all other terms of an agreement"
3. CMS Energy Sdn Bhd v Poston Corp [2008] 6 MLJ 561; [HELD]; The powers conferred to Arbitral Tribunal by s.18 is not only for the substantive issue but also on the point of preliminary objections as to its jurisdictions. If a party is unhappy with any preliminary rulings may appeal to High Court against such rulings within 30 days of its receipt. 
4. TNB Fuel Services Sdn Bhd v China National Coal Group Corp [2013] 4 MLJ 857; [HELD]; The court-ordered stay for court proceedings in pursuant to s.10 AA noting a court shouldn't be involved in the facts of the dispute as long as the arbitration agreement is not null and void or incapable of performance. 
5. Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs, Government of Pakistan [2011] 1 AC 763 [HELD]; Article 16.1 of the Model Law provides Arbitral Tribunal may rule on its own jurisdiction, including any objections with the respect to the existence or validity of the arbitration agreement. However, pursuant to article 34.2 an arbitral award may be set aside if the applicant furnished proof that the agreement was not valid under the law the parties have subjected or under the law of the seat. 

According to Dr.Prof Sundra Rajoo again in his book, as stated above; on Page 297, he comments that 

Whenever there is a jurisdictional challenge, an arbitrator who can decide on his own jurisdiction has three (3) alternative course of actions; 

1. An arbitrator may determine he has no jurisdiction at all; particularly where the lack of jurisdiction is evident; subsequently the arbitral proceedings will terminate. 
2. An arbitrator may determine he has jurisdiction and issue interim award. The parties may challenge the award from judicial review
3. An arbitrator may continue with the arbitration without adopting either of the courses above until stopped by an order from a competent court.