ABOUT THE AUTHOR

YB Dato' Sri Azalina Othman Said is a Minister in the Prime Minister’s Department (Law & Institutional Reform), Government of Malaysia. Her mandate covers the administration of the Legal Affairs Division (BHEUU). 

As the world grows increasingly interconnected, the demand for effective mechanisms to resolve cross-border disputes has never been more urgent. International arbitration has long stood as a cornerstone of global commerce, providing a neutral, efficient, and enforceable means for resolving disputes between parties. Mediation, too, is gaining momentum as businesses seek quicker, collaborative resolutions that help maintain valuable commercial relationships. However, like any system, it must adapt and evolve to remain relevant and fit for purpose. 

This central theme of reform and adaptation is at the heart of the upcoming Kuala Lumpur Forum on International Arbitration 2024 on the Future of Arbitration: Reforms and Innovations, bringing together stakeholders from across ASEAN and other regions to discuss the future of dispute resolution. 

As the forum will highlight, the future of international arbitration and its growth in ASEAN lies at the intersection of reform, innovation, and overcoming key challenges such as how the power of artificial intelligence can be successfully harnessed. 

THE POWER OF ASEAN 

Malaysia will be the Chair of ASEAN for 2025, at a time when across Southeast Asia, our economies are expanding and attracting vital foreign investments, especially in sectors like infrastructure, energy, and technology. 

With this surge in commercial activity comes an inevitable rise in disputes, creating demand for efficient dispute resolution mechanisms. Historically, Europe and North America have dominated international arbitration. However, there is a growing appetite for reliable arbitration services across the region – from Kuala Lumpur to Hanoi. 

ASEAN, with our diverse legal systems and increasing involvement in global commerce, is therefore primed to become an ever more central player in the arbitration market. To seize this opportunity, we must focus on reforms that support this growth. By doing so, ASEAN can position itself as an attractive destination for international businesses seeking reliable arbitration options outside the traditional Western centres.

In parallel, mediation is becoming an invaluable addition to dispute resolution, offering a cost-effective, collaborative, and timely alternative that can preserve business relationships. The Singapore Convention on Mediation, which enables cross-border enforcement of mediated settlements, positions ASEAN to champion mediation as a reliable option. By promoting both mediation and arbitration, ASEAN can provide a versatile dispute resolution framework that meets global business needs and strengthens the region’s role in international commerce.

THE ROLE OF INNOVATION

Under Prime Minister Anwar Ibrahim’s leadership, Malaysia has taken the first steps in reforming its Arbitration Act 2005 with the introduction of the AIAC Court of Arbitration, aligning our system with existing international standards such as the UNCITRAL Model Law on International Commercial Arbitration and the New York Convention (Convention on the Recognition and Enforcement of Foreign Arbitral Awards). 

While reforms such as these are necessary, innovation will be the driving force in shaping the future of international arbitration. As the world becomes increasingly digital, we must harness technology to improve efficiency, transparency, and inclusivity in arbitration.

One of the most promising developments in this regard is the rise of artificial intelligence (AI) in arbitration. AI has the potential to revolutionize the way arbitrators analyse evidence, review documents, and even draft awards. By automating routine tasks, AI can reduce costs and save time, allowing arbitrators to focus on the substantive legal issues at hand. AI can also assist in predicting outcomes, which would help parties make more informed decisions about whether to settle or proceed to arbitration.

As with all developments in AI however, there must be a degree of caution in its application and a recognition of the limitations to the technology. Human judgment in resolving disputes is irreplaceable. It should not replace the role of arbitrators in deciding the merits of a case. Striking a balance between technological assistance and human oversight will be crucial as we integrate AI into the arbitration process.

CHALLENGES ON THE HORIZON

Despite the potential for reform and innovation, international arbitration faces significant challenges. In particular for ASEAN, the fragmentation of legal frameworks governing arbitration across different jurisdictions presents a particular complexity. This creates inconsistencies in how arbitration is conducted and how awards are enforced. 

Regional cooperation is essential to harmonize arbitration laws and create a more predictable environment for businesses that in return will benefit ASEAN states economically. ASEAN, for example, could play a pivotal role in coordinating efforts to standardize arbitration practices across Southeast Asia, as demonstrated by the proposed ASEAN Law Association Recommendations, Best Practices and Non-Binding Guidelines on the Enforcement of Arbitral Awards within ASEAN.

There is also the challenge posed by third-party litigation funding – a mechanism through which disputes can be funded in order to provide better access to justice. While in principle third-party funding is a vital tool enabling litigants to bring claims or resolve disputes, there are legitimate questions as to ensure that profit does not come before justice in such arrangements. 

CONCLUSION

The future of international arbitration holds great promise, but it also presents significant challenges. Reform is essential to address complexities and accessibility. Innovation, particularly in AI, offers exciting opportunities to enhance efficiency. However, these advances must be balanced with the need for human judgment and careful alignment with existing international frameworks.

The Kuala Lumpur Forum on International Arbitration will serve as a precursor for the upcoming ASEAN Law Forum 2025, which will explore a broader range of issues critical to ASEAN’s future. This cross-sectoral Law Forum will touch on the broader principles of access to justice and driving economic advancement, and the continued pursuit of legal reforms that promote both efficiency and innovation. ASEAN must continue to play a central role in shaping the future of industry. Our region is home to some of the fastest-growing economies in the world, and as we continue to integrate into the global economy, the importance of a fair, efficient, and accessible dispute resolution system cannot be overstated. By embracing reform and innovation, and addressing the challenges ahead, we can ensure that international arbitration and mediation remains a cornerstone of global commerce for years to come.