In a dispute concerning payment issues in a construction project, AIAC was sued in judicial review proceedings for decisions it made as the statutory adjudication authority under the Construction Industry Payment and Adjudication Act 2012 (CIPAA). The core legal question revolved around whether the AIAC’s designation under Malaysian law coupled with its privileges as an international entity, afforded it immunity from being named in a lawsuit or judicial review challenge.
Background Facts
The First Respondent in this appeal i.e., One Amerin Residence Sdn Bhd, a party to a construction contract, was dissatisfied with the way the adjudication process was administered under CIPAA and sought to quash AIAC’s actions on among others, the appointment of the adjudicator and the imposition of administrative fees through judicial review. In doing so, it argued that AIAC’s actions violated statutory provisions or were otherwise ultra vires the CIPAA. Consequently, the AIAC contested the proceedings, asserting legal immunity under both CIPAA and the International Organizations (Privileges and Immunities) Act 1992 (IOPIA).
The High Court decided in favour of AIAC concluding that they are clothed with the immunities provided for under the IOPIA as well as section 34(1) of the CIPAA from any court proceedings including One Amerin’s judicial review application. Subsequently, the Court of Appeal reversed the High Court’s decision citing, among others, that the immunity enjoyed by AIAC pursuant to IOPIA was not absolute and restricted to acts carried out by AIAC in the exercise of its functions as mandated under international agreements. Hence, the appeal herein.
Key Statutory Provisions
Section 34(1) of CIPAA is pivotal in understanding the AIAC’s position. This section states that no action or suit may be instituted or maintained in any court against the AIAC or its officers for any act or omission carried out in good faith in performing its statutory functions. The AIAC maintained that this clause bars any proceedings, including judicial review that challenge its role in administering adjudications.
Additionally, the AIAC invoked privileges under the IOPIA, a law granting certain recognized international organizations immunity from suit and legal process. By way of regulations enacted pursuant to the IOPIA, the AIAC (formerly known as the KLRCA) was declared an international organization and granted immunity “from suit and other legal process” necessary for carrying out its mandated functions.
Legal Arguments and Analysis
The applicant contended that judicial review is a special process meant to ensure public authorities remain accountable. It argued that if the AIAC were permitted immunity here, parties aggrieved by the exercise of the AIAC’s statutory duties would be left without judicial recourse.
In contrast, the AIAC highlighted two points. First, it noted that CIPAA explicitly provides an alternative remedy: a dissatisfied party may challenge or set aside an adjudication decision under sections 15 and 16, thus avoiding a direct lawsuit against the AIAC itself. This underlined Parliament’s intent to keep the AIAC and its officers out of protracted legal battles so as not to disrupt or discourage efficient resolution of payment disputes. Second, the AIAC argued that the broad phrasing of “no action or suit” in section 34(1) and “immunity from suit and other legal process” in the IOPIA necessarily encompassed all court proceedings, including judicial review.
On the issue of constitutionality, the courts generally begin with a presumption that laws are valid and that Parliament would not enact unconstitutional measures. A party challenging such provisions must demonstrate clearly how they violate the Federal Constitution. Here, no credible evidence was presented that CIPAA or the IOPIA contravened constitutional guarantees of access to justice. The courts observed that section 34(1) restricts lawsuits only when the AIAC is performing its duties in “good faith,” leaving open the possibility of legal action if there is proven bad faith or an ultra vires act.
Outcome and Practical Implications
Ultimately, the courts determined that the AIAC’s immunity was valid. From a policy standpoint, the arrangement preserves the AIAC’s neutrality and independence. It prevents challenges that might undermine speedy adjudication and ensures that the AIAC, which also operates internationally, does not become entangled in litigation arising from its oversight responsibilities.
At the same time, parties to an adjudication remain free to dispute the adjudicator’s award via mechanisms provided by CIPAA itself, mitigating concerns about a lack of due process or legal remedies. Thus, while the AIAC itself may not be sued or named in judicial review for its official duties, the adjudication outcomes it oversees can still be scrutinized.
Conclusion
The Federal Court’s decision underscores Parliament’s intent to shield the AIAC from lawsuits when it is acting properly under CIPAA. By framing the immunity both in the IOPIA and in section 34(1) of CIPAA, Malaysian law strikes a balance between protecting a critical dispute-resolution institution and upholding avenues for parties to challenge any questionable results of an adjudication. The decision reinforces the principle that immunity is not absolute; it hinges on good faith and faithful adherence to statutory powers. Consequently, AIAC would continue to operate in the adjudication arena, bolstered by legislative safeguards designed to maintain its integrity and efficiency.
About the authors
Lum Man Chan
Partner
Dispute Resolution
Halim Hong & Quek
manchan@hhq.com.my
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