Modernising the Arbitration Industry:

The Potential of an AI-Arbitration Legal Framework in Malaysia

Mohamad Fateh Labanieh

Ahmed Abdulla Saif Saeed Alshamsi

Zainal Amin Ayub

Harlida Abdul Wahab

 

Abstract: Arbitration has gained prominence as a preferred method of dispute resolution due to its notable advantages, particularly its efficiency and speed compared to traditional court proceedings. Recently, there has been growing interest in integrating artificial intelligence (AI) into arbitral processes. However, the use of AI in arbitration remains unregulated in Malaysia. This article employs a doctrinal legal research methodology to explore the feasibility of establishing a legal framework for AI-assisted arbitration in Malaysia. Data were collected through a library-based approach, encompassing primary sources such as statutes, regulations, and case law, as well as secondary sources, including journal articles, online materials, and textbooks. Through analytical and critical examination, the article identifies that while the Silicon Valley Arbitration and Mediation Centre (SVAMC) has issued guidelines on the use of AI in arbitration, these guidelines are subject to critique and have not been universally adopted. The analysis reveals that Malaysia’s Arbitration Act 2005 (Act 646), despite previous amendments aimed at modernising the arbitration landscape, lacks provisions to support the legal and ethical integration of AI technologies. To address this gap, the article proposes targeted amendments to Act 646. These revisions would not only legitimise the use of AI in arbitration but also enhance Malaysia’s standing as a regional arbitration hub, promote technological innovation, and improve procedural efficiency. The article advocates for a hybrid AI-powered arbitration model that automates specific decision-making processes while maintaining human oversight and control. Such a model could reduce costs, expedite proceedings, and improve overall effectiveness. The proposed reform is presented as a strategic imperative for maintaining Malaysia’s competitiveness in the evolving global arbitration landscape.