Mediation Agreement (Malaysia)

A Mediation Agreement in Malaysia sets out how the parties agree to resolve their dispute through mediation or arbitration.

The Mediation Act 2012 defines mediation as a process in which the parties are assisted by a mediator to achieve a negotiated agreement — the mediator does not decide the dispute but supports discussion and assists the parties in identifying interests and formulating options for settlement. This distinguishes mediation from arbitration (where the arbitrator makes a binding award under the Arbitration Act 2005) and from court litigation (where the judge imposes a binding decision). Section 7 of the Mediation Act 2012 provides that unless the parties otherwise agree, all communications made during mediation and the mediator's notes are confidential and cannot be used as evidence in subsequent court or arbitration proceedings.

The primary institutional frameworks for mediation in Malaysia are administered by the Asian International Arbitration Centre (AIAC) — formerly the Kuala Lumpur Regional Centre for Arbitration — which operates under the AIAC Mediation Rules 2018, and the Malaysian Mediation Centre (MMC) operated by the Malaysian Bar Council under the MMC Mediation Rules. The Construction Industry Payment and Adjudication Act 2012 (CIPAA 2012) also incorporates a mediation phase for construction payment disputes before adjudication. Bank Negara Malaysia's Financial Mediation Bureau (now Ombudsman for Financial Services, OFS) handles mediation of disputes between financial consumers and financial service providers regulated under the Financial Services Act 2013 and the Islamic Financial Services Act 2013.

A mediated settlement agreement reached under the Mediation Act 2012 is binding on the parties as a contract under the Contracts Act 1950 and may, upon application to the High Court of Malaya, be recorded as a consent order under Order 42 Rule 1 of the Rules of Court 2012, which gives it the same enforceability as a court judgment. The Singapore Convention on Mediation (the United Nations Convention on International Settlement Agreements Resulting from Mediation), which Malaysia signed in 2019, provides for cross-border enforcement of international commercial mediated settlement agreements in signatory countries.

The legal framework governing the Mediation Agreement (Malaysia) in Malaysia draws on several key statutes and regulatory bodies. Under Malaysian law, the Contracts Act 1950 (Act 136) governs contractual obligations. The Companies Act 2016 (Act 777) regulates corporate entities through the Companies Commission of Malaysia (SSM). The Employment Act 1955 (Act 265) and the Department of Labour govern employment matters. The Personal Data Protection Act 2010 (Act 709) and the Personal Data Protection Department protect personal data. The Inland Revenue Board of Malaysia (LHDN) administers tax obligations. The Industrial Court adjudicates employment disputes under the Industrial Relations Act 1967 (Act 177). Parties executing a Mediation Agreement (Malaysia) in Malaysia should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Companies Act 2016 (Act 777) sets the foundational requirements.

A Mediation Agreement is needed in Malaysia whenever parties to a dispute wish to attempt mediation as a cost-effective and relationship-preserving alternative to court litigation or arbitration.

A Mediation Agreement is needed when parties to a commercial contract have a dispute — over payment, performance, quality of goods, or interpretation of contractual terms — and wish to resolve it without the cost, delay, and publicity of High Court litigation. Mediation typically costs a fraction of court litigation and can be concluded within 1–3 months, compared to 2–5 years for a contested High Court trial.

A Mediation Agreement is required in construction disputes under the Construction Industry Payment and Adjudication Act 2012 (CIPAA 2012) as part of the dispute resolution process, and is encouraged as a first step before adjudication, arbitration, or litigation for building contract disputes including those governed by the PAM Contract 2018, the CIDB Standard Form of Contract for Building Works, and the PWD Form 203A.

A Mediation Agreement is needed when parties in an ongoing court proceeding wish to attempt mediation with the assistance of a court-annexed mediator under the Court Mediation programme administered by the Judiciary of Malaysia under Practice Direction No. 5 of 2018. The court may encourage or order parties to attempt mediation at case management conferences in civil proceedings, particularly in family disputes, commercial contract matters, and employment-related claims.

A Mediation Agreement is required when parties to a family dispute — including divorce-related property division claims under the Law Reform (Marriage and Divorce) Act 1976, children custody and access arrangements, and maintenance disputes — wish to resolve their differences through mediation at the Malaysian Mediation Centre (MMC) or a private mediator, preserving the parties' relationship for co-parenting purposes.

A Mediation Agreement is needed when an employer and employee have a workplace dispute — including wrongful dismissal claims, discrimination complaints, or terms of employment disagreements — and both parties prefer a confidential resolution rather than a public hearing before the Industrial Court under the Industrial Relations Act 1967 or the Labour Court under the Employment Act 1955.

A valid Mediation Agreement in Malaysia under the Mediation Act 2012 must contain the following essential elements.

Parties to the Agreement: Full legal names, NRIC numbers or SSM registration numbers, and addresses of all parties agreeing to mediate. All parties with a direct interest in the dispute should be parties to the Mediation Agreement. For company parties, execution must comply with Section 66 of the Companies Act 2016 (signed by two directors, or one director and the company secretary, or under the common seal).

Description of the Dispute: A concise description of the dispute to be mediated, including the relevant transaction or relationship, the nature of the disagreement (payment dispute, breach of contract, boundary dispute, etc.), and the approximate monetary value (if quantifiable). A clear scope of the dispute helps the mediator understand the issues and prepares both parties for the mediation session.

Mediator Appointment: The name, qualifications, and contact details of the agreed mediator, or the process by which the mediator will be selected if not yet appointed — for example, by reference to the AIAC mediator panel under the AIAC Mediation Rules 2018, or by nomination from the Malaysian Mediation Centre (MMC) accredited mediator list. Mediators in Malaysia are accredited by the MMC, the AIAC, or relevant professional bodies.

Confidentiality Obligations: A clause confirming that all communications, negotiations, documents, and information exchanged during the mediation are confidential under Section 7 of the Mediation Act 2012, and that neither party will disclose mediation communications in any subsequent court or arbitration proceedings. The confidentiality clause should cover the parties, the mediator, and any advisers or representatives present at the mediation.

Mediator Conduct and Impartiality: Confirmation that the mediator has disclosed all potential conflicts of interest to the parties and that the mediator will conduct the mediation in accordance with the applicable mediation rules and the ethical standards for mediators.

Mediation Costs and Fees: The agreed allocation of the mediator's fees and mediation centre administrative costs between the parties — typically shared equally. The AIAC and MMC publish their current fee schedules, which are typically based on the amount in dispute.

Settlement Recording: A provision specifying how a mediated settlement agreement will be recorded — whether as a binding written settlement agreement signed by all parties, or whether the parties intend to apply to the High Court of Malaya to record the settlement as a consent order under Order 42 Rule 1 of the Rules of Court 2012, giving it the enforcement status of a court judgment.

Additional compliance elements for a Mediation Agreement (Malaysia) used in Malaysia include: Under Malaysian law, the Contracts Act 1950 (Act 136) governs contractual obligations. The Companies Act 2016 (Act 777) regulates corporate entities through the Companies Commission of Malaysia (SSM). The Employment Act 1955 (Act 265) and the Department of Labour govern employment matters. The Personal Data Protection Act 2010 (Act 709) and the Personal Data Protection Department protect personal data. The Inland Revenue Board of Malaysia (LHDN) administers tax obligations. The Industrial Court adjudicates employment disputes under the Industrial Relations Act 1967 (Act 177). Forms-legal.com provides this template as a starting point for Malaysia-compliant documentation.