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The Malaysian Courts' Rules Committee has issued the Rules of Court (Amendment) 2018 amending the Rules of Court 2012 ("Amended Rules"), which contains the rules governing High Court and Subordinate Courts proceedings in Malaysia.
The highlight of the Amended Rules concerns mainly 2 areas: (i) the new web-based platform for Court auctions known as e-Lelong; and (ii) the procedures in respect of applications to set aside, stay and enforce adjudication decisions in respect of the Construction Industry Payment and Adjudication Act 2012.
Click here to read our client update.
With the aim of expanding the scope of permitted activities that can be undertaken by Real Estate Investment Trusts ("REITs"), the Securities Commission Malaysia ("SC") issued the Guidelines on Listed REITs ("Listed REITs Guidelines"), which took effect on 9 April 2018. Under the Listed REITs Guidelines, a listed REIT is now allowed to undertake property development activities. Listed REITs are also now allowed to acquire real estate through lease and income support arrangements.
Following the issuance of the Listed REITs Guidelines, all requirements relating to listed REITS within SC's existing Guidelines on REITs have been superseded. Moving forward, SC’s Guidelines on REITs will apply to unlisted REITs only.
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership ("CPTPP") was signed on 8 March 2018 by Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam (in the absence of the US) in an effort to boost regional trade liberalisation. The CPTPP incorporates all provisions of the original Trans-Pacific Partnership save for a limited number of provisions which the CPTPP countries have agreed to suspend. These provisions will remain suspended until such time that the CPTPP countries decide to revive them by consensus. Some of the notable suspended provisions affect intellectual property rights, trade in services, environment and the scope of investor-state disputes.
The CPTPP will bring about benefits such as the substantial elimination of tariff and non-tariff barriers for goods, improved access to services markets and greater legal protections for foreign direct investments. It also presents a new opportunity for companies to trade with other CPTPP countries (especially with those where a free trade agreement does not currently exist) and to increase investments across the trans-pacific region. The CPTPP will come into force after at least half of the CPTPP signatories ratify it. It is worth noting that while the CPTPP does not currently include the US, the door remains open for the US to join the CPTPP with the consent of other members.
The Anti-Fake News Bill, tabled in Malaysian House of Representatives on 26 March 2018, was passed on 3 April 2018. It came into force on 11 April 2018.
The Anti-Fake News Act 2018 ("Act") is intended to "deal with fake news and related matters", whereby "fake news" has been broadly defined to include "any news, information, data and reports, which is or are wholly or partly false, whether in the form of features, visuals or audio recordings or in any other form capable of suggesting words or ideas".
Under the Act, it is an offence to maliciously create, offer, publish, distribute, circulate or disseminate fake news, the penalty being a fine not exceeding RM500,000, imprisonment for up to 6 years, or both. Malaysian Courts are also empowered under the Act to issue a court order for the offender to make an apology to persons affected by the fake news.
The Act creates offences for providing financial assistance, whether directly or indirectly, to the spreading of fake news, as well as an offence for failure to remove any publication containing fake news. Every offence punishable under the Act is a seizable offence.
Existing laws which address fake news, such as the Communications and Multimedia Act 1998 are not repealed. According to statements by the Malaysian Communications and Multimedia Commission, the existing laws should be read together with the new law, and that the new law is necessary to cater to current needs, as well as to address loopholes in existing laws.
After posting a doctored image of a magazine cover featuring the Prime Minister of Malaysia on his Facebook page in April 2016, a Malaysian Member of Parliament (MP) was charged with two counts of initiating and sharing two links of "fake communication" with the intention to offend others under section 233 of the Communications and Multimedia Act 1998 ("CMA").
Section 233(1)(a) of the CMA essentially prohibits the publication of content deemed to be "obscene, indecent, false, menacing or offensive in character with intent to annoy, abuse, threaten or harass another person", any person found guilty of which would be liable, upon conviction, to a maximum fine of RM50,000 and / or a maximum one-year jail term.
Pursuant to these charges, an application was filed in the High Court of Malaya to challenge the constitutionality of Section 233 of the CMA on grounds that the section is "too broad" and is a violation of the rights enshrined in Article 10 of the Federal Constitution of Malaysia, which guarantees freedom of expression.
On 24 January 2018, the High Court of Malaya dismissed the application, ruling that Section 233 of the CMA is constitutional and does not violate the Federal Constitution. In dismissing the application, the High Court judge ruled that freedom of expression is not absolute to those charged under section 233 of the CMA.
As reported in our previous TMT Regional Update, a massive scale data breach occurred in October 2017 whereby the personal data of millions of Malaysians were listed for sale on an online public forum by an unknown source, and regulatory authorities including the Malaysian Communications and Multimedia Commission ("MCMC"), the Personal Data Protection Commissioner’s office ("PDPC") and Malaysian police force were investigating the breach.
In a twist of events, police investigations have traced the data breach to Nuemera (M) Sdn Bhd, i.e. the company engaged by MCMC to handle the Public Cellular Blocking Service ("PCBS") on behalf of MCMC. PCBS was launched by MCMC in 2014 to block lost or stolen mobile phones using its unique International Mobile Equipment Identity ("IMEI") number.
Pursuant to these revelations, a civil suit has been filed against both MCMC and Nuemera by politician Fahmi Fadzil, who acts as the communications director for the People's Justice Party (Parti Keadilan Rakyat or "PKR").
The legal counsel for Fahmi Fazil have stated that the case will be based on breach of trust by MCMC for failing to guarantee the personal safety and personal information of the 46.2 million mobile subscribers. The leaked data included personal information such as individuals' names, mobile numbers, addresses and national identification numbers.
Click here to read our TMT Regional Update referred to above. The report is found on page 6 of the Update.
Following the massive-scale data breach involving 46 million Malaysian mobile phone users in October 2017, the online public chat forum, Lowyat.net reported in January 2018 that files containing personal details of more than 220,000 pledged organ donors had been leaked online as early as September 2016. The source of this latest leak has not been identified as of yet.
The recent data breach has far-reaching implications as it involves not only personal information of pledged organ donors, but also personal information of the nominated next-of-kin of the pledged organ donors. The presence of relationship information (e.g. spouse, sibling or parental) is said to increase the risk that victims of the data breach will be exposed to "social engineering" attacks, i.e. a form of manipulation to trick people into divulging confidential information by making use of the relationship information to gain the confidence of would-be victims.
In March 2018, Deputy Communications and Multimedia Minister Jailani Johari provided an update on the status of investigations into the two data breaches. According to the Minister, regulatory authorities including the Malaysian Communications and Multimedia Commission ("MCMC"), Department of Personal Data Protection ("JPDP"), the Attorney-General's Chambers of Malaysia ("AGC"), and the National Cyber Security Agency ("Nacsa"), were still investigating the matter under Section 4 of the Computer Crimes Act 1997 ("CCA") (which creates an offence for unauthorized access to computer material with intent to commit or facilitate commission of a further offence), and Section 130 of the Personal Data Protection Act 2010 (for the offence of unlawful collection of personal data).
On 27 February 2018, the Central Bank of Malaysia (Bank Negara Malaysia or "BNM") issued a policy document titled Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) – Digital Currencies (Sector 6) (the "Policy Document").
Digital currencies are not presently recognised as legal tender in Malaysia. Nonetheless, the Policy Document has been issued to ensure that effective measures are in place against money laundering and terrorism financing risks associated with the use of digital currencies and to increase the transparency of digital currency activities in Malaysia.
The Policy Document sets out, amongst others, the minimum requirements and standards that reporting institutions (i.e. any person offering services to exchange digital currencies) must observe when carrying out any one or a combination of these types of activities: (i) exchanging digital currency for money; (ii) exchanging money for digital currency; or (iii) exchanging one digital currency for another digital currency, whether in the course of carrying on a digital currency exchange business or otherwise.
BNM has highlighted that the reporting obligations imposed on the digital currency exchanges ("DCEs") is the first step towards making digital currency activities more transparent in Malaysia, but it does not in any way connote the authorisation, licensing, endorsement or validation by BNM of any entities involved in the provision of digital currency exchange services.
In January 2018, the Second Finance Minister of Malaysia, on behalf of the Central Bank of Malaysia (Bank Negara Malaysia or "BNM") confirmed that BNM will not be enforcing a blanket ban on the trading of cryptocurrencies, as the Malaysian Government views digital currencies as part and parcel of Malaysia's "digitalisation roadmap" and a ban would curb innovation and creativity in the financial sector, particularly financial technology.
Notwithstanding that digital currencies are not currently regulated in Malaysia, the Inland Revenue Board of Malaysia ("IRB") has confirmed that cryptocurrency traders are still subjected to Malaysian tax laws. In imposing a freeze on the bank account of London based cryptocurrency exchanger Luno, the IRB stated that the freeze was to enable the IRB to determine whether the cryptocurrency company had complied with the requirements of the Income Tax Act 1967 ("ITA"), as cryptocurrency businesses are subjected to Malaysian income tax by virtue of the Section 3 of the ITA. Section 3 of the ITA provides that tax shall be charged upon the income of any person accruing in or derived from Malaysia.
In a separate statement by IRB CEO Datuk Seri Sabin Samitah, the IRB has also confirmed that all property transactions in Malaysia using cryptocurrency will still be liable for real property gains tax ("RPGT"), as taxes should be paid even when property transactions are carried out with digital currencies.
As at the date of this update, participation in Initial Coin Offering ("ICO") schemes (i.e. fundraising activities / investment schemes through the issuance and sale of digital tokens in exchange for investors paying for these tokens through cryptocurrencies) is neither prohibited nor regulated in Malaysia.
However, in early January 2018, the Securities Commission Malaysia ("SC") issued a cease and desist order to CopyCash Foundation (a Singapore-based blockchain startup) to immediately cease and desist all its proposed activities including a purported plan to launch an ICO in Malaysia, after the SC found that there was a reasonable likelihood that disclosures in CopyCash Foundation's white paper and representations to potential investors would contravene relevant requirements under Malaysian securities laws.
Following this event, the SC, together with the Central Bank of Malaysia (Bank Negara Malaysia or "BNM") issued a joint cautionary statement on ICO schemes in Malaysia, stressing that ICO schemes may involve activities that are subject to laws administered by the SC and BNM, and that carrying on such activities without proper authorisation will be an offence, whereby both authorities will not hesitate to take action against any offenders.
The provisions contained in the Companies Act 2016 ("CA 2016") and the accompanying Corporate Rescue Mechanisms Rules 2018 on corporate voluntary arrangements ("CVA") and judicial management ("JM"), two new corporate rescue mechanisms in Malaysia, came into force on 1 March 2018. Prior to this date, a distressed company could only propose a scheme of arrangement with its creditors (which required court approval) and this is retained in CA 2016, with some changes.
A CVA, available only to private companies, is a composition in satisfaction of a company's debts or scheme of arrangement of a company's affairs. A director, judicial manager or liquidator may propose a CVA. Directors remain in control of the company and a nominee, being an independent insolvency practitioner, supervises the implementation of the arrangement.
A JM is essentially a temporary Court-supervised rescue plan where an external administrator (the judicial manager) manages, rescues or disposes the business of a company to maximise returns. A JM application can be made by the company, its shareholders, directors or any creditor and only if: (i) the company or its creditors consider that the company is or will be unable to pay its debts; and (ii) there is a reasonable probability of rehabilitating the company or of preserving its business as a going concern, or that otherwise the interests of creditors would be better served than by resorting to winding up.
CVA and JM are not available to certain regulated entities.
On 28 December 2017, the Malaysian Competition Appeal Tribunal ("CAT") affirmed the Malaysian Competition Commission’s ("MyCC") decision which found MY E.G. Services Berhad ("MyEG") had infringed section 10 of the Competition Act 2010 as it had abused its dominant position in the market for the sale of mandatory foreign workers' insurance by applying discriminatory terms. As MyEG failed to cease its infringing conduct, due to the daily penalty of RM7,500 commencing from 25 June 2016, the fine ballooned from the initial proposed penalty of RM307,200 by MyCC in its proposed decision on 6 October 2015 to RM2,272,200 upon issue of MyCC's decision on 24 June 2016, to RM6,412,200 when the case was ultimately decided upon by CAT.
MYEG was also ordered to: (i) cease and desist immediately from imposing different conditions to equivalent transactions in the processing of mandatory insurances for online foreign worker permits renewal applications; and (ii) provide an efficient gateway for all its competitors in the market for the sale of the mandatory insurances, which would allow the other competitors to compete at the same level, within sixty (60) days from the date of the CAT's decision.
MyEG's subsidiary, MY E.G. Commerce Sdn Bhd, an insurance agent of RHB Insurance Berhad sold mandatory insurances for the renewal of foreign worker permits. Its customers would enjoy speedier and easier processes (including automatic verification and no uploading requirements) when purchasing the mandatory insurances through MyEG's portal, compared to purchases made from other insurers which required additional steps. MyCC viewed such additional steps constituted different conditions to equivalent transactions and this was affirmed by CAT. In CAT's view, this was tantamount to MyEG applying pressure on end users to purchase mandatory insurances from RHB Insurance Berhad via MyEG's subsidiary.
MyEG and its subsidiary intend to file a judicial review of the CAT's decision and to apply for a stay against the decision.
Please note that whilst the information in this Update is correct to the best of our knowledge and belief at the time of writing, it is only
intended to provide a general guide to the subject matter and should not be treated as a substitute for specific professional advice.
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Christopher & Lee Ong
Level 22, Axiata Tower ,
No. 9 Jalan Stesen Sentral 5
Kuala Lumpur Sentral,
50470 Kuala Lumpur, Malaysia
www.christopherleeong.com
Contacts: Lee Hock ChyeManaging PartnerD +603 2273 1919F +603 2273 8310hock.chye.lee@christopherleeong.comYon See TingPartnerD +603 2278 8311F +603 2278 8322see.ting.yon@christopherleeong.comFiona SequerahPartnerD +603 7958 8310F +603 7958 8311fiona.sequerah@christopherleeong.comLim Wee HannPartnerD +65 62320606wee.hann.lim@rajahtann.comYau Yee MingPartnerD +603 2278 8311F +603 2273 8322yee.ming.yau@christopherleeong.comKuok Yew ChenPartnerD +603 7958 8310F +603 7958 8311yew.chen.kuok@christopherleeong.com| Rajah & Tann Asia is a network of legal practices based in Asia. |
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This update is solely intended to provide general information and does not provide any advice or create any relationship, whether legally binding or otherwise. Rajah & Tann Asia and its member firms do not accept, and fully disclaim, responsibility for any loss or damage which may result from accessing or relying on this update. |
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