KUALA LUMPUR — The Third-Party Funding Code of Practice 2026 has come into force in Malaysia from January 1, marking a significant step toward enhancing ethical standards and transparency in arbitration proceedings, the Legal Affairs Division (BHEUU) of the Prime Minister’s Department said.
According to BHEUU, the enforcement of the code coincides with the implementation of the Arbitration (Amendment) Act 2024, which introduces a more structured regulatory approach to third-party funding in arbitration.
The code, issued under Section 46D of the Arbitration Act 2005, outlines expected ethical conduct and practices for third-party funders, serving as an important reference point within the country’s arbitration ecosystem.
BHEUU said the code strengthens the existing regulatory framework by formalising disclosure and verification requirements for third-party funding arrangements in arbitration proceedings.
Minister in the Prime Minister’s Department (Law and Institutional Reform) Azalina Othman Said previously highlighted that the legislative changes were informed by challenges arising from the Sulu arbitration dispute involving Malaysia.
She said the amended law now requires funded parties to disclose third-party funding agreements to all relevant parties, including arbitral tribunals and the courts, as a measure grounded in transparency.
Azalina added that while third-party funding remains permissible and supported, the lack of disclosure in earlier cases had limited the government’s ability to confirm funding arrangements, with key information only uncovered through investigations.