Mediation Just Got Real Teeth in Malaysia. That Changes How You Should Use It.

In May 2026, Malaysia enacted the International Settlement Agreements Resulting from Mediation Act 2026 (Act 881), giving domestic effect to the Singapore Convention on Mediation. It went almost unnoticed. For Malaysian companies that mediate cross-border commercial disputes, and for the many more who will encounter mediation for the first time as international trade and investment into Malaysia grows, it is worth understanding properly, because it changes what a “good” mediated settlement looks like.

A quick word on where this view comes from. Already back in 2019, one of our authors published an academic review of the Singapore Convention’s key features and the criticism it had received, and later argued, at a mediation conference in Seoul, that giving mediated settlements real enforceability could backfire: mediations could become slower, costlier, more heavily lawyered and less creative, precisely because more is now at stake in every word of the settlement agreement. Seven years on, Malaysia’s Act gives us an actual domestic text to test that against, rather than a hypothetical.

What the Act does, briefly

Historically, a mediated settlement in Malaysia was only as good as the other side’s willingness to honour it. If they walked away, you started again, from a breach of contract claim. The Singapore Convention aimed to change that, and Act 881 implements it into Malaysian law. It lets a party take a qualifying international settlement agreement to the Malaysian High Court and have it recorded as a court order, enforceable like a judgment, or rely on it as evidence that a dispute has already been resolved. It applies to written, commercial, international settlement agreements reached through mediation, and excludes consumer, family, and employment disputes, along with settlements that are already enforceable as a court judgment or an arbitral award.

It is not in force yet. Commencement requires a separate notification by the Minister, not yet issued. That gap is useful: it is a runway to prepare, not a reason to ignore this.

Why the fine print matters more than the headline

The Act does not simply say “mediated settlements are now enforceable.” It sets out, in some detail, the grounds on which a Malaysian court can refuse to enforce one. Two of them deserve particular attention because they go directly to how mediations are run, not just how settlements are drafted: enforcement can be refused where there was a serious breach by the mediator of the standards applicable to the mediation, or where the mediator failed to disclose circumstances raising justifiable doubts about their impartiality or independence, and that failure materially affected a party’s decision to settle.

These are close to word-for-word the same grounds that drew pointed criticism internationally when the Singapore Convention itself was adopted, on the basis that they invite exactly the kind of “mini-trial” over a mediator’s conduct that mediation is supposed to avoid, and put pressure on the confidentiality that makes mediation work in the first place. Malaysia has now imported that risk into domestic law along with the benefit. The practical takeaway is not that mediation has become dangerous. It is that who mediates, and how carefully the process and the settlement are documented, now matters as much as what is agreed.

What this means in practice

For a Malaysian business new to international mediation, the informal picture, an experienced businessperson in a room with a facilitator, a handshake, and a short letter confirming terms, understates what now needs to happen if you want that settlement to be enforceable rather than merely honourable. Three things are worth building into practice from the outset, not retrofitting after a dispute arises. Use a credentialed, experienced mediator, and keep a record, whether that is the mediator’s signature on the settlement agreement, a separate certification, or an attestation from the administering institution, since Act 881 requires one of these before a court will enforce or admit the settlement. Draft the settlement agreement itself with the same discipline as a contract: clear, final, unambiguous obligations, because “not clear or comprehensible” and “not final according to its terms” are both grounds on which enforcement can be refused. And if the agreement is not in Malay or English, arrange a certified translation early, since the Act requires one before the court will act on it.

None of this makes mediation less useful. It makes it less forgiving of the loose, undocumented approach that has been common practice, and it rewards the businesses that treat mediation with the same rigour they would bring to arbitration or litigation.

The opportunity

Very few Malaysian businesses, and not many advisers, have engaged with this Act at all. That is, in itself, useful information: there is a real window to get ahead of a change most of the market has not yet clocked, rather than learning its finer points the hard way once the first enforcement application reaches the High Court. If you use mediation, domestically or across borders, or are weighing it as an option for a live or upcoming dispute, we would be glad to talk through what Act 881 means for how you approach it.

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Raja Nadhil Aqran is the Managing Partner of Aqran Vijandran in Kuala Lumpur, advising clients on commercial litigation, corporate advisory, ESG and compliance matters across Malaysia and the wider region.

Dr. Harald Sippel is an Austrian-qualified attorney (Rechtsanwalt) and Senior Foreign Advisor at Aqran Vijandran in Kuala Lumpur, supporting foreign companies – with particular depth in DACH-region and Korean client work – on Malaysian law matters across all practice areas.

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