Your Overseas Counterparty Has Stopped Paying: What You Can Actually Enforce

If an overseas counterparty has stopped paying, what you can enforce in Malaysia turns on which of three routes your contract left open. A foreign judgment can be registered here only if it comes from a superior court in one of the seven countries in the First Schedule to the Reciprocal Enforcement of Judgments Act 1958, and only within six years. A foreign arbitral award reaches much further, through sections 38 and 39 of the Arbitration Act 2005. Anything else means fresh proceedings in Malaysia.

Most businesses find out which route they are on only after the money has stopped. By the time anyone reads the dispute clause, the enforcement position is already fixed.

What actually decides whether you can enforce?

Two things, and neither is the strength of your claim.

• The dispute clause. Arbitration, Malaysian courts, a named foreign court, or nothing — each leads to a different route below.

• Where the assets are. Bank accounts, third-party receivables, goods in a warehouse, shares, property, and any Malaysian footprint — a branch, a subsidiary, a distributor holding your stock.

A counterparty with Malaysian receivables is a different problem from one with nothing here. Establish both before choosing a route.

Which foreign judgments can be registered in Malaysia?

Only judgments of a superior court of a country in the First Schedule to the Reciprocal Enforcement of Judgments Act 1958. There are seven: the United Kingdom, Hong Kong SAR, Singapore, New Zealand, the Republic of Sri Lanka, India (with stated territorial exclusions) and Brunei Darussalam. Section 3(1) limits registration to the superior courts named for each country. Application is to the High Court under Order 67 of the Rules of Court 2012, and the Act covers the whole Federation, Sabah and Sarawak included.

The list is shorter than most people assume. It does not include the United States, mainland China, any continental European state, Australia, Japan, Korea, Indonesia, Thailand or Vietnam. The Schedule can be added to or amended by order under section 3(2), so confirm the current list against the Gazette rather than treating it as fixed.

Section 3(3) adds three conditions: the judgment must be final and conclusive between the parties; a sum of money must be payable under it, not being a sum payable in respect of taxes or other charges of a like nature, or a fine or other penalty; and it must post-date the country's addition to the Schedule. A pending appeal does not by itself destroy finality (section 3(4)). The window is six years from the judgment, or from the last judgment given in appeal proceedings (section 4(1)). Once registered, the judgment has for execution the same force and effect as a judgment of the registering court, entered on the date of registration (section 4(2)).

What if the judgment is from a country not on the list?

Then registration is unavailable and the route is a fresh action in Malaysia on the foreign judgment as a debt — a second full proceeding after you have already won once.

This is not a menu. Where a judgment falls within Part II of the Act, registration is the exclusive route: section 7 bars any court in Malaysia from entertaining proceedings to recover the sum other than by way of registration. A creditor holding a Singapore or English High Court judgment cannot prefer a common law claim, and cannot fall back on one after letting the six years lapse.

What if you have an arbitral award instead?

Generally the better position. Malaysia acceded to the New York Convention on 5 November 1985, and the Convention now has in the region of 170 contracting states — against seven under the reciprocal judgments scheme. Foreign awards are enforced through sections 38 and 39 of the Arbitration Act 2005, not under the Reciprocal Enforcement of Judgments Act.

Two qualifications matter commercially. Malaysia entered two declarations under Article I(3), both still in force: a reciprocity reservation, so the Convention applies only to awards made in the territory of another contracting state, and a commercial reservation, limiting it to relationships considered commercial under Malaysian law. An award seated in a non-contracting state falls outside the route entirely.

Section 38(1) was substituted with effect from 1 January 2026 by the Arbitration (Amendment) Act 2024. An award — whether seated in Malaysia or from a foreign State — is now recognised as binding without a separate recognition application, but enforcement still requires a written application to the High Court, subject to section 39. Those grounds are exhaustive — enforcement may be refused only on them — and go to capacity and the validity of the agreement, notice, scope, the composition of the tribunal, arbitrability and public policy. Not a route back into the merits.

What must be filed is narrower than creditors expect. In Siemens Industry Software GmbH & Co KG v Jacob and Toralf Consulting Sdn Bhd & Ors [2020] the Federal Court held that the award, for these purposes, is the tribunal's decision on the substance of the dispute — the dispositive portion. The reasoning is akin to grounds of judgment and is not registered, which protects confidentiality. That decision construed the pre-2026 section 38, so its fit with the substituted provision is a point to take advice on.

How do the three routes compare?

What can the debtor do to stop you?

On a registered judgment, section 5(1)(a) sets out six mandatory grounds for setting registration aside: the judgment is not one to which Part II applies or was registered in contravention of the Act; the original court had no jurisdiction; the debtor did not receive notice in sufficient time to defend and did not appear; the judgment was obtained by fraud; enforcement would be contrary to public policy in Malaysia; or the rights under the judgment are not vested in the applicant. Section 5(1)(b) adds a discretionary ground where the matter was already the subject of a final and conclusive judgment. The first and last are the ones actually run — assignments, group restructurings and factored receivables all raise who the rights are vested in.

There is also a trap for a creditor who ignored its own contract. Under section 5(3)(b) the original court is not deemed to have had jurisdiction where proceedings were brought contrary to an agreement to settle the dispute otherwise than in that court. The protection is not absolute: it is expressly subject to the carve-outs in section 5(2), so a debtor who voluntarily appeared or submitted, was plaintiff or counterclaimed there, or had agreed beforehand to submit to that court, cannot rely on it.

What should you do before instructing anyone?

1. Read the dispute clause and the governing law clause together, and identify the seat.

2. Map the assets by jurisdiction, and check which side of the First Schedule line you are on.

3. Check every clock — contractual limitation, contractual notice periods, and the six-year registration window if a judgment exists.

4. Preserve the paper trail: orders, delivery documents, any acknowledgement of the debt.

5. Weigh the commercial levers first — withholding supply, security over goods in your hands, set-off, settlement. Where there is a Malaysian corporate presence, statutory demand and winding-up pressure may also be available; that route has its own thresholds and risks and turns on the facts.

For the domestic mechanics of the underlying claim, see our guides to breach of contract in Malaysia and contract termination. If the review shows the contract left you on the weakest of the three routes, that is a drafting problem, and it is what our international and cross-border contract drafting work exists to prevent.

Frequently Asked Questions

Which countries' judgments can be registered in Malaysia?

Seven. The First Schedule to the Reciprocal Enforcement of Judgments Act 1958 lists the United Kingdom, Hong Kong SAR, Singapore, New Zealand, the Republic of Sri Lanka, India (with stated territorial exclusions) and Brunei Darussalam, and only judgments of the superior courts named there qualify. The United States, mainland China, continental Europe, Australia, Japan, Korea, Indonesia, Thailand and Vietnam are not in the Schedule, which can be amended by order — confirm it against the Gazette.

How long do we have to register a foreign judgment in Malaysia?

Six years under section 4(1), from the date of the judgment or of the last judgment given in appeal proceedings. That is separate from the limitation period on the underlying contractual claim, and from any contractual notice period, which often bites earlier than either.

Can we skip registration and just sue in Malaysia on the foreign judgment?

Not where the judgment falls within Part II of the Act. Section 7 makes registration the exclusive route and bars a Malaysian court from entertaining proceedings to recover the sum otherwise. A fresh common law action on the judgment as a debt is available only for a country that is not in the First Schedule.

Is an arbitral award easier to enforce than a foreign court judgment?

Usually, on reach: around 170 New York Convention contracting states against seven under the reciprocal judgments scheme, with refusal only on the exhaustive grounds in section 39 of the Arbitration Act 2005. Two qualifications — Malaysia's reciprocity reservation means the award must have been made in another contracting state, and its commercial reservation limits the Convention to relationships considered commercial under Malaysian law. Recognition has been automatic since 1 January 2026, but enforcement still needs a written application to the High Court.

The counterparty has a Malaysian subsidiary. Can we enforce against it?

Not automatically. A subsidiary is a separate legal person and is not liable for its parent's debts merely because of the shareholding. That changes if the subsidiary is itself a party or has given a guarantee — which is why a parent guarantee and a Malaysian-facing security package are worth negotiating at the outset.

Which route fits your situation

The enforcement position you are in now was decided by the contract you signed, not by anything that has happened since the counterparty stopped paying — and the window to fix it for the next deal closes at signature, not at breach. Which route you end up on turns on the dispute clause, the seat, and where the assets are. Our international and cross-border contract drafting work maps those three, then puts the forum, the security and the guarantees in place so the paper you hold is enforceable where the money is.

This article is for general information only and does not constitute legal advice. Every transaction and every set of facts is different. Obtain specific advice from a qualified adviser before acting on any part of it.

Related guides

• Breach of contract in Malaysia

• Contract termination: when and how to end an agreement