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Malaysia

Malaysia is an independent federation consisting of two geographical regions separated from each other by the South China Sea: Peninsula Malaysia (or West Malaysia) and East Malaysia, comprising Sabah, Sararwak and the Federal Territory of Labuan.

STEP Labuan branch page

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New developments

Awaited reform in Labuan

  • A major consolidation and reform of the financial services legislation in Labuan has been proposed for enactment in 2009. Among the proposals are included amendments to the Labuan Offshore Trusts Act. Suggested changes would inter alia provide for Managed Trust Companies and exemption for Private Trust Companies; allow reservation by a settlor of certain powers; permit purpose trusts; allow for the duration of trusts to be unlimited and for trustees to subsequently fix a limit or shorten a fixed limit; allow Malaysians to be settlors and beneficiaries of Labuan trusts so long as the Labuan trust assets are foreign assets; and permit Malaysian properties to constitute Labuan trust assets where the settlors are foreign. There is also a proposed new Labuan Foundations Act.

1. Introduction

a. History and background

Malaysia is an independent federation consisting of two geographical regions separated from each other by the South China Sea: Peninsula Malaysia (or West Malaysia) and East Malaysia, comprising Sabah, Sararwak and the Federal Territory of Labuan.

The currency is the Malaysian ringgit (MYR).

b. Legal system

Malaysia has three parallel systems of law, each with its own hierarchy of courts.

Malaysia’s constitutional, administrative, criminal and commercial laws are based on common law. Common law courts consist of subordinate courts, two High Courts, the Court of Appeal and the Federal Court. The Federal Court is the final court of appeal.

The second of Malaysia’s three legal systems is the Islamic law system. The primary source of Islamic law is the Quran. Islamic law is applied only to Muslims and administered by the Syariah Courts. Each state has its own Syariah Courts.

Malaysia’s legal system also includes a native law system, applied in the states of Sabah and Sarawak and applicable only to natives (a legally defined status).

Malaysian law consists of both statute and case law. Malaysian legislation comprises the Federal Constitution, Federal Acts of Parliament, subsidiary legislation, ordinances and delegated legislation of the various states.

The general law is based on judicial precedent. Where there is no written law in force in Malaysia, the court will apply the common law of England and rules of equity as administered in England by virtue of the Civil Law Act 1956. This Act provides for different cut-off dates for reception of English common law and equitable principles in Peninsular Malaysia, Sabah and Sarawak.

Editorial board
David Chong TEP
Portcullis TrustNet (Labuan) Ltd, Labuan, Malaysia

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