1. Political and Legal System

Malaysia is a constitutional monarchy with a system of parliamentary democracy. The Federal Constitution is the supreme law of the land providing the legal framework for legislation, courts and administrative aspects of the law. It also defines the powers of the government and monarch, as well as the rights of citizens, and the separation of powers amongst the executive, judicial and legislative branches.

Below the Federal Constitution, legislative instruments are in the form of: Acts passed by Parliament; Regulations and other subsidiary legislations passed by the executive (Ministerial Regulations); and, State laws and regulations. Federal laws prevail over inconsistent state and Shariah laws.

Malaysia comprises 13 states as well as three federal territories. Nine of the states are ruled by hereditary rulers, among whom the "Yang di-Pertuan Agong" or King of Malaysia is elected for a five-year term on a rotating basis.1 Each state is divided into districts.

The executive branch is formally headed by the King but executive authority is exercised through the Cabinet led by the Prime Minister and subject to the authority of Parliament. The Cabinet is selected from among members of Parliament.2 The King is obligated to act upon the advice of the Cabinet.

The Federal Constitution provides for the separation of competencies between the Federation and the States. The federal government has legislative power over external affairs, including making laws and implementing treaties domestically, justice (except civil law cases among Malays or other Muslims and other indigenous peoples, adjudicated under Islamic and customary law), federal citizenship, finance, taxation, commerce, industry, and other matters. States enjoy legislative power over matters such as land, local government, Shariah law and Shariah courts. Article 75 of the Federal Constitution asserts that a federal law shall prevail over any inconsistent state laws. Federal laws enacted by the Parliament of Malaysia apply throughout the country, including making laws applicable to States as regards international agreements.3

State governments also have their own environmental regulations and are also are primarily responsible for protection of water resources, however the federal government is increasingly regulating this area. State territorial waters extend to 12 nautical miles of the coast, beyond which federal jurisdiction applies to the 200 nautical mile exclusive economic zone. Federal authority also governs any oil and gas operations within state territorial waters as well as any activities concerning the continental shelf.

The Federal Parliament comprises the House of Representatives and the Senate. The 222 members of the House of Representatives are elected for a maximum of five year terms based on voting districts.4 Senators are elected for three-year terms, 26 of whom are elected by the 13 state assemblies, 40 are appointed by the King, two represent the federal territory of Kuala Lumpur, and one each represent the federal territories of Labuan and Putrajaya.5

Each of Malaysia's 13 states are governed by state governments, which have their own State Assembly and cabinet of Chief Ministers who are selected from their respective State Assembly by the majority party. Each state may enact its own environmental laws and regulations.

The superior courts are the High Court in the States of Malaya (High Court in Malaya, and the High Court in the States of Sabah and Sarawak (High Court in Sabah and Sarawak), Court of Appeal, and the Federal Court, while the Magistrates' Courts, the Sessions Courts, and other courts6 are classified as subordinate courts. The Federal Constitution of Malaysia provides for a dual justice legal system of Shariah laws applying to Muslim citizens and secular criminal and civil laws applying to non-Muslims. The dual system applies to personal legal matters not commercial transactions.

The application of common law in Malaysian criminal cases is specified in section 5 of the Criminal Procedure Code (Act 593), which states that English law shall be applied in cases where no specific legislation has been enacted. In addition, sections 3 and 5 of the Civil Law Act 1956 allow for the application of English common law, equity rules, and statutes in Malaysian civil cases where no specific laws have been made. The principle of stare decisis also applies in Malaysian law whereby any decisions by a court higher in the hierarchy will be binding upon the lower courts.

Certain government ministries would play a major role in the development of CCS regulation and the approval of a CCS project in Malaysia. Key government ministries include:

  • Economic Planning Unit (EPU) of the Prime Minister's Department is responsible for national planning and prepares the country's 5-year plans and advises the cabinet. It approves and endorses major infrastructure projects in the country based on the country's 5-year plan in consultation with other government ministries, the private sector and civil society. The EPU could help coordinate among government agencies, in particular cross-sectoral projects, and plays an important role in law and policy development.
  • Ministry of Natural Resources and Environment (MNRE) is responsible for representing Malaysia at the UNFCCC, serves as the DNA, and prepares the country's climate change action plan. MNRE's Department of Environment (DOE) is responsible for carrying out the Environmental Quality Act.7 MNRE's DOE issues environmental permits for projects and regulates discharge of pollutants in the environment. MNRE's Department of Mineral & Geosciences provides expertise to the government in assessing the suitability of storage sites and would serve as a resource for policymakers developing CCS law and regulation.
  • Ministry of Energy, Green Technology and Water (KeTTHA) is the federal policy body for energy, green technology and water. In developing policy, KeTTHA would conduct consultation with stakeholders and would provide recommendations to the Cabinet in planning and reform efforts. Under KeTTHA, the Energy Commission regulates power and downstream gas and the National Water Services Commission regulates the water supply industry, each with responsibility pricing, technical standards and safety. Tenaga Nasional Berhad and Sabah Electricity Sdn. Berhad, among other government agencies, are also under the responsibility of KeTTHA. KeTTHA together with MNRE also acts secretariat for the National Green Technology and Climate Change Council. KeTTHA has been exploring CCS as part of Malaysia's Low Emissions Strategy.
  • Energy Commission is responsible for regulating power and downstream gas supply, promote competition and the development of the energy industry. It plays a largely advisory role with major decisions made by the Cabinet. The Energy Commission reviews requests for rate increases, which would then be considered KeTTHA and the EPU, and then ultimately decided by the Cabinet.
  • Ministry of Science, Technology & Innovation (MOSTI) sets R&D priorities for Malaysia and provides R&D grants. It could be asked to review the feasibility and soundness of new technologies, generally at the request of another agency. MOSTI operates some of Malaysia's national laboratories.
  • Ministry of International Trade and Industry (MITI) regulates oil refining and foreign investment into Malaysia. MITI is also responsible for developing strategy on incentives for foreign and domestic companies.
  • Ministry of Domestic Trade and Consumer Affairs (MDTCA) regulates the marketing and distribution of oil products in Malaysia. The MDTCA coordinates and issues permits for petroleum pipelines. It would also likely review the cost of CCS to manufacturers and consumers.
  • Department of Occupational Safety & Health regulates workplace safety and would have jurisdiction over the work safety issues associated with a CCS facility.
  • National Green Technology and Climate Change Council (MTHPI) is chaired by the Prime Minister to formulate policies and identify the strategic issues in the National Green Technology Policy development and climate change. It also coordinates, monitors and evaluates the effectiveness of the National Green Technology Policy and Green Technology programmes and climate change at the national level. MNRE and KeTTHA jointly act as secretariat. The Council comprises eight working committees (Industry Working Committee, Human Capital Working Committee, Research and Innovation Working Committee, Promotion and Public Awareness Working Committee; Transportation Working Committee, Green Neighborhood Working Committee, Adaptation Working Committee, and Green Development Working Committee).
  • Petronas is both the wholly state-owned upstream oil and gas production company, known as Petronas Carigali Sdn Bhd, and the regulator for upstream oil and gas industry through its Petroleum Management Unit. In its capacity as a regulator, the Petroleum Management Unit awards production sharing contracts for onshore or offshore oil and gas production areas to Petronas Carigali or third parties. For all oil and gas production sharing contracts awarded to third parties, Petronas Carigali is a compulsory partner. It also operates three of the country's five refineries and, through its domestic retail company, owns over 900 retail stations.8 Petronas is wholly-owned by the State, and, under the Petroleum Development Act, is subject to the control of the Prime Minister.9
  • Tenaga Nasional Berhad (TNB) is Malaysia's largest power generator and primary transmission and distribution company in Peninsular Malaysia. TNB is 70% owned by the State via diverse set of stakeholders and is the sole buyer of power in peninsular Malaysia. TNB also owns 80% of Sabah Electricity Sdn Bhd (SESB), the main utility in Sabah, east Malaysia.
  • Khazanah Nasional Berhad, the federal government investment company, holds approximaley 37% of TNB's shares, over half of the federal government total 70% stake in TNB.10 As their largest shareholder, it influences TNB's direction and policies.
  • SIRIM Berhad is a state-owned research institution operated as company under MOSTI. SRIM assists the MOSTI's Department of Standards of Malaysia in developing standards for technologies with environmental implications. SIRIM collaborates closely with KeTTHA and MNRE. SIRIM is currently developing life cycle-based standards for biofuels and could develop standards for CCS operations.
  • Planning, Coordinating and Implementing Committee on Electricity Supply and Tariff (Jawatankuasa Perancangan Pelaksanaan Pembekalan Elektrik dan Tarif or "JPPPET"), chaired by KeTTHA, recommends to the Cabinet the plan for the country's electricity supply and changes to the electricity tariff structure. Its members include representatives from the EPU, Ministry of Finance, Petronas, TNB, Energy Commission, MITI, Malaysian Investment Development Authority (MIDA), the MNRE, and the State Governments of Sabah and Sarawak.

The diagram below shows selected central government entities and stakeholders that would be involved in regulating or undertaking a CCS project. State or local government entities are not shown on the diagram.

1 Article 32, Federal Constitution.

2 Articles 39 and 43, Federal Constitution.

3 Article 76, Federal Constitution.

4 Article 46, Federal Constitution.

5 Article 45, Federal Constitution.

6 The Sessions Court, Magistrates' Court, Sharia Court, Juvenile Court, Penghulu Court and Native Court.

7 Pursuant to Section 3 of the Environmental Quality Act 1974, the Director General of Environmental Quality, who is appointed by the Minister of MNRE, is responsible for administering the Act and carrying out its functions, powers and duties.

8 Faizah Jamaludin, "Malaysia" in Oil Regulation 2010, Law Business Research.

9 Article 3(2), Petroleum Development Act of 1974.

10 Tenaga Nasional Berhad 2010 Annual Report.