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Zul Rafique & Partners succeeds in its jurisdictional challenge relating to claim against a Korean parent company

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9 December 2021

Please click HERE for the Mandarin version of the case update.

T Kuhendran, Esther Tan and Delvin Singh Mangat from Zul Rafique & Partners’ Construction Dispute Resolution Practice Group, succeeded in its jurisdictional challenge, in respect of claims brought by the Claimant in an arbitration proceeding, against the main contractor (the “R1”) and their parent company based in Korea (the “R2”).

As a matter of background, the Claimant, being the Employer, appointed R1 as the main contractor for a MYR247 million poultry processing plant project (the “Project”). R2 issued a parent company guarantee (the “PCG”) to the Claimant in respect of the Project.

The Claimant has commenced arbitration proceeding against the Respondents. The claim against R1 was based on the arbitration agreement between the parties, and the claim against R2 was based on the PCG.

At the outset of the arbitration proceeding, the Respondents raised a challenge on the Tribunal’s jurisdiction to deal with claims made against R2, and contended that the Tribunal’s jurisdiction was limited to matters and disputes between the Claimant and R1 only. In this regard, the Respondents’ arguments were three-fold:

a. Firstly, there is no arbitration agreement between the Claimant and R2;

b. Secondly, even if there was an arbitration agreement, the Claimant has not fulfilled the contractual condition precedent to refer disputes between the Claimant and R2 to arbitration;

c. Finally, even if there was an arbitration agreement, R2 has never given consent to be joined as a party to the arbitration.

On the other hand, the Claimant, contended amongst others as follows, in support of its position that the Tribunal has jurisdiction to deal with claims under the PCG. The Claimant’s main contention was that pursuant to section 9(5) of the Arbitration Act 2005 (“AA”), the arbitration agreement has been incorporated into the PCG by reference.  

The Tribunal, having considered the submissions of parties, found in favour of the Respondents and ruled that the arbitration agreement was not incorporated in the PCG by reference. As such, the Claimant’s claims against R2 pursuant to the PCG is beyond the scope and jurisdiction of the Tribunal.

The arbitration proceeding will now proceed based on matters and disputes between the Claimant and R1 only.

For more insight into this area of law, please contact our Partners in the Construction Dispute Resolution Practice Group:
Kuhendran Thanapalasingam
Susan Tan Shu Shuen

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