MTC Engineering Sdn Bhd v VME Process Asia Pacific Pte. Ltd.

Appellant(s): Mtc Engineering Sdn. Bhd.

Respondent(s): Vme Process Asia Pacific Pte. Ltd.

• YA Datuk Ravinthran a/l Paramaguru
• YA Datuk Azhahari Kamal bin Ramli
• YA Dato' Ahmad Fairuz bin Zainol Abidin

• The respondent entered into a main contract with the appellant's subsidiary, which contained an arbitration clause for disputes arising from it.
• The appellant subsequently issued a Letter of Undertaking (LOU) to the respondent, assuming all payment obligations of its subsidiary under the main contract, but the LOU itself did not contain an arbitration clause.
• When the respondent initiated legal proceedings against the appellant based on the LOU, the appellant sought a stay of proceedings under Section 10 of the Arbitration Act 2005, arguing the arbitration clause from the main contract was incorporated into the LOU.

• Whether an arbitration clause contained in a main contract, to which the appellant was not a party, was incorporated by reference into a separate Letter of Undertaking (LOU) issued by the appellant.
• Specifically, whether the reference in the LOU to the main contract satisfied the requirement of Section 9(5) of the Arbitration Act 2005, that the reference be "such as to make that clause part of the agreement".
• Whether integration clauses in the main contract, which designated the LOU as an integral part of it, operated to incorporate the arbitration agreement into the LOU.

• The Court dismissed the appeal, upholding the High Court's decision that the arbitration clause was not incorporated into the LOU.
• The Court clarified that for incorporation by reference under Section 9(5) of the Arbitration Act 2005, the reference must clearly indicate an intention to make the arbitration clause part of the agreement, not merely serve as contextual information.
• It was held that the reference in the LOU was merely a recital for context, and the LOU was a standalone contract, thus the arbitration clause from the main contract was not incorporated. The integration clauses in the main contract were also deemed irrelevant to the dispute between the parties to the LOU.