MTC ENGINEERING SDN. BHD. v VME PROCESS ASIA PACIFIC PTE. LTD.

Case Significance

Confirms that a non-party to a contract cannot invoke its arbitration clause simply because a separate agreement it signed refers to that contract: incorporation by reference under section 9(5) of the Arbitration Act 2005 requires more than a bare reference, and a letter of undertaking without its own arbitration clause does not attract a stay.

This Court of Appeal decision concerns whether a party can invoke an arbitration clause contained in a main contract to which it is not a party, merely because a separate agreement to which it is a party refers to that main contract. The respondent, a Singapore company supplying oil-and-gas topside processing modules, had entered into an engineering, procurement, construction and pre-commissioning contract with a subsidiary of the appellant, MTC Engineering Sdn Bhd, for a field development project; clause 44.2 of that contract provided for binding arbitration in Singapore under the SIAC Rules. On the same day, the appellant issued a letter of undertaking in favour of the respondent, assuming all payment obligations under the main contract so that its obligations mirrored those of its subsidiary; the letter of undertaking contained no arbitration clause but was attached to the main contract as an appendix. When the respondent sued the appellant in the High Court, the appellant sought a stay under section 10 of the Arbitration Act 2005, contending that the arbitration agreement in the main contract had been incorporated by reference into the letter of undertaking. The Senior Assistant Registrar granted the stay, but the High Court overturned it, and the appellant appealed. The Court of Appeal held that the appellant, not being a party to the main contract, could not invoke its arbitration clause merely by the reference in the letter of undertaking, and that the requirements for incorporation by reference under section 9(5) of the Arbitration Act 2005 were not satisfied. It agreed with the High Court that a Federal Court authority relied on by the appellant was not relevant, since that case concerned the procedural requirements for recognising an arbitral award under section 38 and did not decide whether an arbitration agreement had been incorporated by reference. Finding no appealable error in the High Court's decision, the court dismissed the appeal and, by agreement, ordered the parties to bear their own costs.