Malaysian Newsprint Industries Sdn Bhd v Bechtel International Inc. [2008]

Malaysian Newsprint Industries Sdn Bhd v Bechtel International Inc. [2008]

In this case the Bechtel applied to the court for a stay of proceedings pending arbitration pursuant to Section 6 of the Arbitration Act 1952.  The issue in question was whether disputes which arose during the course of execution of extended project services which had been negotiated between the parties after the execution of the original technical services agreement could be resolved through arbitration under arbitration clause provided for in the original technical services agreement.

Malaysian Newsprint Industries and Bechtel entered into a technical services agreement on 30th July 1996. Under this agreement, Bechtel agreed to review and analyze plans obtained by Genting Sanyen Newsprint for the construction of a newsprint facility. Bechtel’s project services under the agreement were due to cease on 30th September 1996. However, Malaysian Newsprint Industries required Bechtel’s services under the agreement beyond this date and as such, the parties entered into negotiations to extend the project services agreement and Bechtel proceeded with their works after September 30 on the basis of this extension.

Bechtel’s view was that the technical services agreement and its arbitration clause applied to the extended project services. Malaysian Newsprint Industries disagreed with this view.

The court held that Malaysian Newsprint Industries had authorized in writing the performance of the extended project services under the terms of the technical services agreement. These authorisations were not rescinded or superseded either in writing or orally, and Bechtel had relied on these written authorisations for the continued performance of its extended project services beyond October 1996. The Court therefore held that the extended project services executed by the Bechtel were governed by the technical services agreement, which included the arbitration clause.

The court affirmed that Malaysian courts will enforce arbitration agreements wherever possible, unless there are exceptional circumstances.

Panel Hearing in respect of Malaysian Newsprint Industries Sdn Bhd v Bechtel International Inc [2008]