Introduction
In PT Wijaya Karya (Persero) TBK & Anor v Zecon Bhd & Anor [2025] 6 MLJ 867, the Malaysian Court of Appeal overturned the High Court decision which set aside a final arbitration award. The High Court found there was no arbitration agreement between the principal parties and their corresponding agents. The Court of Appeal, however, reaffirmed that a non‑signatory may, in appropriate circumstances, be bound under the “Group of Companies” doctrine.
Brief facts
Zecon Bhd’s subsidiaries were awarded a design and build contract for the development of the Mydin Retail Mall in Kuching (“Project”). In implementing the Project, Zecon Bhd engaged PT Wijaya Karya (Persero) TBK (“PT Wijaya”) to provide project management services and manpower supply for the superstructure works. The parties entered into a project management services agreement (“PMSA1”) for the contract sum of RM13,830,591 on 13 August 2014.
Subsequently, Zecon Bhd appointed Zecon Construction (Sarawak) Sdn Bhd (“Zecon Sarawak”) to act as its nominee and agent, while PT Wijaya appointed Wijaya Karya Perseron Sdn Bhd (“Wijaya Karya”) as its nominee and agent. Zecon Sarawak and Wijaya Karya then entered into a separate project management services agreement (“PMSA2”) for the contract sum of RM11,485,397 on 12 November 2014. Both PMSA1 and PMSA2 contained identical dispute resolution clauses referring disputes to arbitration (“Arbitration Agreement”).
Disputes subsequently arose between the parties and were referred to arbitration. The Tribunal issued a final award in favour of PT Wijaya and Wijaya Karya (“Award”).
Zecon Bhd and Zecon Sarawak filed an application to set aside the Award, which the High Court allowed on the grounds, among others, that there was no arbitration agreement between Zecon Bhd, Zecon Sarawak, PT Wijaya and Wijaya Karya within the meaning of section 9(1) of the Arbitration Act 2005.
Arbitration Agreement and the “Group of Companies” doctrine
On appeal, the Court of Appeal overturned the High Court decision on the grounds, among others, that the High Court erred in finding an absence of an arbitration agreement.
The Court recognised the “Group of Companies” doctrine, as outlined in Dow Chemical France & Ors v Isover Saint Gobain ICC Award No 4131, YCA 1984, where an arbitration agreement entered into by certain entities may bind other companies within the same corporate group if their conduct in negotiation, performance or termination demonstrates the intention to be bound.
In the instant case, Zecon Bhd and PT Wijaya were the proper principals, while Zecon Sarawak and Wijaya Karya were their respective agents. Both principals, by conduct, had consented to assigning their obligations under PMSA1 to their agents. As such, it was appropriate for all four entities to be brought into the same arbitration. Accordingly, Zecon Bhd, Zecon Sarawak, PT Wijaya and Wijaya Karya remained bound by the Arbitration Agreement.
Key takeaways
An arbitration agreement may extend to non-signatory entities within the same corporate group where their conduct demonstrates an intention to be bound.
This update is prepared by Ricson Choong Yuk Lim.
For more information, please reach out to your usual contact from our Arbitration Practice Group.
