Arbitration agreement in subcontract: incorporation by reference

Abstract

Contracting parties in all industries often employ the Incorporation By Reference (IBR) practice and use arbitration as the method to resolve their disputes. However, these practices are not without issues. There are arguments for and against them. The most disputed subject is when an arbitration clause is incorporated by reference from one contract to another. In Malaysia, the ruling is that a general statement of incorporation is enough to signify intent of Incorporation by Reference of an arbitration clause. To examine further on the issue, this qualitative study presents a critical analysis of 15 legal cases in Malaysia so as to identify the IBR principles practiced that affect the jurisdiction, whether to accept or reject the case. The law cases were primary sources reported in Malayan Law Journal (MLJ) which were retrieve from online the database of LexisNexis legal search engine. The method employed was legal research methodology that focused on descriptive analysis of law in lifting out the facts and judges’ scrutiny of the cases. The findings showed that in Malaysia, under the Arbitration Act 2005, there are three significant IBR principles being exercised by judges namely document need to be clearly identified, document clearly drafted and document need to be accessible. Based on the findings, it is hoped that before venturing into any contract, the parties involved will have clearer picture on what to do and what precautions to be taken against risks of dispute.