KUALA LUMPUR (April 14): Pestec International Bhd (KL:PESTEC) said it has failed to stop an arbitration over a guarantee it gave for a now-terminated subcontract won by its unit for the Gemas-Johor Bahru double-track rail project.

In a filing with Bursa Malaysia on Monday, the company said its wholly owned unit Pestech Technology Bhd’s (PTECH) bid to stop arbitration proceedings was dismissed by the High Court.

The court instead favoured Syarikat Pembenaan Yeoh Tiong Lay Sdn Bhd’s (YTL Construction) application to stay arbitration proceedings.

YTL Construction is the wholly owned construction arm of YTL Corp Bhd (KL:YTL).

Pestec said it will appeal the High Court’s decision at the Court of Appeal.

The arbitration in question is the second YTL Construction has filed with the Asian International Arbitration Centre (AIAC) involving Pestec and PTECH.

It is specifically for YTL Construction to seek compensation from Pestec as the guarantor of the performance of its unit PTECH’s sub-contract agreement with YTL Construction.

Pestec, as the guarantor, agreed to ensure that its subsidiary, PTECH, fulfilled the terms of a subcontract with YTL Construction.

The subcontract, signed on Dec 18, 2018, involved a fixed-price contract for the design, construction, installation, testing, and maintenance of electrification systems for the Gemas-Johor Bahru double-track rail project.

The subcontract between YTL Construction and PTECH was allegedly terminated unlawfully on May 10, 2023.

The dispute is now being handled through a separate arbitration under the AIAC.

PTECH has also filed significant counterclaims against YTL Construction.

Pestec’s actions are part of several proceedings linked to the Gemas-Johor Bahru railway project.

TSR Bina Sdn Bhd, a unit of TSR Capital Bhd (KL:TSRCAP), is separately pursuing arbitration against YTL Construction over a similarly terminated subcontract, which it also alleges to have been wrongfully ended.

At 4pm, shares in Pestec were down half a sen or 3.33% to 14.5 sen with a market capitalisation of RM337.2 million.