KUALA LUMPUR (Sept 1): Boustead Holdings Bhd's 51%-owned MHS Aviation Bhd has served a notice of arbitration against Petroliam Nasional Bhd's wholly-owned oil exploration arm Petronas Carigali Sdn Bhd (PCBS) today for breach of contract with claims in damages of RM42.7 million.

The contract dated June 29, 2011 was for the provision of rotary wing aircraft equipment and services (for heavy type aircraft-EC225), Boustead said in a bourse filing today.

According to the contract, the Rules of the Kuala Lumpur Regional Centre for Arbitration would apply, it added.

"By the said contract, MHS was engaged by PCSB to provide it with five EC225 helicopters for use in PCSB's oil and gas exploration and production operations.

"However, the use of all five helicopters was suspended by PCSB unilaterally following two forced landings in the North Sea in May and October 2012 involving EC225 helicopters that were unconnected to the parties in the present case," it said.

Boustead said MHS has made eight claims including the RM42.7 million in damages, general damages, other damages deemed fit by the Arbitral Tribunal and a declaration that PCSB pays it the monthly standby rate during the period the Emergency Airworthiness Directive issued by European Aviation Safety Agency remains legally applicable to Malaysian registered EC225 helicopters by virtue of the Department of Civil Aviation regulations/directives.

"The arbitration is part of the company's ongoing recovery actions to protect and preserve MHS's rights and monetary claims for various works and services provided in respect of contracts entered into by MHS," it said.

Boustead said following consultation with its solicitors, the board is of the view that MHS has good claims in this matter.

However, the arbitration is expected to materially affect the operational and financial position of MHS.

“As for the Boustead group, the arbitration will not have a material impact on the operational and financial position for the financial year ending Dec 31, 2016,” it said.

At 2.55pm, Boustead was up one sen or 0.46% to RM2.17, with 147,300 shares done, valuing it at RM4.4 billion.