In mid-July 2022, Malaysians learnt that a group of heirs of the Sulu Sultanate (“Sulu Heirs”) were attempting to seize assets of PETRONAS subsidiaries in Luxembourg. Many were baffled by this and questions have come up as to whether Malaysia is in debt to these Sulu Heirs.
The story begins in 1878 when the Sultan of Sulu granted all rights and powers in connection to parts of Sabah to the British North Borneo Company (“SBUB”). This granting of rights and powers, which was intended to be ‘forever and in perpetuity’, was for the sum of 5,000.00 dollars per annum. Later, in 1903, the Sultan of Sulu signed a deed granting SBUB rights and power over some additional islands with an increase of annual compensation to 5,300.00 dollars.
These 5,300 dollars was first paid by SBUB and then by the British Government until the formation of Malaysia in 1963. From that point onwards, Sabah became a part of the Federation of Malaysia, an independent country free from the burdens of colonialism. However, the Malaysian government chose to take over the payment of 5,300.00 dollars (in Malaysian Ringgit) from the British Government and continued doing so up until 2013, when the payments were suddenly stopped. Although no official statement has been made explaining the decision to stop paying the Sulus in 2013, the armed invasion into Lahad Datu is assumed to be the reason behind it.
Unhappy having not been paid their annual compensation since 2013, Sulu Heirs claimed a whopping US$32.20 billion from the Government of Malaysia. This amount is far larger that the RM5,300.00 yearly payments from 2013. According to the Sulu Heirs, they are entitled to payments for the income made from Sabah’s natural resources.
The Sulu Heirs’ claim was successful in part and they obtained an arbitration award for US$14.92 billion with 10% interest per annum and further costs of US$7.5 million. This award was made by a sole arbitrator, Gonzalo Stampa who is believed to be based in Spain. Clearly, this award has gone far beyond the RM5,300.00 not paid by Malaysia since 2013. This is not to mention that Stampa had no legal jurisdiction to make the award in the first place.
What is Malaysia’s position? Do we owe the Sulu Heirs money? Is Malaysia bound by the award in favour of the Sulu Heirs?
Having committed to making payments of RM5,300.00 to the Sulu Heirs for 50 years, any attempt by Malaysia to deny responsibility over the same would be an attempt to reverse a longstanding agreement, or simply a ‘u-turn’. If the Malaysian Government no longer wants to make these payments (be it for the Lahad Datu invasion or otherwise), the proper course of action would be to look to the Courts. As this has not been done, the Malaysian Government has essentially defaulted on these payments. This position was made clear in the Attorney General’s (Tommy Thomas at the time) letter to the Sulu Heir’s lawyers offering to make payment of RM48,230.00 (RM37,100.00 and 10% interest amounting to RM11,130.00).
However, there is a huge gap between what Malaysia recognised as compensation to the Sulu Heirs and what has been awarded. The Prime Minister’s office has made it crystal clear that the award is invalid and in violation of law. The proper place to determine the Sulu Heirs’ claim is the Malaysian Courts, as was done in 1939 when predecessors to the Sulu Heirs had succeeded in claiming the 5,300.00 dollar compensation from the Government of North Borneo.
In short, if the Sulu Heirs have a claim to make against the Malaysian Government, they can make it at the Malaysian Courts. Until then, the Malaysian Government will fight the outrageous award for US$14.92 billion.
About the Author
Sahain is currently pursuing his pupillage at NKPT under the tutelage Mr. Joachim Xavier. He graduated with Honours from the National University of Malaysia. Sahain believes that the legal fraternity plays an integral part in the operation of the rule of law in Malaysia and is keen to utilise his legal education towards the betterment of society and the country.
