Sultanate heirs use international law to make Malaysia pay

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Imagine a group of litigants taking the US government to court in Russia and getting a ruling that billions of dollars are owed to them for an agreement signed in the early 19th century – on the grounds that Alaska belonged to Russia before 1867 if the Greek government was determined by the courts in Turkey to owe a huge sum of money on a historic contract, the argument being that because Greece was then in the Ottoman Empire, Turkey would be the right place to address this issue? Both cases are unthinkable, and the latter could bring incendiary Greek-Turkish relations to the brink.

However, something very similar to this just happened in Malaysia. This led to a bailiff last week serving asset seizure notices at the Luxembourg offices of two subsidiaries of Petronas, the Malaysian energy giant, and panicking the government into believing that national assets anywhere in the world could be in danger.

The asset seizure notices were issued following a ruling that Malaysia owes $14.9 billion to a group that claims to be the heirs of a sultanate that hasn’t existed since 1915, and is an unwelcome example of how the international legal system can still be entangled with almost forgotten relics of colonial history.

The story begins in 1878, when the then Sultan of Sulu, a group of islands in the western Philippines, signed an agreement that allowed the British North Borneo Company to take over a piece of land in this which is today the Malaysian state of Sabah. Any dispute as to whether this was a lease or an assignment should have been clarified by a later treaty in 1903 which confirmed the “cession”. North Borneo later became a British colony and in 1963 agreed to become part of the newly created state of Malaya.

While colonialism may be long gone, international law must catch up

Until nine years ago, Malaysia continued to pay an annual cession of 5,300 ringgits ($1,190) to the descendants of the last sultan, who died in 1936. But in 2013, a group of 235 people were associated with the one of the pretenders to the defunct sultanate. “invaded” Sabah – which sounds like a joke, except that 56 of the militants died, as did 10 members of the Malaysian security forces and six civilians.

The amount of money that could reasonably be claimed, therefore – if it were not considered permanently forfeited after the attack on Malaysia – could be around $13,500, with interest. Hardly a sultan’s ransom. The heirs and their lawyers, however, brazenly used this opportunity to demand compensation for Sabah’s vast mineral wealth that no one knew about in 1878.

Tommy Thomas, who was Malaysia’s attorney general when the case was pending, recently said the heirs told the Malaysian government ‘they tried to go to the UK’ as a former colonial power from North Borneo. “The UK kicked them out. The UK said, ‘We have nothing to do with this, go to the courts in Malaysia'”.

The heirs then traveled to Spain, the former colonial rulers of the Philippines, where the High Court in Madrid appointed an arbitrator, Gonzalo Stampa. According to Mr. Thomas, Malaysia contacted the Spanish authorities, and “the court in Madrid agreed with us and canceled everything” – whereupon Mr. Stampa took the case to France, which likes to call itself ” the homeland of international arbitration”. In February the huge sum was awarded, a judgment that the French Court of Appeal ordered suspended on July 12 – except that by then the bailiffs had already gone into action in Luxembourg.

The story is even more convoluted than that, and while it seems odd that the case moved to France, the explanation given by an implicated source to a Malaysian newspaper, The edgewas that an “arbitration is like a plane – once it’s taken off, there’s no way the control tower where the plane took off can dictate what happens”.

The Malaysian government is convinced that he is right. Perhaps a relatively small sum may be owed to heirs, but nothing close to $14.9 billion. And that’s being generous, as many historians dispute that the Sultanate of Sulu ever had a legitimate claim to the land of Sabah in the first place; in fact, they say, it belonged to Brunei.

“Sulu never had a treaty or title deed from Brunei, and there is no record or evidence that Sulu ever owned or ruled North Borneo,” says Bunn Nagara, head of the Sabah Malaysia Study Group. Brunei ceded the area to British North Borneo. Company in 1877. “Sulu claimed the territory and had a reputation for plundering coastal settlements, so as an insurance policy the company entered into another surrender agreement with Sulu.”

In short, heirs were blessed with cession payments for land that may not have been theirs for so long. Until recently, this has all been primarily the province of historians, although, as Mr. Bunn points out, “the claim remains a very populist issue in the Philippines, unsupported by the facts as they stand. Previous presidents such as Corazon Aquino and Gloria Arroyo, who tried to water down Manila’s claim to Sabah, have been accused by some of being traitors.”

Now, however, as the Malaysian government tells the FinancialTimes that the suspension of the sentence in Paris was a reason for other countries to refuse its execution, the lawyers for the heirs in London insisted that “the foreclosure procedure is an ongoing program”.

Malaysian authorities are taking steps to protect overseas assets, but the concern at the moment is that lawyers for heirs, who are believed to be backed by a large litigation fund in London, “can choose from among the other 167 jurisdictions that are parties. at the New York Convention on Arbitration, then Malaysia will have to come forward and say we have a stay from the Paris Court of Appeal,” says the one involved in fighting this action in Kuala Lumpur. “The limit to that? Countries have a role to play in these kinds of disputes? Shouldn’t colonialism have been over by now?”

All good points. What this bizarre story shows, however, is that even though colonialism is long gone, its legacy can still be exploited. International law must catch up. Ordinary Malays do not deserve this attempt to extract billions from them. And somehow, I suspect that deep sympathy for the descendants of the last Sultan of Sulu is not high on their lawyers’ list of concerns.

Posted: Jul 20, 2022, 4:00 AM

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