Malaysia has won a legal battle in France that is likely to lead to the annulment of an award of nearly $15 billion over territorial claims over what is now the state of Sabah on the island of Borneo.
In a hearing yesterday, the Paris Court of Appeals ruled that the arbitration court that ordered Malaysia to make the payment to eight self-claimed heirs of the defunct Sulu Sultanate did not have jurisdiction to rule in the case.
The French decision appears to have brought to an end the strange legal case involving eight Philippine citizens who claim to be the legal descendants of Jamalul Kiram II, the last Sultan of Sulu, who once ruled over large parts of what are now the southern Philippines and eastern Malaysia.
In February of last year, a French arbitration court ordered the Malaysian government to pay the eye-watering sum of $14.9 billion to the Sulu heirs related to a deal that the Sultan of Sulu signed in 1878 with a British trading company over the use of his territory, in what is now the Malaysian state of Sabah on the island of Borneo.
In June, Malaysia’s government obtained a stay order against the enforcement of the French court ruling, on the grounds of sovereign immunity. But in the meantime, lawyers acting for the Sulu heirs moved to enforce the award by attempting to seize several Malaysian assets, including Europe-based subsidiaries of the state oil and gas firm Petronas.
Yesterday’s court decision had to do with technicalities around the appointment of the Spanish arbitrator Gonzalo Stampa, who delivered the multibillion-dollar award to the Sulu heirs last year. The French judges upheld Malaysia’s challenge against a “partial award” made by Stampa on May 25, 2020, during which he dismissed Malaysia’s objections against the arbitration proceeding and ruled that he had the jurisdiction to arbitrate the Sulu claimants’ case in Madrid.
The “partial award” was subsequently nullified by the Spanish High Court of Justice in June 2021, when it ruled that Malaysia had not been properly served ahead of Stampa’s appointment in 2019. In September, however, Stampa took the seemingly unusual step of transferring the arbitration proceeding to Paris, where he would go on to render the final award.
Critics of Stampa and the Sulu heirs have accused them of “forum shopping” – of “hopping from one foreign jurisdiction to the next to find a court that was willing to hear their claim,” as two Malaysian writers put it in these pages last year. As it turns out, Spanish authorities are currently taking criminal action against Stampa for ignoring the High Court’s ruling to stop the arbitration case.
In a statement issued immediately after yesterday’s ruling, Law Minister Azalina Othman Said said that the court decision means the Sulu claimants cannot seek to enforce what she described as a “sham award.”
“The Paris Court of Appeal found that the arbitrator wrongly upheld his jurisdiction,” she said in the statement. “This decision, which is final and binding, is a decisive victory for Malaysia in its ongoing pursuit of legal remedies, which Malaysia is confident will result in comprehensive defeat for the Claimants and their funders.”
While yesterday’s decision does not specifically annul the $14.9 billion award, she said, “Malaysia is seeking to have the annulment recorded in a court decision as soon as possible, which should lead to the collapse of the Claimants’ global enforcement efforts to date.”
She added, “The government of Malaysia will continue to take all necessary actions including legal actions to put an end to the claims and to ensure that Malaysia’s interests, sovereign immunity and sovereignty are protected at all times.”