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Malaysia won’t budge ‘an inch’ over Sabah as Philippine heirs chase US$15 billion claim

South China Morning Post logo South China Morning Post 20/07/2022 Hadi Azmi
  • PM Ismail Sabri says a task force has been set up to study all of Malaysia's overseas assets, as he swears to protect the 'security and sovereignty' of Sabah
  • The feud over the eastern Malaysian state, linked to a colonial-era land deal, has sparked a blame game between politicians, with a police report filed against ex-premier Najib Razak

Malaysia's Prime Minister Ismail Sabri Yaakob has vowed to defend the country's overseas assets as it grapples with a stunning effort by the Philippine heirs of a late sultan to enforce a US$15 billion arbitral award linked to a colonial-era land deal.

Eight descendants of the last sultan of Sulu, a small Philippine island chain, have for the past decade been seeking to settle a dispute over an 1878 agreement involving territories that include what is now the resource-rich eastern Malaysian state of Sabah.

In their latest move, the heirs' lawyers in London served an asset seizure notice on two Luxembourg-based subsidiaries of Malaysia's national petroleum company Petronas.

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Malaysia's assets at risk as sultan heirs in Philippines claim giant award

The lawyers say more seizures will follow unless a resolution is reached and Malaysia recognises the award handed down by a French arbitrator in March - which Kuala Lumpur has refused to do until now.

With the issue becoming one of the most talked-about topics in the country - even triggering a chaotic start to a parliament sitting this week - Ismail Sabri on Tuesday said Kuala Lumpur "will not compromise even an inch in protecting the country's security and sovereignty".

"A special task force has been set up to look into the issue in a comprehensive manner, not only concerning Petronas assets but also Malaysia's other assets abroad," he said. "There are many government-linked companies which have assets overseas and this will be looked into thoroughly."

Tap to enlarge © Provided by South China Morning Post Tap to enlarge

Fingers pointed

The issue has drummed up more drama in Malaysia's already topsy-turvy political scene as rival camps blamed each other for the saga. Rafizi Ramli, a senior member of opposition leader Anwar Ibrahim's Parti Keadilan Rakyat has filed a police report against former prime minister Najib Razak over the case.

Rafizi claims Najib, who remains powerful despite currently facing multiple corruption trials, had been negligent in 2017, when the heirs first made the claim. Najib was prime minister from 2009 to 2018.

Some 100 PKR representatives filed police reports against Najib on Tuesday, local media reported Rafizi as saying.

An opposition politician says Najib Razak had been negligent over the matter in 2017. File photo: Reuters © Provided by South China Morning Post An opposition politician says Najib Razak had been negligent over the matter in 2017. File photo: Reuters

Najib, in turn, says the Pakatan Harapan alliance that defeated him in the 2018 polls are at fault, as the arbitration notice was only served after the election on May 9 that year.

"Two months later, on July 30, an arbitration notice was submitted to the government through the foreign affairs ministry seeking claims amounting to US$32 billion. How can I be negligent when I was not in power?" Najib said in remarks to the local portal Free Malaysia Today.

"So why didn't the Pakatan Harapan Cabinet discuss such an important issue that affects our sovereignty? Were they in the dark or didn't they care? This is why the former Pakatan Harapan ministers need to confirm that they did not discuss or act on the matter."

The ex-premier, a member of Prime Minister Ismail Sabri's United Malays National Organisation (Umno) party, also took issue with Pakatan Harapan's attorney general, Tommy Thomas, for a letter he wrote to the Sulu heirs "expressing regret" over Kuala Lumpur's suspension of payments to them since 2013.

Malaysian PM Ismail Sabri Yaakob says the government 'will not compromise even an inch in protecting the country's security and sovereignty'. File photo: Bernama/dpa © Provided by South China Morning Post Malaysian PM Ismail Sabri Yaakob says the government 'will not compromise even an inch in protecting the country's security and sovereignty'. File photo: Bernama/dpa

Parliament debate

Meanwhile, Parliamentary Speaker Azhar Harun, brother of the current attorney general Idrus Harun, has been criticised by lawmakers for disallowing members from Sabah from having the topic debated on the house floor, as the legislature reopened for a month-long sitting on Monday.

Azhar said such discussions would be sub judice, given that the case was still in the courts. Malaysia has remained firm on its position that there is no merit to the sultan's heirs' claim, and consequently to the March arbitral award.

In March, after the ruling by arbitrator Gonzalo Stampa, the foreign ministry said "the subject matter of the claim is not commercial in nature and thus cannot be subject to arbitration", adding that the 1878 agreement at the centre of the controversy "contained no arbitration agreement".

Earlier in March, Malaysia already asserted that it does not recognise the French arbitration court ruling as it upholds its immunity as a sovereign state.

"In addition, the subject matter of the claim is not commercial in nature and thus cannot be subject to arbitration and the 1878 Agreement contained no arbitration agreement," said the Foreign Ministry and the Attorney-General's Chambers in a joint statement.

Sultan Jamalul Kiram III came to the throne at age 10 in 1894. He was the last formally recognised sultan of Sulu. © Provided by South China Morning Post Sultan Jamalul Kiram III came to the throne at age 10 in 1894. He was the last formally recognised sultan of Sulu.

Petronas, which contributes some 12 per cent to Malaysia's annual revenue, last week confirmed the seizure orders for their interests in Azerbaijan assets by Luxembourg bailiffs.

But the two units concerned had already sold their assets in Azerbaijan and the proceeds had already been divested, the company said. "Petronas views the actions taken against it as baseless and is working vigorously to defend its legal position on this matter," it said.

The royal heirs' claim is linked to the Sulu sultanate's 17th and 18th-century rule over parts of the present-day Sabah - one of two Malaysian states in Borneo.

The sultanate in 1878 signed an agreement handing the territory over to the North Borneo Chartered Company (NBCC), a British colonial company tasked to exploit the resources in North Borneo.

A beach in Kota Kinabalu, Sabah, in Malaysia. File photo: Shutterstock © Provided by South China Morning Post A beach in Kota Kinabalu, Sabah, in Malaysia. File photo: Shutterstock

The Philippines has long claimed that this agreement constituted a lease, rather than a full cession, of the territory to the NBCC.

Sabah, along with neighbouring Sarawak, and Malaya - what is present-day Peninsular Malaysia - formed the new nation of Malaysia in 1963, six years after the end of British colonial rule. Malaysia says there is no basis for any claim over its current territories.

The postcolonial government did take over the land leasing agreement and made nominal payments to the heirs until 2013, when some militants pledging allegiance to Sulu royalty faced off with Malaysian security forces. Six civilians, 10 Malaysian security personnel and 56 militants were killed in the stand-off.

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This article originally appeared on the South China Morning Post (www.scmp.com), the leading news media reporting on China and Asia.

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