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Explained: Why a late Sultan’s heirs want Malaysia to pay $15bn over a colonial-era land dispute

Malaysia's state oil and gas producer, Petronas, is being told to pay around $15 billion for settling a colonial-era land dispute of a former kingdom spread across Malaysia and the Philippines. What is the case, and how has the government responded?

Petronas Twin Towers are seen illuminated in colours of the Malaysian flag during Independence Day, in Kuala Lumpur, Malaysia August 31, 2020. (Reuters Photo: Lim Huey Teng/File)

Malaysia’s state oil and gas producer, Petronas, is being told to pay around $15 billion for settling a colonial-era land dispute of a former kingdom spread across Malaysia and the Philippines.

Petronas has operations in more than 50 countries, including India, and its iconic twin towers are some of the most prominent landmarks in Kuala Lumpur.

A French arbitration court that had the case before it ordered the Malaysian government to pay $14.9 billion to the descendants of a late Sultan in February this year.

In order to enforce the award, the claimants moved to seize two Luxembourg-based units of Petronas, Financial Times reported. However, Malaysia said it obtained a stay on this ruling on July 13 citing threat to its sovereignty.

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In an email statement, Petronas said: “Petronas contests the validity of these enforcement actions against its two aforementioned subsidiaries and is taking all necessary measures to defend its legal position,” reported Reuters.

On July 18, Malaysian media outlets reported that some leaders from opposition parties demanded a discussion on the matter in parliament, but with the Speaker noting procedural rules and that the matter was sub-judice the debate did not happen.

What is the Malaysian Sultan heirs’ case?

Malaysia came under British colonial rule from the late 18th century, and in this period the British entered into various deals with local rulers, some of whom held the title of ‘Sultan’. One such arrangement was in 1878, when a British company leased land from the Sulu kingdom’s Sultan.

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The Sulu kingdom extended from Sabah, the northeast region of Borneo island of Malaysia, upto some islands that are now a part of the country’s neighbour in its northeast, the Philippines. The region is rich in oil resources, a fact that was discovered only after it was leased to the British, according to the Financial Times report.

After Malaysia became independent in 1957, the area came under the country’s government. In the present case, there are eight Philippines-based claimants who say that they are the last Sultan’s successors and they deserve inheritance from the land that was never sold to the British, only leased. There is some debate over the wording and translation of the 1878 agreement, on whether it let the land be leased or be given permanently to the British.

What are the claims and disputes over Sabah?

Over time, the region has seen many lay claims to it. In pre-colonial history, Brunei held control for a period; Indonesia also made claims which were later given up by it.

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A man from the Philippines claiming to be a descendant of the Sultan’s called himself the “poorest sultan in the world” because of his rights to the land allegedly being taken away. In 2013, there was violence in Salah, believed to have been caused by a militia of this man’s followers.

Until this conflict, the Malaysian government sent the eight claimants to the Sultan’s land an annual stipend of $5,300, in recognising that they were the relatives of the last Sultan and successors of the 1878 agreement. The claimants said that after the 2013 attack, Malaysia halted the payments. Eventually, a legal challenge was initiated by them.

What has the Malaysian government said?

Law minister Wan Junaidi Tuanku Jaafar said the stay would prevent the award from being enforced and set aside the ruling. Zafrul Aziz, Malaysia’s Finance Minister, told Financial Times in an earlier interview that the present rise in global oil prices after the beginning of the Ukraine-Russia war has helped the country’s finances, as the economy had not been doing well of late.

He said in April that given the size of the country’s economy, the $15 billion award being demanded was about 3% of its GDP, and called it “a frivolous, no-basis case”.

Lawyers for the heirs said the stay on the award is only valid in France and remains enforceable elsewhere, basing this on a UN treaty on arbitration recognised in 170 countries, indicating they will attempt to move to enforce the award. It was also reported that for every year the award goes unpaid by Malaysia, the money owed will increase by 10%.

First published on: 19-07-2022 at 02:48:51 pm
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