Sulu Claims: A Private Affair That Has Gone Very Far

Invoking the said convention was a brilliant strategy to enforce the rights of the Sultan's heirs which are private rights that do not involve sovereignty

Sulu Claims: A Private Affair That Has Gone Very Far

In February this year, we read about the award of $14.9 billion to the heirs of the Sultan of Sulu in a dispute that took shape after the Lahad Datu incident in 2013.

That year, approximately 200 troops of the "Royal Army of Sulu" landed at Lahad Datu in Sabah.

Their aim was to claim what they considered the territory of the Sultanate. Malaysian security forces repelled the attack.

Subsequently, the Najib Razak government decided to stop its payment of RM5,300 to the heirs of the sultanate. Perhaps this was as a punishment for the chaos and violence that ensued during the Lahad Datu incident.

Today, the decision to cease payment to the heirs, supported by former PM Tun Dr Mahathir Mohamad, is haunting Malaysia and the country might be on the brink of losing $14.9 billion.

The Sultan's heirs filed an application for the judicial appointment of an arbitrator before the Civil and Criminal Chamber of the Superior Court of Justice of Madrid and they opened a can of worms. A real nightmare for the Malaysian government.

The threat of seizure of assets following an arbitral award obtained by the heirs of the Sultan of Sulu in Europe could snowball, says a lawyer from the Philippines who wrote an explainer in the Manila Times.

Luxembourg Bailiffs Seize Petronas Subsidiaries In Sulu Claim
The Luxembourg-registered subsidiaries, Petronas Azerbaijan (Shah Deniz) and Petronas South Caucasus, managed the state-owned energy company’s gas interests in Azerbaijan and could be worth more than $2bn.

Prof Danial Saul Hofileña Jr says Invoking the said New York Convention of 1958 was a brilliant strategy to enforce the rights of the Sultan's heirs which are private rights that do not involve sovereignty.

The Arbitration

After the Lahad Datu incident and Malaysia's refused to pay further rental payments to the heirs of the Sultan of Sulu who filed an application for the judicial appointment of an arbitrator before the Civil and Criminal Chamber of the Superior Court of Justice of Madrid.

Because the case involves commercial arbitration and does not concern sovereignty over North Borneo, it was filed by the Sultan's heirs rather than the Sultanate.

The arbitration was held in Paris, and the rules of arbitration were the 2010 UNCITRAL Arbitration Rules.

To push forward their agenda, the heirs appointed Dr Gonzalo Stampa, a Spaniard, as a lone arbitrator who rendered an arbitral award in the reported sum of $14.9 billion to the Sultan's heirs.

Enforcing the arbitral award, bailiffs of a court in Luxembourg seized assets of Petronas Azerbaijan and Petronas South Caucasus.

"Seizure was justified by the New York Convention of 1958. The convention, wherein Malaysia is a signatory, allows "recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal," says Hofileña.

Invoking the said convention was a brilliant strategy to enforce the rights of the Sultan's heirs which are private rights that do not involve sovereignty, says the lawyer.

"They sought partial satisfaction of the award in Luxembourg, a country outside the territorial jurisdiction of the venue where the arbitral award was made and a signatory to the 1958 Convention.

"Although enforcement was suspended by the Paris court, the assets of oil-rich Malaysia are global, and the heirs can very well ask for enforcement of the arbitral award from the more than 160 other countries that are signatories to the treaty," he says.