What A Price To Pay Revisiting Ex Ag S Words After Rm63b Sulu Award

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Although there appeared to be no evidence linking the Sulu descendants who were receiving the annual fees from Malaysia to the intruders of Lahad Datu in 2013, the Malaysian government ceased payments to them, rued the former attorney-general.
In his book, My Story: Justice in the Wilderness, published last year, Tommy Thomas (above) warned it could prove to be a costly decision.
Yesterday, it was reported that Spanish arbitrator Gonzalo Stampa instructed the Malaysian government to pay US$14.92 billion (RM62.59 billion) to the claimants.
This is due to a violation of the 1878 agreement signed by Sultan Jamal Al Alam, Baron de Overbeck, and the British North Borneo Company’s Alfred Dent.
Malaysia stopped paying the sultan's heirs their annual RM5,300 cession money since 2013 following the armed incursion.
Contacted this afternoon, Thomas declined to comment on the matter beyond saying, “I stand by what I wrote in Chapter 39 (of his book).”
Thomas acknowledged in his book that there were no legal grounds for Malaysia to stop the annual payment and doing so resulted in a breach of the 1878 agreement.
“As one would expect, the families of the Sulu descendants who had been receiving payment for 135 years threatened legal action against Malaysia.
“Such threats were not taken seriously by past administrations.” he wrote.
Thomas also highlighted that Malaysia's membership in the Convention on Recognition and Enforcement of Arbitral Awards signed in 1958 in New York (the New York Convention) could also impact the matter.
Assets vulnerable to seizure
The former attorney-general said he was surprised when briefed on the claim sometime in 2019 and his initial reaction was to disregard the arbitration, advise the government not to submit to the jurisdiction of Spanish courts, or to participate in the ex-parte arbitration.
However, his former legal firm partner Sitpah Selvaratnam and Elaine Yap, a commercial barrister appointed to advise on the matter, warned it would be perilous to do so because of the New York Convention.
“The danger was that assets of Malaysia situated in any New York Convention member state (which apparently numbers about 160) would be vulnerable to attachment or seizure, on the application of the eight claimants, if they were awarded damages by a Spanish arbitrator.
“This was the consequence, regardless of whether Malaysia participated in the Spanish arbitration.
“Thus, if the arbitration was allowed to proceed ex parte without Malaysia's participation, the award could be in millions, and our foreign assets would be in jeopardy,” he added in his book.
In 2019, Thomas said lawyers from London, acting on behalf of the Sulu descendants, sent letters seeking Malaysia's participation in the arbitration proceedings before a single Spanish arbitrator in Spain.
“I was shocked by this turn of events. It was understandable that the previous recipients were peeved with Malaysia ceasing to pay them.
“If they were minded to resort to litigation, the proper forum was the High Court at Sandakan, as their ancestors themselves recognised in 1939.
“What was absolutely not acceptable was suing in a foreign country which had no connections, either as a matter of fact or legally, with their claim for annual compensation.
“The dispute revolved around the failure to pay an agreed sum as consideration for land surrendered in Sabah. All the connections were with Sabah, which was the proper forum to adjudicate any dispute,” he added.
Ludicrous Spanish arbitration
Thomas also revealed that the British government rejected the lawyers' request to appoint an arbitrator, which led them to turn to Spain.
“The 1878 agreement provides that any dispute 'shall be submitted to Her Britannic Majesty’s Consul-General for Borneo'. That office disappeared upon the formation of Malaysia.
“The only possible link to Spain was that for a short period between 1878 and 1885 Spain had some rights over North Borneo, which were passed over in 1885 to Great Britain.
“Since there was no arbitration agreement in the 1878 and 1903 documents, the Sulu claimants applied to the courts in Spain, which appointed a Spanish arbitrator to determine a dispute between Philippine citizens and Malaysia, pertaining to agreements dealing with land in Malaysia and payments by Malaysia in ringgit. How absurd and how ludicrous,” he penned.
Following this, Thomas said he instructed the Attorney-General's Chambers (AGC)'s International Affairs Division to appoint a reputable multinational firm of solicitors, headquartered in London, but with a branch in Spain to provide advice.
“But I was not impressed with their advice and their fees were exorbitant. They were soon replaced by a firm of Spanish lawyers,” he added.
At the same time, he turned to Sitpah, whom he described as a world-class commercial law barrister who also often sat as arbitrator in international disputes. She, in turn, recommended that the AGC appoint Yap.
Thomas said the legal team also comprised two senior federal counsels.
To ensure that Malaysia does not participate in the Spanish arbitration instituted against its will, Thomas said Sitpah and Yap suggested seeking an injunction.
“I gave instructions to do this. Yap prepared all the court papers, undertook the research, and drafted written submissions. The government was represented in court by senior federal counsel.
“The judge in the High Court ordered all the court papers to be served on the British lawyers for the eight individuals and the Spanish arbitrator. That was done by e-mail, registered post, and by personal service through our Spanish lawyers.
“Thus, the eight individuals had actual knowledge of the Sabah court proceedings. None of them participated. The judge granted a declaration to the government of Malaysia to the effect that the proper forum for resolving the dispute was the High Court in Sabah, and not Spain.
“An injunction was issued to restrain the arbitration. The orders were served on the relevant persons, including the arbitrator.
“When I left office, our Spanish lawyers were in the midst of registering the Malaysian court injunction and issuing a fresh challenge in the courts of Spain.
“This was to seek the setting aside of the Spanish court order appointing the arbitrator. All the steps that Malaysia could reasonably take to confront the problem about the Spanish arbitration were promptly and professionally taken.
“The unforeseen consequences of Malaysia becoming a member of the New York Convention came to haunt us. What a price to pay when the annual payment to the Sulu claimants was stopped unilaterally by Malaysia in 2013 in the aftermath of the Lahad Datu incursion. And that too for RM5,300 per year,” he wrote.
Rewriting the 1878 agreement
Meanwhile, Thomas also sent a letter to the Spanish arbitrator informing him that Malaysia had recently tendered the RM5,300 payment from 2013 and promised to pay the sum in the future.
“It followed that there was no longer any dispute in any event. The lawyers for the Sulu claimants responded by stating that they were now claiming billions of ringgit. There was absolutely no legal or factual basis for such an absurd and ludicrous claim.
“Based on their Notice of Arbitration submitted in July 2019, it was clear their primary objective was to seek the re-writing of the 1878 agreement so that the annual payments of RM5,300 – which they falsely and wrongly interpreted as ‘lease payments’ – were adjusted to reflect the value of Sabah’s oil and gas revenue since the 1970s.
“According to the claimants, they should be paid 'some three million times greater than the annual amount called for' or an equally proportioned lump sum in exchange for terminating the agreement and ceding their sovereignty over Sabah.
“Aside from the unmeritorious arbitration claim, the actions of the claimants and the sole arbitrator, as well as the decision of the Superior Court of Justice in Madrid brought to light myriad legal issues.
“Most important is the doctrine of state immunity. State immunity is a mandatory rule of customary international law of long-standing that sovereign states may not be impleaded in the domestic courts of other sovereign nations against their will.
“The 1878 Agreement was not a commercial transaction, but an act of a sovereign to cede territories. There was no expressed or implied waiver of state immunity by Malaysia.
“Thus, the inexplicable decision by the Superior Court of Justice of Madrid to entertain the claimants' request for judicial appointment of an arbitrator against a sovereign state struck me as wholly unacceptable,” he added. - Mkini

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