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Malaysia Escapes Paying Sulu Heirs USD15b: Sabah’s Tumultuous History Explained

In February 2022, a French arbitration court ruling ordered the Malaysian government to pay US$14.92 billion (RM62.6 billion) to the heirs of the last Sultan of Sulu, an island group between Borneo and the Philippine island of Mindanao, as part of a settlement for a colonial-era land deal. 

In July of that same year, however, the Paris Court of Appeal halted the ruling – explaining that enforcing the award could violate Malaysia’s sovereignty as a nation[1].

This is merely the latest in a series of controversies and disputes involving the late Sultan of Sulu, the ugly legacy of European colonisation in Southeast Asia and simple greed between two nations.

Whose Territory Is This? – The Competing Claims Of Sabah

To better understand this controversy, we must first look at the history of a 60-year dispute over the rightful ownership of Sabah.

  • Early 1500s: The North of Borneo, now known as Sabah, was ruled by the Sultanate of Brunei in the early 1500s under the rule of Sultan Bolkiah.
  • 1658: Sabah was surrendered to the Sultanate of Sulu for helping the Sultanate of Brunei in settling and suppressing a revolt[2]
  • 1735 -1742: Sabah was awarded by Brunei Sultan Abdul Hakkul Mubin to the Sulu Sultan Salah-ud-Din Karamat Bakhtiar. It was under the control of the Sultanate of Sulu, especially its coastal inhabitants. 
  • 1878 – 1946: The control over the territory was relinquished to the British, specifically to the British North Borneo Company under the treaty signed on 4 January 1878 between the Sultan of Sulu Mahomet Jamal Al Alam and Baron de Overbeck and Alfred Dent as a contract of lease, grant and concession of North Borneo territories for an annual payment of 5,000 dollars.
  • 1946: The British North Borneo Chartered Company surrendered its duties and North Borneo became a British crown colony[2]

The Sulu And The  Philippines Side Of The Story

Even long after the formation of the Malaysian Federation and Sabah’s integration into Malaysia in 1963, the Philippines still refuses to recognise Sabah as a part of Malaysia. Muedzul Lail Tan Kiram, the reigning sultan, claims that his grandfather agreed to integrate Sulu into the independent Philippines to further his effort to reclaim Sabah[3].

To date, only two Philippine presidents have actively espoused or supported the Sulu’s Claim; these are Diosdado Macapagal and the dictator Ferdinand Marcos. Since Marcos was ousted from the government in 1986, the Philippines has not formally recognized the Sultan of Sulu[3].

Before Malaysia was formed in 1963, the Philippines officially attempted to regain control over Sabah on 22 June 1962. The Philippines government filed a claim over Sabah against the UK, which possessed the territory at that time [2].

The Philippines contested that the 1878 agreement was a lease rather than a transfer of sovereignty,  claiming that: “the sovereignty over the territory has remained vested in the Sultanate of Sulu. The occupation of the territory first by Overbeck and Dent and later by the British North Borneo Company had been occupation by a lessee or an administrator, not occupation by an owner or sovereign.[2]

A Fragmented History And The Bills To Pay

Despite these claims of always having sovereignty, Shari Jeffri, a private researcher of North Borneo/Sabah history, believes that this history may not be as complete as initially thought after finding a letter among the North Borneo Chartered Company’s files on the Sulu Sultanate in Britain’s National Archives in Kew, London in 2015[4].

When I found the files, I felt that our history was incomplete. I felt that the documents were an important source of reference on the history of North Borneo and needed to be shared with the public as they contain significant facts and relevance to our national sovereignty. – Shari Jeffri, banker and private researcher of North Borneo/Sabah history[4]

Perhaps the most damning evidence he found was that the Sultanate of Brunei never truly withdrew control of North Borneo to the Sulu Sultanate[4].

As far as the Chartered Company and the colony were concerned, they always treated the cession payment as a commercial transaction and not a sovereign transaction. There was no passing of sovereign title because the only recognised sovereignty at that time was Brunei. Only Brunei could grant the sovereign title. Meaning the Sulu Sultan doesn’t have a sovereign title to give away North Borneo. – Shari Jeffri, banker and private researcher of North Borneo/Sabah history[4]

Regardless of the Philippines’ true claims over Sabah, Malaysia stubbornly continues to utilise its former status as a British colony to justify its hold over Sabah, citing the Overbeck and Dent version of the 1878 treaty which states: “all the rights and power belonging to me over all the territories and lands being tributary to us on the mainland on the island of Borneo in consideration of a yearly compensation of 5,000 dollars, together with all other powers and rights usually exercised by and belonging to sovereign rulers and which we hereby delegate to him of our own free and sovereign will.[2] 

This, Putrajaya claims, means that sovereignty was transferred to Malaysia when it succeeded British Malaya.

Source: Sabah Tourism Board

Today, the Sulu Archipelago continues to be inhabited by the Tausug people, believed to be descended from the different ethnic groups that had migrated to the Sulu archipelago, refugees from the unrest in the Southern Philippines and economic migrants from Indonesia’s Kalimantan[5].

The Sulu Sultanate ended when the last officially-recognised Sultan of Sulu, Jamalul Kiram II, died in 1936 without any heirs[1]. Due to  this, payments to the Philippines temporarily ceased until 1939 when North Borneo High Court chief justice Charles F Macaskie named nine court-appointed heirs, causing the payments to resume[6].

Following Sabah’s independence and joining the Malaysian Federation in 1963, Malaysia took over these payments – equivalent to RM5,300 a year – until 2013[6].

An Invasion As A Reason To Cut Off Payments

On February 11th 2013, the entire nation was rocked when a militant group invaded the eastern shores of Sabah, displacing some 80 locals from 15 homes in Lahad Datu. This group, comprising over a hundred people, were identified as followers of the self-proclaimed Sultan of Sulu, Jamalul Kiram III, with their stated goal being to ‘reclaim’ part of Borneo as their ancestral land[7].

This occupation quickly devolved into a shootout between the militants and Malaysian armed forces, ending in a death toll of 68 in total – 56 Sulu gunmen, nine among Malaysian authorities, and six civilians[1].

This incursion is cited as the unofficial reason why Malaysia decided to end its yearly payments in 2013. Then-prime minister Najib Razak claimed it as such, citing public anger over the incursion as the primary reason for cancelling Malaysia’s payments to the Sulu heirs:

I felt it was incumbent upon my duty and responsibility to protect the sovereignty of Sabah and the people of Sabah. – Najib Razak, former prime minister of Malaysia[8]

Former attorney-general Tan Sri Tommy Thomas begged to differ.

…there appears to be no evidence linking the Sulu Claimants who were receiving the annual compensation from Malaysia with the armed invaders of Lahad Datu.

If the Government of Malaysia had such evidence, the prudent course would have been to file an action in the High Court of Sabah at Kota Kinabalu against the Sulu Claimants (all of whom were known to our Embassy in the Philippines where the annual payment was disbursed to them), seeking an Order of the Sabah Court that because the Sulu claimants were personally and directly involved in the Lahad Datu invasion; they had forfeited their right to receive future payments and that the 1878 Grant had ceased to operate.
– Tan Sri Tommy Thomas, former attorney-general[9]

The Sulu claimants, who won the US$14.92 billion award, shared similar sentiments having sought to distance themselves from the intrusion, with their lawyer claiming to the arbitrator that it is “reckless and irresponsible” to insinuate that they are “fighting a proxy legal battle for extremists who launched a violent attack” on Sabah in 2013[10].

For what it’s worth, Malaysia did offer in September 2019 to resume paying the RM5,300 and to pay the outstanding sums for 2013 to 2019, along with 10 percent interest.  However, the offer was rejected by the Sulu claimants’ lawyer in October 2019,  highlighting Sabah’s higher current value now due to its oil and gas resources[10].

Striking A New Oil Field And The Ensuing Drama

Whatever the reason was for payment cancellation in 2013, it was clear that the discovery of valuable natural resources was responsible for reigniting the Sulu claimant controversy as on April 28, 2017, the Sulu claimants wrote to Malaysia to seek renegotiation of the 1878 deal, which they said was now “unbalanced” after valuable natural resources were found in Sabah. 

The “game-changing” discovery of petroleum in the state was brought up by the Sulu claimants as something that could not be foreseen when the 1878 deal was signed. The claimants said the ensuing revenue for Sabah was about 20 million times more than the RM5,300 annual sum[10].

On November 2, 2017, eight individuals — Nurhima Kiram Fornan, Fuad A. Kiram, Sheramar T. Kiram, Permaisuli Kiram-Guerzon, Taj-Mahal Kiram-Tarsum Nuqui, Ahmad Nazard Kiram Sampang, Jenny K.A. Sampang, Widz-Raunda Kiram Sampang — began their bid as alleged heirs of the Sulu sultan to receive more money from Malaysia over Sabah, applying for an arbitrator on February 1, 2018, and formally filing their notice of arbitration on July 30, 2019[10].

Malaysia fired back by filing a lawsuit in the High Court of Sabah and Sarawak — with the judge sitting in Kota Kinabalu, Sabah — against the eight claimants and the appointed Spanish arbitrator, Gonzalo Stampa, with the ultimate aim of stopping the Spanish arbitration[10].

This aim was achieved on January 14, 2020, when the High Court of Sabah and Sarawak granted all nine court orders sought by Malaysia. These include declarations that there is no arbitration agreement in the 1878 document or between Malaysia and the eight; declarations that Malaysia did not waive its sovereign immunity to confer jurisdiction for the Madrid court to appoint Stampa as arbitrator and that he has no jurisdiction over the sovereign state of Malaysia. 

It also granted Malaysia injunctions to stop the eight claimants from continuing the arbitration in Spain and to stop them from enforcing awards made in the Spanish arbitration[10].

There is an underlying but unmistakable imperialist arrogance in the actions of Stampa as well as the French and Spanish Courts in purporting to exercise jurisdiction over the Government of Malaysia. 

There is similarly an imperialist arrogance in these courts not immediately accepting that this dispute is clearly and unambiguously for the High Court of Sabah. The Malaysian government rightly rejected the validity of the arbitration from the outset and rightly rejected the validity of Stampa’s arbitration award. – Tan Sri Tommy Thomas, former attorney-general[9]

From Spain To France

This brings us back to the current situation as the Sulu claimants brought their case to the High Court in Paris, France, on September 17, 2021, obtaining an “exequatur order” (a legal document that permits the enforcement of the order) in the process that recognises Stampa’s May 2020 decision where he had decided he could carry out the arbitration.

Source: Reuters

Relying on the “exequatur order” and the Madrid courts’ alleged interference to stop the arbitration, the Sulu claimants on October 11, 2021, applied to change the place of arbitration to Paris, with Stampa describing the city as a “neutral venue”[10].

On December 16 2021, Malaysia fired back by obtaining an order from the Paris Court of Appeal to suspend the “exequatur order”, which the Sulu claimants had relied on to have Stampa change the arbitration venue to France and continue the arbitration. 

The country’s France-based lawyer on February 18, 2022, asked Stampa to immediately stop the arbitration, pointing out that the Spanish courts’ June 2021 decision and the Paris courts’ December 2021 suspension order meant that the arbitration was illegitimate[10].

The Malaysian government does not recognise the claim and did not participate in the purported arbitration proceedings because Malaysia has always upheld and has never waived 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. We further stress that the claimants’ identities are doubtful and have yet to be verified. – Foreign Ministry and the Attorney-General’s Chambers[11]

Money Or Rights? – Who Stands To Lose The Most?

Ultimately, the reasoning behind the Sabah dispute boils down to the subject of money. As mentioned above, the discovery of oil and gas deposits in Sabah showed that there was a huge monetary gain to be made in the state’s ownership. And the Sulu claimants certainly believed that the previous amount of payment was not adequate for the resources involved.

Source: Reuters

This dispute led to the claimants seizing Malaysian government assets around the world to enforce the French arbitration award. Among the seized assets were two Luxembourg-based subsidiaries of Malaysia’s state energy firm Petronas. A move that Petronas, unsurprisingly, called baseless and sought to fight[12].

In the end, however, the ones who truly have the most to lose are the ones caught in the crossfire. For those escaping the violence in Mindanao, whoever owns Sabah is unimportant, for they continue to cross the Sulu Sea to find refuge. Malaysia had spent millions on an expensive new border force after the 2013 intrusion, but it has failed to stop the illegal movement of people between Sabah and Mindanao. 

Source: AFP

Indeed, most of the foreign Islamist fighters who joined the seizure of the city of Marawi in Mindanao in 2017 arrived via Sabah[13]. And to add insult to injury, the resources spent on this endeavour were sorely needed to develop and address the widespread poverty in Sabah[14].

Today there are an estimated 800,000 undocumented persons, most of whom have been in Sabah for decades. Many living in poverty; are not allowed to work, get an education or access affordable healthcare.  An estimated 290,000 children born in Sabah to multi-generational families living in Sabah were not considered Malaysians[14].

And to make things worse, the Covid-19 pandemic saw hundreds of undocumented Filipino migrants being deported back to the Philippines as the disease spread throughout the state. And because the Philippines stubbornly continues to view Sabah as part of its territory, it has historically refused to open a local consulate[3].

Although Malaysia had formed a special task force to study and formulate an appropriate action plan to tackle the Sulu claim[10] it still continues to neglect the voices of Sabahans to the forefront, especially that of the Tausug or Suluk people whose own narratives remain conspicuously absent during the Sabah dispute.

If the Malaysian government wants to show that Sabah is a part of their country, they should consider moving beyond mere politics and include Sabahan civil society and experts[14]. Only then can real history be made and the dispute, if not permanently settled, then at least calmed.

Explore our sources:

  1. D. Martinus. (2022). The long history of the Sultanate of Sulu & why Malaysia ‘owes’ it US$15 billion. Mashable. Link.
  2. A. Malindog-Uy. (2020). Sabah: Malaysia’s Or Philippines’? The Asean Post. Link.
  3. F. Regalado. (2020). Malaysia’s spat with Philippines over Sabah: Five things to know. Nikkei Asia. Link.
  4. P. Golingai. (2022). Holes in Sabah history. The Star. Link.
  5. J. Samad. (2022). Sabah’s tumultuous history of competing claims. FMT. Link.
  6. FMT. (2022). Explain claim by Sulu sultan’s heirs in detail, govt told. Link.
  7. N. Najib. (2013). Lahad Datu invasion: A painful memory of 2013. Astro Awani. Link.
  8. R. Latiff & A. Ananthalakshmi. (2022). How Malaysia ended up owing $15 billion to a sultan’s heirs. Reuters. Link.
  9. T.S.T. Thomas. (2022). Explaining the Sulu claim. The Edge. Link.
  10. I. Lim. (2022). 10 things about: How the alleged Sulu heirs got a US$14.9b order against Malaysia. Malay Mail. Link.
  11. D. Chan. (2022). Malaysia doesn’t recognise French arbitration court ruling granting billions to Sulu Sultan’s descendants. New Straits Times. Link.
  12. Reuters. (2022). Petronas says taking steps to protect global assets after seizure of Luxembourg units. Reuters. Link.
  13. J. Chin. (2022). Sulu claim shows Southeast Asia cannot yet escape colonial legacy. Nikkei Asia. Link.
  14. B. Welsh. (2022). Sulu shocks: Context and solutions. Link.

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