Report by Ananya Singh
An interesting legal case has just been concluded in Malaysia. Let’s read about it.
Malaysia has won a court appeal against claimed descendants of Mohammed Jamalul Alam, in a case involving payment for the extraction and use of natural resources present in the area. Jamamul Alam was the Sultan of Sulu – a region in present-day Malaysia – in the 19th century.
In 1878, an agreement was signed between the Sultan and British colonists, allowing the latter to extract mineral deposits of oil and gas from the area under the Sultan. This area included rainforest-covered islands in present-day Philippines, and Sabah in present-day Malaysia.
In 1957, upon independence from British colonial rule, the island of Borneo was given to Malaysia, which included the area of Sabah, whose people chose to be a part of the country. Malaysia continued to honour the agreement signed between the Sultan and British by paying descendants of the Sultan $1000 per year. This meant that they had taken over the role of the British in the agreement. The heirs currently identify themselves as citizens of the Philippines.
In 2013, however, supporters of the Sultan invaded the Sabah area forcefully leading to clashes lasting a month. Due to this action, Malaysia stopped paying the heirs the customary $1000. However, the heirs of the Sultan claimed that they had not played a role in the attack and initiated an arbitration in Spain in 2017.
An arbitration is a process in which a contract is signed between two disputing parties to appoint a third-person (not necessarily a legal member) to settle the dispute. For example, if you and your friend have a dispute, you mutually decide to consult your class teacher for a solution. It is important to note that the arbitrator (in this case the teacher) has been agreed upon by both parties (you and your friend).
Further, it is mentioned in the contract who the arbitrator will be, and by which country’s laws will the dispute be settled. For example, two companies may decide that they will follow India’s laws when settling their dispute and all laws of India will then be taken into account regarding the issue. Lastly, there are arbitration courts in individual countries to deal with arbitration issues. The legal court of a country is not involved in the solving of the disputes.
However, no arbitration contract was signed between the heirs and the Malaysian government. Therefore, Malaysia refused to identify Spanish Gonzalo Stampa as an arbitrator. Instead, in 2019, it offered to resume the annual payments of $1000 and pay $10, 400 which should previously have been paid along with interest. But the heirs refused.
In 2020, Mr. Stampa ruled that Malaysia pay $14.9 billion to the heirs as compensation. Originally, the heirs had claimed $32 billion. $14.9 billion would have been the second largest arbitration compensation paid in history.
In 2022, however, Malaysia challenged the appointment of the arbitrator in Spanish court, but Mr Stampa argued that courts had no say in arbitration matters. Then, Mr. Stampa transferred the case to the French Arbitration Court to ensure that the compensation was paid to the heirs.
Following this, Malaysia filed an appeal in the Paris Court claiming that the actions by Mr. Stampa were illegal as Malaysia had not signed an arbitration contract with the heirs, nor had any say in the appointment of the arbitrator.
On 6 June, 2023, then, the Paris Court ruled that the arbitrator did not have the power to provide a judgement on the issue and ordered the heirs to pay Malaysia $106, 904. Mr. Stampa is also facing criminal prosecution in Spain for his actions as an illegal arbitrator.
A criminal prosecution means holding a trial against a person accused of a crime to decide whether they are guilty or not.