Malaysia’s Fight Against $14.9 Billion Sulu Sultanate Award: A Case for Arbitration Reform

Malaysia’s Fight Against $14.9 Billion Sulu Sultanate Award: A Case for Arbitration Reform

Annulling the Sulu Sultanate Award

The Malaysian Government has embarked on the mission to nullify a $14.9 billion award issued by a Spanish arbitrator, Dr Gonzalo Stampa. The award was issued in favour of alleged descendants of the Sulu sultanate. The Malaysian Government’s move to annul this award is viewed as a step towards ending a protracted dispute over the Sulu claims. The alleged Sulu heirs, backed by third-party litigation funder Therium, have attempted to extort this hefty sum from Malaysia, leading to the government having to defend its interests in Spain, France, Luxembourg, and the Netherlands.

Call for Transparency and Arbitration Reform

Datuk Seri Azalina Othman Said, Minister in the Prime Minister’s Department (Law and Institutional Reform), emphasized that the Sulu case was not an isolated incident. The Minister has called for a thorough review of the conduct of arbitrators and the oversight of third-party litigation funders. Part of the review process includes exploring transparency and disclosure obligations for the relevant parties involved in arbitration.

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Dealing with Inherited Challenges and Lessons Learned

The Sulu fraud case, inherited from the previous government, posed significant challenges for the current unity government. Despite these challenges, the unity government’s efforts have resulted in significant victories in Paris and The Hague, thanks to the combined efforts of various ministries and agencies under the leadership of Prime Minister Datuk Seri Anwar Ibrahim. The unity government has also engaged in dialogues with arbitration experts globally in a bid to clarify best practices in arbitration, while also sharing Malaysia’s experience dealing with the Sulu heirs’ claims.

International Arbitration in Malaysia and Future Partnerships

Malaysia has shown its support for arbitration as a preferred dispute resolution method. The country is home to the Asian International Arbitration Centre (AIAC), a renowned hub for dispute resolution. In a recent development, the AIAC signed a Memorandum of Understanding with the SOAS Arbitration and Dispute Resolution Centre, University of London, aimed at promoting teaching and research activities related to alternative dispute resolution.

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Maintaining the Sanctity of Arbitration

Malaysia’s experience with the Sulu fraud case underscored the necessity of upholding the sanctity of the arbitration process and opposing any abuse of the procedure. In June, both the Paris Court of Appeal and The Hague Court of Appeal ruled in Malaysia’s favor, rejecting the Sulu group’s application to recognize and enforce the award. The Sulu group had reportedly tried to seize the assets of the Malaysian petroleum company, PETRONAS, in Luxembourg and the Netherlands, and also targeted Malaysian diplomatic assets in France.

Conclusion

The ongoing battle to annul the Sulu sultanate award is more than just a legal dispute for Malaysia. It is a call for a global reform of the arbitration process, emphasizing the importance of transparency, disclosure obligations, and oversight of third-party litigation funders. The Malaysian government’s experience and ongoing efforts to combat the Sulu fraud case could serve as a valuable lesson for other nations dealing with similar arbitration challenges.

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