Malaysia doesn't owe anyone money for Sabah

The world has acknowledged Malaysia’s sovereignty over Sabah and as a component state of the federation, Malaysia invested billions of ringgit to develop Sabah, establishing a working government to administer this territory. 

Since 1878, the heirs of the Sulu sultanate have not contributed significantly to the political stablity and economic development of Sabah. When Sabah was invaded by Japan, they were nowhere to be seen, fighting for their so-called land. 

Malaysia does not owe anyone money for Sabah, especially not the heirs of the forgone sultanate of Sulu. 

The 1878 treaty signed between the then sultan of Sulu and two British agents, Baron Von Overbeck and Alfred Dent, on the cession of Sabah was utilised by the heirs of Kiram to claim "cession money" from Malaysia. In fact, the Sulu sultanate was disbanded by the Americans in 1915 via the Carpenter Accord.

During the Japanese occupation in 1941, Sabah was made a Japanese colony and the Japanese empire obviously did not pay any "cession money" to the heirs of the defunct Sulu sultanate. 

Sabah gained independence when it was federated into Malaysia on Sept 16, 1963. 

Malaysia consistently paid the so-called "cession money" or "compensation money" amounting to RM5,300 to the heirs of Kiram until 2013. This was a meagre sum, amounting to RM441.67 per month. Malaysians are paying even higher amounts of money for their housing loans and rent, compared to the sum paid to the heirs of Kiram.

Malaysia does not owe anyone money for Sabah because:

- Malaysia is sovereign over Sabah;

- The Sulu sultanate was disbanded in 1915;

- The 1878 treaty was invalidated as Sabah became a Japanese colony in 1941;

- The Spanish arbitation is illegal; and

- There was no arbitration clause in the 1878 agreement and arbitration cannot be forced upon parties.

The 1939 case

In 1939, the heirs of the sultan of Sulu, i.e. the predecessors of the current generation of Kiram’s family, referred to the High Court of Sandakan, Sabah regarding a dispute under the Deed of Cession 1878. The judge confirmed the status of cession money under the said agreement. Accordingly, by bringing the suit at the North Borneo High Court, the heirs of the defunct sultanate of Sulu acknowledged the jurisdiction of the Malaysian court with regards to solving any issues related to the agreement. 

So why do the so-called heirs of the defunct Sulu sultanate now resort to arbitration in Spain? The significance of the 1939 case is that the heirs of the non-existent sultan of Sulu had acknowledged Malaysia/the Malaysian court as the rightful venue to adjudicate any issues arising from the agreement. Therefore, as the rightful heirs of the obsolete sultanate and the successors to the parties in the 1939 suit, the current generation of the Kiram family is legally bound by the decision made in 1939.

The 2020 case

In 2020, the Malaysian government filed a suit at the Sabah High Court to stop the Spanish arbitration led by a Spanish arbitrator. The arbitration was filed by the current generation of the Kiram family. The judge had to decide whether: 

(i) There was an arbitration clause in the Deed of Cession 1878;

(ii) Malaysia had waived its sovereign immunity to submit to the Spanish arbitration; and

(iii) Whether Malaysia was the rightful venue to decide issues relating to the said deed, based on historical facts and legal points of view.

Arbitration can never be forced on parties

The High Court contended that nothing in the Deed of Cession 1878 demonstrated that both Malaysia and the defunct sultanate agreed to refer any disputes for arbitration. In fact, the parties must clearly express their agreement to submit to arbitration. 

Such intention must be clearly mentioned in an "arbitration agreement" or an "arbitration clause". Further, the word "arbitration" must be clearly mentioned in the deed. 

The court found that there was no such arbitration agreement or arbitration clause in the deed. This meant a lack of legal basis for the parties to submit to arbitration. 

Section 9 (1) of the Arbitration Act 2005 (Act 646) defines an arbitration agreement as "an agreement by all parties to submit to arbitration in all or certain disputes between them in a legal relationship either it is contractual or not". Section 9 (2) states that the agreement for arbitration can be in the form of an arbitration clause within the main agreement or a separate agreement for arbitration. 

Spanish arbitration is illegal

The Spanish arbitration is illegal as it violated Malaysia’s sovereign immunty and ignored a crucial legal issue, i.e. whether Spain was the rightful country to determine the claim. By virtue of the Madrid Protocol 1885 – an international agreement signed by Spain, Britain and Germany – Spain had relinquished its interest over the Sulu Archipelago and confirmed the British position in Sabah. 

Spain has no relation either to the deed or to Sabah. Therefore, Spain has no jurisdiction to decide on the matter. The country that has the jurisdiction is Malaysia. Section 23 (1) of the Courts of Judicature Act 1964 (Act 91) confers jurisdiction to Malaysia since Sabah is the place where the issue arose. Needless to say, jurisdiction is territorial. Since there is no proof of Malaysia waiving its sovereign immunity, the Spanish arbitration is illegal and the award is legally unenforceable.

As a sovereign state, Malaysia should not have paid even a single sen to the heirs of Kiram since 1963. However, out of good will, the government at that time paid the annual sum of RM5,300 anyway. 

It was not wrong for Malaysia to cease payments in 2013 as Putrajaya neither deals with terrorists nor respects treaties with long-lost sovereigns.

However, the letter written by Malaysia’s attorney-general in 2019 expressing Malaysia’s regret in ceasing the payments was a mistake and should not have been sent. Why should Malaysia regret not making payments to the heirs of Kiram when it is clear that Sabah is unmistakably Malaysia’s?

Why should Malaysia honour a colonial treaty signed by an entity which is no longer a sovereign?

As Sabah is globally recognised as part of Malaysia, Malaysia is in no way obliged to entertain the claims of the descendants of a lost sovereign. 

Lessons must be learnt from this unwarranted "Sulu arbitration" that may put Malaysia’s interests at stake. The ruling government must be aware and remain steadfast against any attempt to undermine Malaysia’s sovereignty.

Malaysia does not owe anyone money for Sabah.

Mohd Hazmi Mohd Rusli is an associate professor at the Faculty of Syariah and Law, Universiti Sains Islam Malaysia, and Mohd Ridwan Talib is a non-practising advocate and solicitor at the High Court of Malaya. 

The views expressed in this article are those of the author(s) and do not necessarily reflect the position of MalaysiaNow.