Sulu Sultan’s Heirs Face Final Defeat in $15 Billion Sabah Claim—Or Do They?

By Louis ‘Barok‘ C. Biraogo — November 10, 2924

AN 1878 treaty, a $15 billion claim, and a decision that could reshape Southeast Asia’s political landscape—France’s Cour de Cassation has delivered a ruling that shuts down the Sultan of Sulu heirs’ case against Malaysia over Sabah. This decision isn’t just legal closure; it’s a pivot point in a dispute dating back to colonial times. Join us as we untangle the web of history, power, and diplomacy that led to this moment, and what it means for Malaysia, the Philippines, and beyond.

A Brief History of the Sultan of Sulu’s Ownership of Sabah

The origins of this case trace back to 1878, when Sultan Jamalul Alam of Sulu entered into an agreement with representatives of the British North Borneo Company. In the agreement, the Sultan granted the company rights over what is now Sabah, in northern Borneo. The dispute hinges on the interpretation of the Malay term “pajakan,” which appears in the original text and can mean either “lease” or “cession.” This difference has led to conflicting views on whether the Sultan permanently transferred sovereignty over Sabah or merely leased it.

The Philippines’ Claim Over Sabah

The Philippines entered the Sabah fray formally in 1961, asserting that Sabah historically belonged to the Sultanate of Sulu, which is now part of the Philippines. This claim centers on the interpretation that the 1878 agreement was a lease rather than a full cession. Following Malaysia’s formation in 1963, which incorporated Sabah as a state, the Philippines protested, arguing that the incorporation violated its sovereignty claims. Malaysia, however, counters that Sabah’s residents overwhelmingly voted in favor of joining Malaysia through a referendum, citing this as a definitive expression of self-determination that supersedes any historical agreements.

The Heirs’ Claim for Compensation

While Malaysia historically made annual payments to the heirs of the Sultan of Sulu as a recognition of the 1878 agreement, this practice ceased in 2013 following a violent incursion by supporters of the Sultanate into Sabah. The heirs claim that the cessation of payments breached the agreement, prompting them to seek arbitration. In 2022, a French arbitration court awarded the heirs a staggering $14.9 billion, leading them to pursue Malaysian assets internationally. Malaysia challenged the award’s enforceability, arguing it was based on a flawed arbitration process and violated sovereign immunity. In a decisive ruling, the Cour de Cassation upheld Malaysia’s challenge, declaring the award “inapplicable and void.”

Legal Analysis: Framework and Implications

The Heirs’ Claim Against Malaysia

The heirs’ case rests on several key points of international law, including principles of treaty interpretation, historical agreements, and the legitimacy of arbitration. The 1878 agreement is at the heart of their claim, yet the ambiguous term “pajakan” has fueled ongoing debates about the nature of the agreement—whether it granted merely use rights or full sovereignty.

The heirs’ legal team argued that Malaysia violated the original agreement by halting payments, justifying their claim under the principle of pacta sunt servanda, which obligates parties to honor agreements. However, Malaysia’s challenge invoked sovereign immunity and argued that arbitration lacked jurisdiction over a sovereign matter. Additionally, Malaysia contested the legitimacy of the arbitrator, Gonzalo Stampa, who faced legal issues and was later convicted of contempt in Spain for defying court orders.

The French Ruling’s Implications

The Cour de Cassation’s ruling is a significant victory for Malaysia, effectively nullifying the $14.9 billion award and alleviating potential financial repercussions. It sets a precedent for cases involving historical agreements with ambiguous terms and reinforces the principle of sovereign immunity in international arbitration. However, for the heirs, this ruling significantly limits their immediate legal options to seek compensation from Malaysia, though it does not completely foreclose them from pursuing alternative legal avenues.

The Heirs’ Claim Against the Spanish Government

The heirs have also filed a claim against the Spanish government, arguing interference in the arbitration process. They allege that a Spanish court clerk’s actions and Stampa’s legal proceedings influenced the case outcome. The heirs may base their claim on principles of state responsibility under international law, arguing that Spain’s actions unjustly impacted their ability to pursue arbitration fairly.

However, Stampa’s conviction for disobeying a Spanish court order provides the Spanish government with a robust defense. Spain may argue that its courts acted within their jurisdiction and that the conviction was based on procedural violations rather than bias. This further complicates the heirs’ case against Spain, reducing the likelihood of securing redress.

Potential Paths Forward: Legal and Diplomatic Options

Given the complexities of international arbitration and the difficulty of enforcing an annulled award, the heirs have limited options for obtaining compensation from Malaysia:

Pursuing Diplomatic Channels: The heirs may attempt to negotiate a settlement with Malaysia, potentially leveraging historical or cultural ties to seek a modest compensation agreement.
International Court of Justice (ICJ): The heirs could seek support from the Philippines to bring the case to the ICJ, although Malaysia’s refusal to recognize the claim makes this unlikely.
Regional Mediation through ASEAN: ASEAN, as a regional body, might offer a forum for informal mediation. However, Malaysia’s entrenched position on Sabah could limit ASEAN’s influence.
Filing New Arbitration in Neutral Jurisdictions: While risky, the heirs may consider new arbitration in jurisdictions perceived as neutral. However, they would likely face similar jurisdictional challenges.

Recommendations for Stakeholders

For the Heirs: Considering the multiple legal setbacks, the heirs should prioritize diplomatic channels and pursue compensation directly through negotiations with Malaysia. If historical compensation is still Malaysia’s goal, the heirs could potentially secure a fair arrangement through international mediation.
For Malaysia: To prevent future legal entanglements, Malaysia could benefit from establishing a clearer historical narrative on Sabah’s status, grounded in contemporary international law. This may reduce future challenges and reinforce sovereignty.
For the People of Sabah and Sulu: A peaceful, diplomatic resolution that respects local sentiments should be paramount. An equitable resolution, potentially involving compensation without sovereignty implications, would address historical grievances and prevent prolonged legal confrontations.

Conclusion

Though the Cour de Cassation has spoken, the true resolution to this age-old dispute remains elusive. The issues of territorial rights and compensation, steeped in colonial history, linger on, begging for more than just legal interpretations. For the Philippines, Malaysia, and the heirs of the Sultan of Sulu, the next step may demand not just diplomacy, but the courage to confront a painful past and chart a cooperative future. In that, perhaps, lies the only hope for a resolution that endures.