Former AG reveals Malaysia’s decision to be a signatory of international arbitration convention could have had unforeseen consequences
KUALA LUMPUR – The effects of Malaysia’s accession to the New York Convention in 1958 could have jeopardised the country’s position if the Attorney-General’s Chambers (AGC) had chosen to ignore the Spanish arbitration initiated by the descendants of the Sulu Sultanate.
The New York convention, which has 160 nations as signatories, deals with recognition and enforcement of foreign arbitral awards.
Former attorney-general Tan Sri Tommy Thomas revealed that the case involved the descendants claiming annual compensation from the Malaysian government which had ceased payments following Sulu militants’ armed incursion in Lahad Datu, Sabah, in 2013.
“Although there appears to be no evidence of any link between the Sulu descendants who were receiving the annual fees from Malaysia, under the 1878 Agreements, and the armed invaders into Lahad Datu, the Malaysian government ceased payments from 2013.
“There were no legal grounds for Malaysia’s refusal to pay annually since 2013. It resulted in Malaysia being in breach of the 1878 Agreement,” he stated in his newly released book, My Story: Justice in the Wilderness.
He said the families of the Sulu descendants who had been receiving an annual payment of RM5,300 for 135 years under the agreement signed during the British era threatened legal action against Malaysia which was not taken seriously by past administration.
However, in 2019, the government was served demand letters which were sent by lawyers from London, acting on behalf of the descendants, seeking Malaysia’s participation in arbitration proceedings before a single Spanish arbitrator in Spain.
“I was shocked by this turn of events. It was understandable that the previous recipients were peeved with Malaysia ceasing to pay them.
“If they were minded to resort to litigation, the proper forum was the High Court at Sandakan, as their ancestors themselves recognised in 1939,” he said.
“What was absolutely not acceptable was suing in a foreign country which had no connections, either as a matter of fact or legally, with their claim for annual compensation.”
“The dispute revolved around the failure to pay an agreed sum as consideration for land surrendered in Sabah. All the connections were with Sabah, which was the proper forum to adjudicate any dispute,” he stated in the book.
At first, Thomas said, his initial response was to disregard the arbitration, and to advise the Malaysian government that it should neither submit to the jurisdiction of the courts of Spain nor participate in the ex parte Spanish arbitration before a single Spanish arbitrator.
“The only possible link to Spain was that for a short period between 1878 and 1885 Spain had some rights over North Borneo, which as stated above, were passed over in 1885 to Great Britain.
Since there was no arbitration agreement in the 1878 and 1903 documents, the Sulu claimants had applied to the courts in Spain, which appointed a Spanish arbitrator to determine a dispute between Philippine citizens and Malaysia, he said.
He added that it pertained to agreements dealing with land in Malaysia and payments by Malaysia in ringgit.
“How absurd and how ludicrous,” said Thomas, who was attorney-general from June 2018 to February 2020.
Assets overseas risk seizure
However, following the advice of his partner in private practice, Thomas pointed out that Malaysia’s assets situated in any of the New York Convention member states, would be vulnerable to attachment or seizure, on the application of the eight claimants, if they were awarded damages by a Spanish arbitrator.
“This was the consequence, regardless of whether Malaysia participated in the Spanish arbitration.”
“Thus, if the arbitration was allowed to proceed ex parte without Malaysia’s participation, the award could be in millions, and our foreign assets would be in jeopardy.”
Thomas then ordered the legal team to file an ‘anti-suit’ injunction in the High Court in Sabah, to restrain the continuation of the Spanish arbitration, while holding on to the stand that Malaysia should not participate in the Spanish arbitration which he described as instituted against our will.
“The government was represented in court by senior Federal Counsel. The judge in the High Court ordered all the court papers to be served on the British lawyers for the eight individuals and the Spanish arbitrator,” he said.
“That was done by email, registered post and by personal service through our Spanish lawyers.
“Thus, the eight individuals had actual knowledge of the Sabah court proceedings. None of them participated.The judge granted a declaration to the government of Malaysia to the effect that the proper forum for resolving the dispute was the high court in Sabah, and not Spain.
An injunction was then issued to restrain the arbitration, and orders were served on the relevant persons, including the arbitrator.
Haunted by New York Convention
Thomas said following his departure from the AGC, at present the Spanish lawyers hired to act on behalf of the government were in the midst of registering the Malaysian court injunction and issuing a fresh challenge in the courts of Spain, seeking to set aside the Spanish court order appointing the arbitrator.
“All the steps that Malaysia could reasonably take to confront the problem about the Spanish arbitration were promptly and professionally taken,” he said.
“The unforeseen consequences of Malaysia becoming a member of the New York Convention came to haunt us.
“What a price to pay when the annual payment to the Sulu claimants was stopped unilaterally by Malaysia in 2013 in the aftermath of the Lahad Datu incursion. And that too for RM5,300 per year.”
Thomas added that in his letter to the Spanish arbitrator, he had mentioned that Malaysia had recently tendered all pending payments from 2013 and promised to pay in the future, following which there was no longer any dispute in any event.
“The lawyers for the Sulu claimants responded by stating that they were now claiming billions of ringgit,” he added.
“There was absolutely no legal or factual basis for such an absurd and ludicrous claim.”
By : G. Surach – THE VIBES