KUALA LUMPUR (July 13): Prime Minister Datuk Seri Ismail Sabri Yaakob on Wednesday declined to comment on the seizure of Petroliam Nasional Bhd's (Petronas) Luxembourg-registered subsidiaries by descendants of the Sulu Sultanate following a US$15 billion (approximately RM66.55 billion) legal dispute with the Malaysian government that arose from an agreement signed 144 years ago.
Instead, he said “Petronas will issue a statement” when reporters asked about the issue after the launch of the Housing Blueprint 3.0 on Wednesday.
Petronas has been dragged into the dispute as Malaysia does not recognise the decision by an arbitrator in France, which ruled in March that Malaysia must pay the descendants US$14.9 billion.
Ismail Sabri in March pledged to fight the French arbitrator's ruling, saying the Malaysian government would not entertain anyone else’s claim over Sabah.
On Tuesday, the Financial Times (FT) reported that bailiffs in Luxembourg seized the companies, namely Petronas Azerbaijan (Shah Deniz) and Petronas South Caucasus, on behalf of their clients on Monday. The report also said the subsidiaries managed gas interests in Azerbaijan that could be worth more than US$2 billion.
The move was part of legal efforts by the Sulu "heirs" to win compensation over land in Sabah that they said their ancestor leased to a British trading company in 1878, long before the discovery of vast natural resources in the area, the FT reported. It also reported that if Malaysia continued to ignore the ruling, the money owed to the "heirs" was set to increase, and that the claimants' lawyers had indicated that they would pursue more state assets if a resolution was not reached.
Following the FT report, Petronas confirmed in a statement that two of its subsidiaries were served with seizing orders in Luxembourg on Monday, but clarified that these units had already divested their entire stakes in the natural gas project in Azerbaijan, and that the proceeds from the disposal had been repatriated.
The state-owned oil company also said it viewed the actions taken against its subsidiaries as "baseless", and that it would defend its legal position in the matter.
Petronas had a 15.5% stake in the Shah Deniz natural gas project in Azerbaijan, which the oil company in February sold 9.99% shareholding in the project to Russian oil and gas company LUKOIL for about US$1.45 billion. It is unclear when exactly Petronas divested the remaining 5.51% stake in the project.
To recap, the dispute arose after "heirs" and "successors-in-interest" to Sultan Jamalul Kiram II initiated a claim against the government of Malaysia through international arbitration proceedings in Madrid, Spain, Malaysia's Ministry of Foreign Affairs and the Attorney General's Chambers (AGC) said in a joint statement in March.
The Ministry and the AGC said the claim was based on an agreement that Sultan Mohamet Jamal Al Alam, the then Sultan of Sulu, entered into in 1878 with Baron de Overbeck and Alfred Dent. Under the agreement, the Sultan of Sulu granted and ceded in perpetuity the sovereign rights over certain territories located in North Borneo, now forming part of Sabah.
As a token, RM5,300 per annum was to be paid to the Sultan of Sulu, his heirs or successors. Following the Lahad Datu armed invasion, payment was ceased in 2013.
"The government of Malaysia does not recognise the claim and did not participate in the purported arbitration proceedings because Malaysia has always upheld and has never waived its sovereign immunity as a sovereign state," Putrajaya said in its March statement.
"In addition, the subject matter of the claim is not commercial in nature and thus cannot be subject to arbitration and the 1878 Agreement contains no arbitration agreement. We further stress that the claimants' identities are doubtful and have yet to be verified," it added.