This article first appeared in The Edge Malaysia Weekly on July 18, 2022 - July 24, 2022
THERE is supposedly an immense amount of wrangling behind the scenes at the US$14.92 billion (RM66.39 billion) claim and ongoing dispute between the eight heirs of the late Sultan of Sulu — Sultan Jamalul Kiram II — and the Malaysian government.
For starters, the eight heirs, who are supposedly “regular folk” without lavish lifestyles, have been able to take on the Malaysian government, hiring top-notch lawyers with several millions in funding from Therium Capital Management Ltd.
In response to an email from The Edge on whether it is funding the heirs of the Sultan of Sulu, Therium replies, “Yes. Therium is funding the claimants.”
Therium, on its website, says it is “one of the longest established litigation funding firms in the world, with current deployed capital at circa US$1 billion and a strong track record of litigation investment across 12 funds”.
“We have funded claims with a total value of circa US$100 billion across the world, including many of the most high-profile funded cases,” it adds. (See sidebar on Therium.)
A logical conclusion then would be that Therium had done the requisite research, come to the conclusion that the Sultan of Sulu’s eight heirs have a strong case against Malaysia and decided to fund them, which should see the fund making gains from their claims.
“You may call them (Therium) whatever you want, but they obviously think the descendants of the Sultan of Sulu have a case, or at least will be able to extract something substantial from Malaysia,” one source with knowledge of the dispute says.
“Think about it, the heirs sought legal advice from Paul Cohen and Elisabeth Mason in London … big names. Who would fund such an endeavour if they didn’t see light at the end of the tunnel?”
Malaysia, meanwhile, has hired big names in the legal arena too, including Bredin Prat in Paris and Uría Menéndez in Madrid. But this raises questions as to why the matter was not settled or nipped in the bud.
To recap, on July 11, bailiffs in Luxembourg, acting for the descendants of the Sultan of Sulu, seized two companies belonging to national oil company Petroliam Nasional Bhd (Petronas) — Petronas Azerbaijan (Shah Deniz) Sàrl and Petronas South Caucasus Sàrl — after arbitration proceedings in Paris in March ruled that Malaysia was required to pay the descendants US$14.92 billion.
This legal dispute came about after the eight heirs initiated international arbitration proceedings against the government of Malaysia in Madrid, based on an 1878 agreement between Sultan Mohamet Jamal Al Alam (the Sultan of Sulu then) and Baron de Overbeck and Alfred Dent, which granted perpetual sovereign rights over what is parts of Sabah today, in return for an annual RM5,300 token payment.
However, after an incursion in 2013 by militants (which Malaysia says are linked to the Sultan of Sulu, but is disputed by the heirs), Malaysia ceased payments of the annual compensation. The armed invasion of Lahad Datu by more than 200 militants resulted in 78 deaths — 68 terrorists and 10 Malaysian armed forces personnel.
This cessation of the RM5,300 annual payment led to the US$14.92 billion claim and subsequent dispute. At the time of the incursion, Malaysia’s premier was Datuk Seri Najib Razak and the foreign minister was Sabah politician Datuk Sri Anifah Aman. Why they ceased the nominal annual payment has never been publicly disclosed.
Some say the incursion breached the 1878 agreement, hence the payments were stopped. However, this has not been publicly stated by the Malaysian government.
While Najib has been blaming the Pakatan Harapan government which came into power post GE14 in 2018, and specifically Tan Sri Tommy Thomas, the AG then, for the issues now, Parti Keadilan Rakyat deputy president Mohd Rafizi Ramli puts the blame squarely on the Najib adminstration for stopping the RM5,300 annual payment to the heirs of the Sulu Sultan.
Last Friday, a press release from Minister in the Prime Minister’s Department (Parliament and Laws) Datuk Seri Wan Junaidi Tuanku Jaafar stated that the cabinet was setting up a special task force to examine, monitor and formulate an action plan to address the issue of the heirs of Sultan Jamalul Kiram II the (Sultan Sulu) against the Malaysian government.
The special task force, to be headed by Wan Junaidi, would include Foreign Minister Datuk Sri Saifuddin Abdullah, Attorney-General Tan Sri Idris Harun and other experts.
There are other areas of concern.
On Wednesday, July 13, Wan Junaidi said in a statement that the Paris Court of Appeal on July 12 had allowed Malaysia’s application for a suspension order to temporarily halt the enforcement of the arbitration ruling in favour of the heirs of the Sulu Sultanate. In a nutshell, he said that Malaysia had blocked the enforcement of the arbitration.
He added that the arbitration is unenforceable under a blanket ruling globally until a final decision by the Paris Court on the Malaysian government’s application to cancel the ruling.
This is being disputed by the lawyers acting for the heirs of the Sulu Sultan.
Paul Cohen, co-lead counsel for the Sulu Sultan’s heirs, says, “The honourable minister’s statement confuses two items. The global arbitration award from Paris allows us to collect US$15 billion dollars from a range of 170 countries. By contrast, the judgment that he is pleased with delays collection in one country (France itself), and temporarily narrows our field to only 169 nations.”
The 170 countries Cohen is referring to are the members of New York Arbitration Convention, of which Malaysia is a signatory.
When asked to comment on the possibility that the enforcement of the arbitration ruling was only unenforceable in France, Wan Junaidi, via a WhatsApp message, says, “So sorry, I’ve to observe certain reservations on whatever I’ve to say in this case. There is so much to protect than to satisfy anyone’s curiosity.”
In his July 13 statement, Wan Junaidi also reiterated what he had said in March this year, that a criminal complaint had been filed against the Spanish arbitrator Stampa.
Stampa had been instructed by the Madrid High Court to cease the arbitration and was terminated as Malaysia claimed to have not been properly notified about it.
Circumventing this, Stampa moved the arbitration to Paris. This is odd as he was appointed by the Spanish courts in the first place. Meanwhile, the Malaysian ambassador in Madrid had filed a criminal complaint against Stampa.
It is noteworthy that Paris is one of the largest arbitration centres in the world.
“The only analogy I can give you is that arbitration is like a plane — once it takes off, there is no way the control tower where the plane took off can dictate what happens,” the source with knowledge of the dispute says.
As with any dispute, there are two opposing stories. However, Stampa’s 148-page Final Award document, setting out the reasoning behind his US$14.92 billion award, is very detailed.
Late last week, The Edge sent questions to Petronas asking if the seizure had come as a surprise, and whether there are fears that other assets may be vulnerable.
Petronas responded: “On July 11, 2022, a ‘saisie-arrêt’ was served on two of Petronas’ Luxembourg-based subsidiaries. Petronas contests the validity of these enforcement actions against its two aforementioned subsidiaries and is taking all necessary measures to defend its legal position.
“Petronas also understands that, on July 12, 2022, the Paris Court of Appeal has suspended the enforcement of the arbitration award, while the Government of Malaysia’s challenge to the validity of that award is pending in the French courts.
“Petronas is taking all the necessary steps and measures, including but not limited to engaging suitably qualified legal counsel, in protecting the legal position of all its global assets,” the national oil company says.
Cohen, in response to questions from The Edge, says, “Our clients have tried to engage with Malaysia for a long time and been rebuffed. Arbitration was the last resort, and after a successful judgement, seizure seems the only option to recover the debt.”
Elisabeth Mason, co-counsel for the heirs of the Sultan of Sulu, adds: “Our clients contacted the government for years on this matter. There was no engagement. The government rejected the process and must now have spent many millions of ringgit in recent years fighting a rearguard action. Their advisers knew the consequence of their strategy, so the government must have known too. In such cases, the debtor doesn’t get specific warning of specific targets for seizure.”
Wan Junaidi and the Attorney-General’s Chambers both came out to say in March this year that Malaysia did not participate in the purported arbitration proceedings, Malaysia has always upheld its sovereign immunity, and that the 1878 Agreement contains no arbitration agreement.
While the back-and-forth goes on, there are other problems besieging the country.
The international legal wrangling couldn’t have happened at a worse time for Malaysia amid the unstable political situation.
Since 2018, there have been four different prime ministers at the helm of the country. While many political warlords are gearing up for a general election, others are in court and possibly facing jail time, or scrambling to look for constituencies and support.
While Prime Minister Datuk Sri Ismail Sabri is the prime minister, he is not Umno president or deputy president, but just one of the party’s three vice-presidents.
He is under pressure from Umno president Datuk Seri Ahmad Zahid Hamidi, who is also chairman of Barisan Nasional, the leading member of the ruling coalition.
If Umno were to pull its support for Ismail Sabri, it is still a question mark whether the opposition parties will step up and throw their support behind the current prime minister.
It is against this backdrop that the Sulu Sultan’s heirs and their financial backers Therium have opted to play poker with the Malaysian government.
While it’s hard to say if they will be successful, they are certainly proving to be a thorn in the Malaysian government’s side.
According to its website, Therium is one of the world’s largest litigation funding firms, registered in Jersey in the English Channel and headquartered in London. The investment fund specialises in funding third-party litigation and international arbitration.
“The firm works across all forms of commercial litigation and arbitration, and invests in a broad range of complex commercial disputes, from securities and shareholder actions, international arbitration, competition and antitrust cases through to intellectual property, insolvency and class actions,” says its Linkedin profile.
Therium has funded claims from around the world with a total value of about US$100 billion. The firm, founded in 2009 by John Bryne and Neil Purslow, today has offices in London, New York, Oslo, Dusseldorf and St Helier, Jersey.
Therium’s website lists a number of class action suits in a range of jurisdictions, and invites those eligible to participate.
The firm is funding a class action brought by third-party sellers on the Amazon platform against Amazon Canada. The plaintiffs are claiming damages arising from the platform’s anti-competitive agreements with third-party sellers that restrict them from selling products on other e-commerce sites at prices lower than that on Amazon.
Another household name Therium has taken on is Domino’s Pizza Enterprises Ltd in Australia. The class action case, taken on behalf of a large group of employees and former employees, is based on allegations that the company had underpaid its staff, mainly pizza delivery drivers.
Litigation funds finance cases and take a portion of the winnings after costs. As the costs of litigation can be expensive, third-party litigation funds offer those who need funding access to legal advice that they may not have been able to afford. However, if the party being funded loses the case, the loss for the litigation fund could be huge too.
In the UK, Therium successfully funded the appeal of 39 sub-postmasters who had their wrongful conviction of theft quashed in 2021. In this case, the Financial Times reported that the sub-postmasters were left with £12 million to share from a £58 million settlement.
Therium also backed an unsuccessful lawsuit undertaken by 6,000 shareholders against Lloyds Banking Group over its acquisition of banking and insurance company HBOS.
According to a recent FT article, the litigation-funding market is worth £2 billion in the UK and thriving. Apart from Therium, another notable litigation fund in the UK is Harbour Litigation Funding.
The eight heirs to the Sultan of Sulu Sultan Jamalul Kiram II all have their residence at Romulo Mabanta Buenaventura Sayoc & de los Angeles, 8767 Paseo de Roxas, Makati, Metro Manila, Philippines, according to court documents.
1. Nurhima Kiram Fornan, a Philippine national born on June 17, 1952, unemployed.
2. Fuad A Kiram, a Philippine national, born Oct 24, 1954, retired.
3. Sheramar T Kiram, Philippine national, born Dec 31, 1968, school administrator.
4. Permaisuli Kiram-Guerzon, a Philippine national, born on Sept 17, 1957, unemployed.
5. Taj-Mahal Kiram-Tarsum Nuqui, a Philippine national, born July 22, 1948, retired.
6. Ahmad Narzad Kiram Sampang, a Philippine national, born Sept 15, 1954, retired.
7. Jenny K A Sampang, a Philippine national, born on Aug 8, 1971, unemployed.
8. Widz-Raunda Kiram Sampang, a Philippine national, born March 20, 1952, businessman.
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