This article first appeared in Forum, The Edge Malaysia Weekly on November 27, 2023 - December 3, 2023

A fortnight ago, in my article “Sovereign immunity in Malaysia — what it is and the way forward”, I laid out the fundamentals of state immunity, its correlation to the Sulu Fraud, and how it informs our way forward as an independent nation. The doctrine of sovereign immunity, as I had alluded to in that article, calls upon the mutual acknowledgement of the state’s sovereignty and independence in the international domain. Today, it is a type of customary international law, built upon the notion of independence, equality and dignity of a sovereign state. This type of immunity is the basis that prevents foreign courts from exercising their jurisdictions against a state.

The government of Malaysia will leverage sovereign immunity not solely as a reaction to the Sulu Fraud, but as a long-term plan to protect future generations from the possibility of such cases repeating itself.

In this article, I would like to share some policy considerations that are crucial in driving the formation of our very own state immunity legislation.

The abuse of arbitral processes, one-sided appointment of an arbitrator and release of the purported final award amounting to US$14.9 billion (RM69.8 billion) in the Sulu proceedings cannot be overstated. As a nation, we are rightly appalled at the relocation of the seat of arbitration by Dr Gonzalo Stampa, from Madrid to Paris, in blatant disregard of the Spanish court’s order in June 2021. This is both outrageous and prejudicial to Malaysia.

Unfortunately, deprived of the inherent immunity protection as a sovereign state, the arbitration proceedings involving Malaysia have proceeded thus far, bringing us to where we are today. Without this inherent immunity, Malaysia has been slammed with a US$14.9 billion purported final award, leaving the country no choice but to defend itself through legal strategies against the arbitrator, the claimants and their financial backer, Therium.

The Sulu Fraud, as in the case of The Federal Republic of Nigeria v Process & Industrial Developments Limited (Nigeria v P&ID), has highlighted the susceptibility of sovereign states to exploitation, more so in international arbitration settings, owing to their confidentiality. The recent judicial decision in the Nigerian case is an example of the proliferation of abuse, fraud and corruption in international arbitration.

Despite the obvious difficulties brought about by the Sulu Fraud, there is a silver lining — it serves as a catalyst to expedite our legislative reform and enact the State Immunity Bill. I am confident that passing the bill will reflect Malaysia’s stand that the immunity of any sovereign nation should always be protected from being abused by any entity, and that sovereign nations will reciprocate in return, should the country’s immunity be infringed upon in their respective courts.

The introduction of domestic state immunity legislation serves to codify customary international law in this respect and to endorse our long-standing judicial practice of the doctrine of restrictive immunity. At the same time, it demonstrates our commitment both to respecting and honouring the sovereignty of a state and its inherent immunity.

The general rule of this legislation is that a foreign state and its property, a head of state and a head of government acting in their official capacity shall enjoy immunity from the jurisdiction of the Malaysian courts. Therefore, no proceedings shall be instituted against them by any party. However, there will be exceptions to the immunity granted in this bill.

In the context of this bill, immunity will be given to a foreign country, which includes the head of state and head of government in their public capacity, government bodies or a foreign entity that executes and performs actions in the execution of the sovereign power of the foreign country (in the exercise of sovereign authority and are acting in that capacity).

The principle of reciprocity is also among the matters given consideration in the drafting of this bill, where Malaysia will provide reciprocal treatment to countries that provide the same.

The kerajaan perpaduan (unity government) is confident that the implementation of a statutory law will provide greater certainty and clarity to the scope of application and other considerations relevant to the doctrine of sovereign immunity. Guidelines, policies and directives may be issued to government agencies for the purpose of putting into effect the State Immunity Bill.

At the outset, the State Immunity Bill offers general immunity to protect all sovereign states should any legal proceedings be commenced against a foreign state in the Malaysian courts. It is compatible with present customary international law and the legal position in the UK and Singapore. Notwithstanding that, it is important to understand that this bill serves to protect a foreign state from being tried or heard in Malaysian courts, having regard to its status as an independent sovereign state.

However, general immunity is subject to waiver by the state and the prescribed categories of exception to the immunity protection under the law. Waiver of immunity, in this context, means that the foreign state renounces or relinquishes its right to rely on the protection of such immunity to resist the jurisdiction of another state. Thus, if a state waives its immunity, any necessary legal actions may be commenced against the state concerned.

Following the enforcement of the said bill, a Foreign State Immunity Council will be established to oversee all matters relating to state immunity and the implementation of the legislation concerned, including the issuance of policies, guidelines and directives.

This prospective State Immunity Bill embodies the principle of reciprocity, to encourage mutual recognition of sovereign immunity between states. This reciprocity treatment would ensure that a comparable degree of immunity protection will be afforded to Malaysia in the jurisdiction of a foreign state. To illustrate, if State X offers a lower degree of immunity to Malaysia, the prime minister of Malaysia may, by an order published in the Gazette, withdraw any/all immunity granted to the said state.

I assure all Malaysians that the kerajaan perpaduan is working hard to legislate this bill for the security of this generation and many more generations to come. I would also like to commend my colleagues in government, under the leadership of Prime Minister Datuk Seri Anwar Ibrahim, who have worked tirelessly, sparing no effort in safeguarding our sovereignty, immunity, interests and national security. Moving forward, the government of Malaysia may also engage in active consultation prior to considering the signing and ratification of the 2004 United Nations Convention on Jurisdictional Immunities of States and Their Property.

Datuk Seri Azalina Othman Said is minister in the Prime Minister’s Department for law and institutional reform

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.