KUALA LUMPUR (Nov 11): The federal government will commence negotiations with Sabah on the 40% revenue-based special grant, which is protected under the Federal Constitution, according to a statement by the Attorney General’s Chambers (AGC). It will not appeal the 40% grant itself, but will challenge what it calls ‘flaws’ in the High Court judgment, the AGC said.
According to the AGC, the judgment — from a judicial review filed by the Sabah Law Society (SLS) — included flawed allegations that both the federal and Sabah governments had abused their powers and violated constitutional duties dating back to 1974.
“This allegation could involve the federal government and the Sabah state government dating back to 1974,” the AGC said.
The judgement also found the post-2021 review to be illegal, irrational, procedurally improper and disproportionate, with the AGC saying that the federal government intends to appeal these issues.
The statement follows a special Cabinet meeting on Nov 11, 2025 to discuss the Kota Kinabalu High Court judgment on Sabah’s special grant. A press conference was slated to follow, but was cancelled at the eleventh hour, with the AGC’s statement issued in its place.
On Oct 17, the Kota Kinabalu High Court ordered Putrajaya and the Sabah government to hold a mandatory review of the 40% return on state revenue that Sabah is entitled to. The review has been pending since 1974.
The order was made by High Court judge Celestina Stuel Galid, who also ruled that the federal government’s issuance of a special grant to the Sabah government, and its method of deriving the sum to be granted, was unlawful.
The judge said that the SLS proved that because the second review order was never carried out from 1974 to 2021, the special grant for Sabah was unlawful and beyond the legal powers of both governments.
“It is unlawful on the part of the federal government to make the intended special grants under the Tenth Schedule to the state of Sabah, illegal and irrational to such an extent that it breached the Federal Constitution in the context of the judicial review,” the judge said.
The SLS claims there had been procedural impropriety which failed to provide for the period between 1974 and 2021, and that the second review order failed to take into account the Inter-Government Committee report which entitles the state to receive a grant of 40% entitlement for that period.
It alleged that the second review order is disproportionate.
The issue has drawn widespread attention ahead of Sabah’s state election, especially after United Progressive Kinabalu Organisation (Upko) president Datuk Ewon Benedick resigned as minister of entrepreneur development and cooperatives, and announced Upko’s exit from Pakatan Harapan ahead of the Nov 29, 2025 polls.
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