PUTRAJAYA (March 16): The Federal Court on Monday granted leave to Petroliam Nasional Bhd (PETRONAS) to challenge the incompetency of several Sarawak state laws.

Chief Judge of Malaya Datuk Seri Hashim Hamzah in his broad grounds said after considering the written and oral submissions, the court is satisfied that it had met the threshold that there is a strong arguable case and the motion is not frivolous.

“As it has met the threshold for leave, PETRONAS is required to file the motion for petition within 21 days,” Hashim, who sat solely on the bench, said.

PETRONAS had sought leave to challenge the inconsistency between the Petroleum Development Act 1974 and the Sarawak Distribution Gas Ordinance 2016 (DGO), among others, while there was opposition from the Sarawak government to PETRONAS' leave application, as submissions took more than five hours.

PETRONAS filed the motion in January to gain leave (permission from the court) to ensure that it continues to operate in full compliance with the applicable laws and sound governance practices as a result of competing federal and Sarawak state laws.

PETRONAS’ lead counsel Datuk Dr Cyrus Das, who appeared with Khoo Guan Huat, when met after the proceedings said following leave being granted to the national oil company, they would file the petition within 21 days, and seek for a full Federal Court bench to hear the challenge.

“A full apex bench may consist of three, or five, or more judges,” he said.

When asked whether PETRONAS’ petition would be heard together with the Sarawak’s government’s petition, Cyrus indicated such a possibility and that it would be decided after case management.

Separately, Sarawak attorney general (AG) Datuk Seri Saferi Ali, who appeared with Sarawak state legal counsel Datuk Seri JC Fong, when met after proceedings, also explained their objection to PETRONAS’ leave application and concurred with Cyrus that Sarawak’s petition to challenge the PDA, the Continental Shelf Act 1966 and the Petroleum Mining Act 1966 could be heard together with the PETRONAS matter.

PETRONAS has to obtain leave (permission) under Article 4(3), Article 4(4) and Article 128(1) of the Federal Constitution for the merits of its challenge to the Sarawak laws to be heard, as it is a company and a non-state entity.

In arguing for leave, Cyrus said the threshold to be met is that PETRONAS has to demonstrate that there is an arguable case, and that the company’s application is not frivolous, as the Sarawak state legislature lacks the competence or power to make law in modifying, amending, revising or making related provision which the lawyer described could be invalid, void and unconstitutional.

Besides the Sarawak DGO, the other Sarawak legislations which the senior counsel argued might be subject to challenge are the Environment (Reduction of Greenhouse Gas Emission) Ordinance 2023, the Sarawak Land (Carbon Storage), the Sarawak Oil Mining Ordinance 1958, the Sarawak National Parks and Nature Reserves Ordinance 1998, the Sarawak Land Code, and the Sarawak Interpretation Ordinance 2005.

He argued that the Sarawak legislature lacks the competence to make laws with respect to matters which are contained under federal lists, which also covers the external affairs of the nation.

Besides this, Cyrus argued that the Sarawak legislature lacks legislative competency to make laws concerning matters that fall under the federal list, including to extend its territorial reach or jurisdiction with regards to the continental shelf by relying on the Order in Council 1954 (OIC).

“A state legislature does not possess the power to redefine or enlarge its territory so as to expand its own legislative reach. The authority to legislate within those limits does not include authority to redraw the territorial boundaries between the state,” he added.

“The OIC is not a Malaysian law, nor is it a ‘present law’ under Section 73(5) of the Malaysia Act 1963. Accordingly, it cannot be relied upon to enlarge Sarawak’s territory or jurisdiction,” he added.

In light of this, Cyrus said PETRONAS is seeking for the court to determine whether the Sarawak legislature has the requisite legislative competency to make the impugned laws.

His co-counsel, Khoo, also told the court that the scope of Sarawak’s DGO encroached the item with regards to the PDA and the federal list.

Senior federal counsel Ahmad Hanir Hambaly @ Arwi said the federal government is not objecting to the motion by PETRONAS, as in their view, the grounds of challenge meet the threshold for leave to be granted under Article 4(3) and 4(4), that there is an arguable case for trial.

In opposing, Saferi said that the matter should be between the federal government and the Sarawak government, and it should not involve PETRONAS, as the argument is with regards to territorial matters.

For this reason, the Sarawak AG said the Sarawak government has filed its own petition, where it named the federal government as respondent.

Fong, meanwhile, took a historical approach and said that PETRONAS should not be granted leave, as he argued that the Sarawak alteration of boundaries should include the continental shelf.

He said the OIC is a law applicable to the UK, and the subsequent legislations with regard to the Sarawak Land Code, Oil Mining Ordinance, National Parks and Nature Reserve Ordinance, and the Interpretation Ordinance are also valid law.

“These ordinances relied upon or give effect to the OIC for the definition of ‘land and lands’, onshore and offshore lands to include the seabed and subsoils in the area of the continental shelf adjacent to the coast of Sarawak,” he added.

“Whether the OIC remains valid or not, or have been superseded by federal laws after Malaysia Day, is not a question to be determined by the Federal Court under its exclusive jurisdiction, and this argument, as the Sarawak AG said, is between the federal and Sarawak government,” he added.

Fong reiterated that the dispute involves the federation and the state, and no outside party, including PETRONAS, as they do not have locus standi.

He added that existing laws are there to regulate land use, and that these rules do not mandate or require anybody to store petroleum and gas, while upon those resources are dried up, to regulate the return of the land and manage carbon storage.

For these reasons, the Sarawak representatives argued that PETRONAS did not meet the requirement for leave.

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