Sultan’s heirs expand efforts to seize Petronas assets

The heirs of a late sultan have launched legal proceedings to seize as many as a dozen Netherlands businesses of Malaysian state oil company Petronas in a move set to further infuriate Kuala Lumpur after similar actions in Luxembourg in July.

Representatives of the heirs of the last sultan of Sulu said on Thursday they had asked The Hague Court of Appeal to recognise the $14.9bn awarded to their clients this year in an arbitration case against Malaysia.

The filing of the petition to enforce the award comes barely two months after the claimants’ lawyers said they had seized two Luxembourg-based Petronas subsidiaries in a sudden escalation of a legal dispute that stems from an agreement signed 144 years ago.

A representative for the claimants said they had identified more than a dozen Petronas businesses registered in the Netherlands, with interests ranging from China and India to the US and Canada. Petronas did not immediately respond to a request for comment on Thursday evening in Kuala Lumpur.

“This is part of an accelerating sequence of enforcement actions,” said Paul Cohen, a lawyer at 4-5 Gray’s Inn Square and co-lead counsel for the claimants. “The almost $15bn arbitration award, which Malaysia is trying to avoid settling, carries an annual 10 per cent interest payment. With those mathematics, playing for time seems a weak strategy.” 

The latest move is part of efforts launched by the Sulu heirs to win compensation over the Malaysian state of Sabah, which they claim their ancestor leased to British colonialists in 1878 before the discovery of vast natural resources in the area.

It is likely to escalate political controversy in Kuala Lumpur sparked by the Financial Times’ report of the Luxembourg move in July. The current administration has announced plans to launch a “task force” to fight further seizures of state assets and a blame game has gripped political circles in Kuala Lumpur.

Last month, former prime minister Mahathir Mohamad accused his predecessor, Najib Razak, of halting the annual stipend that Malaysia had paid to the Sulu heirs for decades in recognition of the 1878 agreement.

“There is no record of him consulting the cabinet or other authorities, he just made a decision to stop paying and that is what triggered the action by the sultan’s descendants,” Mahathir told the FT.

Najib, now jailed over his role in an embezzlement scandal at the 1MDB state fund, has himself suggested that Mahathir urged the government to halt the payments in 2013 over an armed invasion of Sabah led by a self-declared Sulu sultan, Jamalul Kiram III.

The case brought by the claimants, among them relatives of Kiram who have disowned the invasion, has been broadly criticised by Malaysia, which is seeking to challenge the legitimacy of the award made by an arbitrator in Paris. In April, finance minister Zafrul Aziz told the FT that it was “a frivolous, no-basis case”.

Malaysia’s foreign ministry did not immediately respond to a request for a comment. The Netherlands is a signatory to the New York Convention of 1958, which commits countries to recognise awards made by arbitrators.