Kuala Lumpur, Malaysia – In a resounding legal triumph, the Paris Court of Appeal has fully annulled the controversial $14.9 billion arbitration award granted to a group of self-proclaimed heirs of the defunct Sulu Sultanate, ruling that the Spanish arbitrator lacked jurisdiction due to the absence of any valid arbitration agreement binding Malaysia. The decision, delivered on December 9, 2025, and confirmed by Malaysian authorities on Wednesday, also mandates that the claimants pay €200,000 (approximately RM957,000 or $232,000) in legal costs to the Malaysian government, marking the latest blow in a protracted international saga over territorial claims to Sabah, Malaysia’s resource-rich eastern state.
Minister in the Prime Minister’s Department (Law and Institutional Reform) Datuk Seri Azalina Othman Said hailed the ruling as a “major victory” not just for the legal team but for Malaysia’s sovereignty, dignity, and the rights of its people, particularly those in Sabah. “This is a triumph of justice over extortion, a clear affirmation that Malaysia will not yield to baseless claims designed to undermine our national integrity,” she stated in a press briefing in Kuala Lumpur, flanked by representatives from the Attorney General’s Chambers and the Sulu Special Secretariat War Room. The War Room, established in 2022 to coordinate Malaysia’s defense, described the outcome as the culmination of relentless efforts to dismantle what it termed a “sham arbitration” orchestrated by the claimants and backed by London-based litigation funder Therium Capital Management, which invested millions in the pursuit.
The dispute traces its roots to January 22, 1878, when Sultan Mohammed Jamalul Alam of the Sulu Sultanate, then a semi-autonomous Islamic kingdom under loose Spanish suzerainty, signed the “Grant and Cession Agreement” with European traders Gustavus Baron von Overbeck and Alfred Dent, representatives of the British North Borneo Company (BNBC). Under the pact, the sultan purportedly ceded “all the rights and powers” over North Borneo (modern-day Sabah) and surrounding islands in perpetuity for an initial payment of 5,000 Mexican dollars and an annual “cession money” of 3,000 dollars. Historians debate the document’s intent: the claimants interpret it as a commercial “lease” (padjak, in Malay), entitling them to ongoing rents, while Malaysia insists it was an outright cession (pajak), transferring sovereignty.
The BNBC governed Sabah as a British protectorate until 1946, when it was ceded to the British Crown following World War II devastation. Upon Malaysia’s formation in 1963—after Sabah’s self-determination vote under UN auspices—the new federation assumed the BNBC’s obligations, resuming modest annual payments to identified Sulu heirs as a goodwill gesture, not an admission of leasehold rights. These payments, equivalent to about 5,300 Malaysian ringgit ($1,200) annually, continued uninterrupted until 2013, when a violent incursion by 200 armed followers of self-proclaimed Sultan Jamalul Kiram III—claiming to reclaim Sabah—left 68 dead in the Lahad Datu standoff. The Malaysian government halted the payments, viewing the attack as a terrorist act that forfeited any moral claim.
Undeterred, eight Filipino nationals—claiming descent from Sultan Jamalul Kiram II—initiated ad hoc arbitration in Spain in 2017, arguing the 1878 agreement constituted a binding lease breached by non-payment. Backed by Therium’s $20 million funding, they sought initial damages of $32 billion, later reduced, citing Sabah’s oil, gas, and timber riches. In March 2019, Madrid’s Superior Court of Justice appointed Gonzalo Stampa as sole arbiter under Spain’s Arbitration Act, despite Malaysia’s non-participation and protests that no arbitration clause existed in the 1878 deed. Stampa, proceeding ex parte, issued a “Partial Award” on May 25, 2020, affirming jurisdiction, and, after relocating to France following revocation of his appointment, delivered the “Final Award” on February 28, 2022: $14.92 billion in damages plus interest.
Malaysia, which boycotted the proceedings as illegitimate, challenged the awards globally. In June 2023, the Paris Court of Appeal refused to recognize Stampa’s Partial Award, citing no binding arbitration pact—a decision upheld by France’s Court of Cassation on November 6, 2024. Enforcement bids collapsed in the Netherlands, Luxembourg, and the United States, while Stampa himself was convicted of contempt in Spain. The December 9 ruling strips the Final Award of all validity, confirming Stampa’s overreach.
“This ends the claimants’ extortionate campaign,” the War Room declared, vowing to pursue cost recovery and counteractions against Therium. Prime Minister Anwar Ibrahim echoed this, crediting the MADANI government’s inter-agency collaboration.
The verdict reverberates beyond courts. Sabah, contributing 25% of Malaysia’s oil and gas, symbolizes economic stakes exceeding $100 billion annually. Philippine President Ferdinand Marcos Jr. has distanced Manila from the heirs, affirming no official claim on Sabah. Legal experts note the case exposes arbitration vulnerabilities to “forum shopping” and third-party funding, prompting calls for reforms in the New York Convention.
As the dust settles, Malaysia eyes closure: asset freezes lift, and the “Sulu fraud” fades. For Sabah’s 3.5 million residents, it is vindication—a colonial ghost exorcised, securing a future unencumbered by 19th-century shadows.
