KL Vows To Defend 'Sovereignty' After Losing $2-B To Sulu Heirs

Malaysia will do all it takes to defend its offshore assets, Malaysian Prime Minister Ismail Sabri Yaakob declared on Tuesday, July 19, 2022, in response to a shocking asset seizure by relatives of the last sultan of an island chain within the territorial domain of the Philippines, P Prem Kumar reported for Nikkei Asia.

Photo Insert: Malaysian Prime Minister Ismail Sabri Yaakob

The assets had been held by two Luxembourg-registered units of Malaysian state energy giant Petronas. "I assure you that we will not compromise even an inch in protecting the country's security and sovereignty," Ismail Sabri said.

"We will take all steps to protect all foreign assets, not only those held by Petronas," he added, insisting there was no reason to panic over the seizures. Malaysia only inherited the lease of Sabah by a British trading firm and it is clear in the agreement that the company does not have any sovereignty over the land.

The origins of the legal issue that led to the seizure date back over 150 years. Eight Filipinos who claim to be the descendants of the last Sultan of the small archipelago of Sulu have a long-standing claim to the oil-rich state of Sabah in Malaysia's Borneo.

Since 2017, they have been actively demanding compensation for land in Sabah that their Sulu ancestors allegedly leased to a British trade business in 1878, prior to the discovery of the state's significant natural riches.

After attaining independence from the United Kingdom in 1957, Malaysia assumed responsibility for the arrangement, paying a nominal annual fee to the heirs. This, however, ceased in 2013 following an armed incursion into Sabah by forces claiming sultanate heritage, ostensibly to restore land rights.

In March, a French arbitrator determined that the present Malaysian government should inherit the liabilities of the leasing deal and, as a result, pay $14.9 billion to the descendants. Malaysia did not represent itself in the arbitration proceedings prior to the verdict.

The verdict paved the path for the July 11 seizure of approximately $2 billion worth of Petronas assets.

This action sent shock waves through other Malaysian corporations with overseas holdings that could be targeted in a similar manner. In accordance with the New York Convention, 170 nations accept such seizures, save Malaysia.

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