KUALA LUMPUR: The Sulu case has raised critical concern about the importance of ethical conduct, integrity, professionalism and good practice by arbitrators, which is the cornerstone of the arbitral process, says Datuk Seri Azalina Othman Said (pic).
The Minister in Prime Minister’s Department (Law and Institutional Reform) said in the Sulu case, in which eight individuals claiming to be heirs of the deceased Sultan of Sulu staked a USD15bil claim against Malaysia, had no arbitration clause as there was no agreement between the Malaysian government and the eight claimants.
"The purported final award resulting from the sham arbitration was issued illegally by a Spanish arbitrator, Dr Gonzalo Stampa, to the eight claimants despite the prior annulment of his appointment as an arbitrator by the Spanish court.
"Any person who acts as an arbitrator is expected to undertake serious responsibilities to the public, as well as to the parties involved, which include ethical obligations, failing which, could cause the whole arbitration system to be undermined.
"In the Sulu case, the element of professionalism and ethical conduct is absent as the arbitration process was not mutually agreed upon by the parties involved (in this case, the eight claimants and the Malaysian government) and the purported final award was illegally issued by an arbitrator.
"The arbitrator's appointment had been annulled by the Spanish court and therefore has no jurisdiction to adjudicate the matter.
"The Sulu case exemplifies how an arbitration process can be abused to threaten sovereign countries in the absence of an oversight mechanism and a failing of arbitrators to adhere to strict professional and ethical standards," she said in a statement on Saturday (June 24).
She said no sovereign nation should be held at ransom by conspirators because of the failure of arbitrators to be held to a strict standard of ethics.
"The arbitration process of today is not immune to abuse.
"Before the judgment in Spain was concluded, the arbitrator in the Sulu case moved the seat of arbitration to Paris.
"The claimants then continued to pursue the recognition and enforcement of the purported final award in other countries such as the Netherlands and Luxembourg.
"Hypothetically, the claimants could continue forum shopping indefinitely in as many countries (that are party to the New York Convention 1958) as they chose until they reach an outcome which they found satisfactory," she said.
Azalina said for Malaysia, the expense in dollars, cents, and resources needed to defend its sovereignty and security came from taxpayers’ contributions.
"From Malaysia’s perspective, this is not a commercial battle but rather a sovereign nation defending its security and sovereignty against sham arbitration.
"As Malaysia continues to defend itself, efforts are being made in tandem to better understand the Sulu case and how the arbitral process can be further made airtight to avoid being abused," she said.
Azalina said these efforts included the upcoming Sabah edition of the International Arbitration Colloquium 2023 which would take place on July 4, 2023.
"The colloquium, which was earlier held in Kuala Lumpur on May 9, 2023, has successfully brought together academics, legal practitioners, historians and the international arbitration community.
"It served as a platform to encourage discussion on the Sulu case.
"The colloquium will be brought to the United Kingdom later this year," she said.
She shared that any country, regardless rich or poor, should not fall victim to rogue arbitrators nor be held at ransom via abuse of legal processes, such in the Sulu case, which was from the start, a sophisticated abuse of the arbitral process.
"As a lawmaker and former legal practitioner, I support the strengthening of the global arbitration system and call for the regulation of litigation funding especially for transparency and proper disclosure.
"This is to mitigate any potential risk of abuse and prevent unethical or reckless practices by litigation funders in the name of profit.
"The Malaysian government will continue to do everything we can to end the Sulu arbitration forum shopping, and put an end to the financial impact of this sham award on the Malaysian government and its taxpayers," she said.
Eight Filipinos claiming to be descendants of the Sulu Sultanate were reported to have taken legal action through arbitration at the Spanish Court to obtain compensation over the alleged leasing of Sabah by their ancestors to the British East India Company in 1878.