Success for Paul Cohen and Elisabeth Mason in one of the most consequential international arbitrations of all time
Paul Cohen and Elisabeth Mason have prevailed in a massive dispute against the state of Malaysia. Cohen and Mason appeared in the arbitration alongside Bernardo Cremades, Jr. of Spanish firm B Cremades & Asociados.
On 28 February, an arbitrator ordered Malaysia to pay US$15 billion to their clients, the heirs to a sultanate, over the exploitation rights to territory on the island of Borneo. The award is the second-largest ever rendered.
"This is an historic victory for the heirs; they have waited literally generations for the justice that has finally been done," said Cohen. "We are honoured and privileged to have represented them."
The award, issued by sole arbitrator Gonzalo Stampa of Stampa Abogados in Madrid, caps a years-long legal process stretching as far back as 2013, when Malaysia stopped paying the heirs the annual amount due under its agreement with them. After several unanswered attempts at renegotiation, the heirs activated the agreement's arbitration clause.
The agreement, signed in 1878 between the Sultan of Sulu and a British concern, gave the latter exclusive and perpetual exploitation rights to the sultan's territory in North Borneo. In return, the British concern would fully compensate the sultan for the loss of his ability to make use of the land.
The heirs are the successors-in-interest to the Sultan of Sulu; Malaysia is the successor-in-interest to the British concern. Over time -- particularly after Malaysia discovered and drilled vast quantities of hydrocarbons from the 1980s onward -- the amount agreed to compensate the Sultan bore no comparison to the real exploitation value of the territory. In fact, even in years with low oil prices, Malaysia earned some three million times more per year than it paid the heirs.
Malaysia's own Attorney-General acknowledged that Malaysia had breached the contract by failing to pay altogether after 2013 [https://www.thevibes.com/articles/news/15992/refusal-to-pay-rm5300-yearly-to-sulu-descendants-couldve-cost-msia-millions-thomas], and offered to pay 10% interest on past due payments. He was unwilling, however, to renegotiate the radically imbalanced terms of payment. After the heirs rejected his offer to resume payment in the same quantity as before (the payment amount had not been raised since 1903), the Attorney-General declined to participate further in the arbitral proceedings.
The New York convention, which has 160 nations as signatories, deals with recognition and enforcement of foreign arbitral awards. Former attorney-general Tan Sri Tommy Thomas revealed that the case involved the descendants claiming annual compensation from the Malaysian government which had ceased payments following Sulu militants’ armed incursion in Lahad Datu, Sabah, in 2013.
News of the award can be found on Global Arbitration Review here https://globalarbitrationreview.com/malaysia-ordered-pay-us15-billion (subscription required)