FOLLOWING news that a French arbitration court has ordered Malaysia to pay the descendants of the sultan of Sulu US$14.9 billion (RM62.2 billion), references have been made to a decision of Sabah High Court, which ruled that Malaysia was the proper venue to resolve disputes arising from the 1878 Deed of Cession and not the Spanish courts.

The following background facts appear in the judgment by High Court judge Justice Mairin Idang Martin in that case: Government of Malaysia v Nurhima Kiram Fornan & Ors [2020] MLJU 425. They highlight the abuse of the legal processes:

(a) The heirs of the sultan of Sulu have commenced arbitration proceedings in Spain (the Spanish Arbitration) pursuant to the deed, signed between the sultan of Sulu and Baron Gustavus de Overbeck and Alfred Dent of the North Borneo Company in 1878, which in present day is binding upon the heirs of the sultan of Sulu, and the Sovereign State of Malaysia.

(b) In 1939, the heirs submitted to the jurisdiction of the High Court of North Borneo (now Sabah and Sarawak) in their dispute of the deed, where judgment was delivered by Chief Justice Macaskie in Civil Suit No. 169/39 in favour of the said heirs.

(c) Despite the absence of any valid or binding agreement between the parties to the deed to refer disputes to arbitration, and despite the submission by the heirs to the courts above, the Superior Court of Justice in Madrid was moved by the heirs to appoint a sole arbitrator in the Spanish Arbitration without regard to established conflict of laws and forum selection rules, and in violation of the sovereign immunity of Malaysia.

(d) Further, the appointment of Dr Gonzalo Stampa as sole arbitrator in the Spanish Arbitration is null and void for procedural defects, and substantive lack of jurisdiction in the proceedings in the Superior Court of Justice in Madrid, and consequent to this and the earlier cited grounds, he has no jurisdiction over Malaysia; and

(e) The commencement and prosecution of the Spanish Arbitration by the heirs is accordingly oppressive and vexatious, and carried on in violation of the legal and sovereign rights of Malaysia.

In such circumstances, it was proper for the High Court, as the natural forum for any disputes arising from the deed, to enjoin the defendants from proceeding with the Spanish Arbitration.

Importantly the High Court held that there was no valid or binding arbitration agreement. Justice Mairin said:

“There is also no provision to show that arbitration is the exclusive forum in which disputes between parties are to be resolved. The deed is silent as to the specific dispute to be referred to arbitration, the seat of arbitration and appointment of arbitrators.

“These are among the requirements needed to indicate parties’ submission to arbitration. Absence of which I found no valid legal basis for the defendants to be referring dispute arising from the deed to the Spanish Arbitration.”

A provision in the deed does make reference for any dispute to be brought for consideration to the British Consul-General for Borneo, a post that no longer exists.

Even if this is a reference for dispute to be referred to arbitration, the provision is inoperative and incapable of being performed for the above reason.

The High Court judge said:

“The absence of such designation today is also acknowledged by the heirs in their notice of arbitration dated July 30, 2019, submitted to the Spanish Arbitration. It was due to such absence that prompted them to request for the appointment of an appropriate person or persons by the British Government to fulfil the consul-general’s role in determining the alleged dispute laid before the Spanish Arbitration.

“Nevertheless, the UK Foreign & Commonwealth Office on behalf of the British Government in a letter dated December 8, 2017, declined this request on various grounds, including the unclear identity of the heirs beyond the description provided by them in their letter to the office, and the unclear position of the deed and the rights or claims of the heirs may have under such a deed after the dissolution of the Colony of North Borneo in 1963.

“The office also suggested that the heirs should take up their claim directly to the government of Malaysia, which to date, they have refused to do so.”

Yet the heirs persisted with the Spanish Arbitration.

In his judgment, Justice Mairin also noted that the Malaysian government was advised by its Spanish counsel that Spain recognised the doctrine of sovereign immunity, unless the sovereign state waived its immunity by submitting to either arbitration or judicial proceedings, which the Malaysian government did not.

Accordingly, the Malaysian government could not be forced to submit to the jurisdiction of the sole arbitrator. The latter had no jurisdiction to deal with the dispute.

The heirs flew more than 10,000km to Madrid to move the Superior Court of Justice there to appoint a sole arbitrator in the Spanish Arbitration.

Then they hopped to France for a so-called arbitration proceeding. They were forum shopping. This was not lost on Justice Mairin who duly noted as follows:

“The heirs have clearly engaged in forum shopping when they unilaterally decided Spain to be the forum for the appointment of the sole arbitrator, seat of arbitration, and supervisory Court in this case. No regard whatsoever has been made to the well-established rules on conflict of laws and forum selection in making such decision.”

The term is said to have been introduced into English law by Lord Pearson in the classical case of Boys v Chaplin [1971] AC 356.

Pearson defined it as “a plaintiff by-passing his natural forum and bringing his action in some alien forum which would give him relief or benefits which would not be available to him in his natural forum”.

Black’s Law Dictionary defines forum shopping as a litigant’s attempt “to have his action tried in a particular court or jurisdiction where he feels he will receive the most favourable judgment or verdict.”

The High Court of Sabah and Sarawak is the natural and proper forum to determine the dispute.

There is no nexus between Spain and the deed, which is the raison d’etre of the dispute, nor is Spain remotely connected to the parties to the dispute.

The Madrid Protocol of 1885 (the Protocol) which resulted in the renunciation by the Spanish Government of all claims of sovereignty over the territories in the then State of North Borneo – now Sabah – affirms the position of the British Government over North Borneo and any Spanish claim to sovereignty over it is void.

As such, the protocol has severed any connection Spain has over the dispute as well as the parties to the dispute.

Due to such lack of nexus, Spain could not be the natural and proper forum to be hearing this matter.

Pearson referred to the “danger” of forum shopping. Another famous English judge, Lord Reid, regarded the practice as undesirable (The Atlantic Star [1974] AC 436).

It is undesirable as it involves, among others, more expense and inconvenience to the parties; it can also lead to two conflicting judgments, as the case is with the heirs to the Sultan of Sulu’s dispute with the Malaysian government.

The most famous of English judges, Lord Denning, likened a litigant who forum shopped to a “moth drawn to a light”. (see Smith Kline & French Lab’ys Ltd. v. Bloch [1983] 1 WLR 730, 733 AC).

The American legal system is also said to tend to treat forum shopping as unethical and inefficient. Litigants who forum shop are accused of abusing the adversary system and squandering judicial resources. (see Forum Shopping Reconsidered (1990) 103 Harvard Law Review 1677.)

At home, Judicial Commissioner Awg Armadajaya, in a recent case, has expressed his view that forum shopping is “an abuse of process and is not permitted. Abuse of process, by definition, is when a litigant uses the legal system by illegal, malicious, or perverted means.” (See Multiglow Corporation Sdn Bhd & Anor v SCG Consultants Sdn Bhd [2020] MLJU 1221.)

The judge explained that the focus of the doctrine is on protecting the integrity of the judicial process. You may add the avoidance of the harassment of the defendant (see Leisure Farm Corporation Sdn Bhd v Kabushiki Kaisha Ngu (formerly known as Dai-Ichi Shokai) & Ors [2017] MLJU 506).

That is why there are a couple of other objections against forum shopping, briefly:

(a) Unfairness to the defendant. The burden on a defendant is greatly increased when trial is held in an alien forum. The inconvenience to the defendant of trial in an alien forum may be so great as to make it difficult for him to put up an adequate defence.

(b) Public interest. The Supreme Court of the United States has said that a court has an interest in not being clogged with foreign actions which would lead to administrative difficulties. Also, the court has an interest in not trying actions which could be tried more appropriately elsewhere, because, for example, the case involves application of foreign law and it is much more likely to misapply the foreign law (see J.J. Fawcett, Forum Shopping – Some Questions Answered (1984) 35 N Ir Legal Q 141).

Litigants should not bypass the natural forum – the most obvious and appropriate forum – and bring their action in an inappropriate forum.

If they do that, their action in the alien or foreign court becomes absurd and ludicrous. – March 7, 2022.

* Hafiz Hassan reads The Malaysian Insight.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.