LAW and Institutional Reform Minister Azalina Othman Said called the Paris Court of Appeal’s decision to uphold Malaysia’s challenge against the partial award rendered on May 25, 2020, by Gonzalo Stampa in the case filed by Sulu heirs.

Let’s appreciate how decisive the victory is.

The Sulu heirs had contested Malaysia’s case before the Paris Court of Appeal on grounds that pursuant to article 1466 of the French Code of Civil Procedure (CCP), the party who refuses to participate in an arbitration procedure is not allowed to raise an irregularity for the first time before the exequatur judge – that is, the judge hearing an application to enforce the award – when it should have been raised during arbitration.

The heirs argued Malaysia had chosen not to participate in arbitration.

The court ruled under Article 1466 of the CCP, the party that knowingly and without legitimate reason refrains from invoking in due time an irregularity before the arbitration tribunal is deemed to have waived its right to rely on it.

However, in the present case, while it was common knowledge Malaysia did not appear before the arbitration tribunal, the Malaysian attorney-general (AG) had, in a letter dated October 14, 2019, addressed to the arbitrator, said:

“On behalf of the Government of Malaysia, I would like it to put on record the fact that Malaysia challenges the entire arbitration process, including the appointment of the tribunal and the choice of forum for the resolution of the alleged dispute.”

In doing so, the AG made it clear that Malaysia challenged the very jurisdiction of the arbitrator. Stampa, in fact, acknowledged there was “objection to (his) competence” in his award.

The court ruled Malaysia could not be said to have refrained from expressing its grievance in good time. Malaysia’s challenge against the lack of jurisdiction of the arbitration tribunal could therefore be heard by the court.

It could also rule on Malaysia’s application to annul the award since article 1525 of the CCP allows the court to hear an appeal against the decision on recognition or exequatur of an arbitral award rendered abroad when the grounds for annulment are, among others, the competence of the arbitration tribunal. 

The court further ruled it was up to itself to review the arbitration tribunal’s decision on its jurisdiction, whether it declared itself competent, by seeking all elements of law or fact allowing it to assess the scope of the agreement, exclusive of any substantive review of the award.

The court said under a substantive law of international arbitration, the arbitration clause is legally independent of the main contract that contains it, directly or by reference. Its existence and effectiveness are assessed, subject to the mandatory rules of French law and international public order, according to the common will of the parties, which alone invests the arbitrator with Stampa’s jurisdictional power, without him necessarily having to refer to a state law.

In the Sulu heirs’ case, the arbitration tribunal was constituted on the basis of a clause inserted in the agreement concluded in 1878.

The parties disagreed on the meaning and scope of this stipulation, written in Jawi, from which they produced different translations.

The Sulu heirs relied on a French translation, stated as follows:

“If a dispute subsequently arises, any dispute between us, our heirs and our successors, with Lord Gustabus Baron of Uberbek or his company, we, of the two parties, would submit this matter to the examination and to the decision of the consul-general of Her Majesty the Queen in the country of Brunei.”

Malaysia, for its part, produced an English translation, which was retained by Stampa as reference in the award. The translation is as follows:

“Should there be any dispute, or reviving of all grievances of any kind, between us, and our heirs and successors, with Mr Gustavus Baron de Overbeck or his Company, then the matter will be brought to the consideration or judgment of Their Majesties’ consul-general in Brunei.”

An English translation made in 1878 by Acting Consul-General W.H. Treacher, who took part in the negotiations and signed the agreement as a witness, reads as follows:

“If, in future, any dispute shall arise between us, our heirs and successors, and Gustavus Baron de Overbeck, or his company, we both will refer it for the decision and concept of the queen’s consul-general in Brunei.”

The court found it necessary to seek the common will of the parties in the light of:

– The principle of interpretation of agreements in good faith, so as not to allow one of them to withdraw from commitments freely consented to but clumsily expressed

– The principle of useful effect, according to which when the parties insert an arbitration clause in their agreement, it must be presumed their intention was to establish a mechanism for the settlement of disputes covered by the arbitration clause.

From the various versions cited above, it could be seen they all concur on the point that the parties wished to appoint a third party to the agreement to hear any dispute arising from the agreement between them or their successors.

The consul-general of the British crown in Brunei was clearly designated to hear disputes, if any. He was a third party to the agreement. It could not be denied that the consul-general was the designated independent third party, Great Britain not being party to the agreement on its date of conclusion.

The court ruled that the clause states: “The will of the parties to invest in the consul-general of the British crown the jurisdictional power to settle any dispute arising between them or their successors, excluding recourse to national courts, to which the function of the consul-general cannot be assimilated.”

However, given the office had been dissolved, it rendered the disputed clause inapplicable. This was reinforced by how in 1946, Sabah – then known as North Borneo – became a British colony, so a British consul could not, from that date, be regarded as an independent third party.

Under these conditions, a new agreement between the parties was necessary. No agreement having been reached, despite renegotiation attempts after 1946, the clause became impossible to implement.

The arbitrator, Stampa, could not therefore validly declare himself competent to hear requests made by the Sulu heirs.

The above decision of the Paris Court of Appeal is not only decisive, but massive.

Kudos to Team Malaysia for the victory! – June 14, 2023.

* 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.