In $15B arbitration battle with Sulu Sultan’s descendants, Petronas Luxembourg units seized again

This week, Luxembourg court bailiffs issued fresh seizure orders for two units of Malaysian state oil firm Petronas PETR.UL, following a bid by descendants of a former sultanate to enforce a $15 billion award they had won against Malaysia, according to the heirs’ lawyer and court documents viewed by Reuters.

In a long-running battle with the Malaysian government over a colonial-era property purchase, the Filipino heirs of the last Sultan of Sulu are attempting to execute a $14.9 billion verdict issued by a French arbitration court last year.

Malaysia, which did not participate in the arbitration, argues that the procedure is unlawful and has promised to employ all legal means to prevent its assets, including those of state-affiliated firms, from being confiscated abroad. It got a stay of the judgement in France, but under a United Nations treaty on arbitration, the ruling remained enforceable elsewhere.

Thursday, Petronas acknowledged the latest seizure order for the two subsidiaries and its parent business, but reaffirmed that the heirs’ efforts were without merit and that the company will continue to defend its legal position.

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The Petronas Azerbaijan (Shah Deniz) and Petronas South Caucasus operations were first seized in July 2022, but the Malaysian government announced this month that the Luxembourg district court had overturned the judgment.

Tuesday, Luxembourg court bailiffs issued a second seizure order for the apartments and associated bank accounts, according to court records given by Paul Cohen, the heirs’ attorney.

Cohen, of the London law firm 4-5 Gray’s Inn Square, told Reuters that the Luxembourg district court had dropped the initial seizure order on a minor problem that has now been resolved, but had not yet rendered a decision on the merits of the arbitration.

“A technical ruling has been properly addressed, and the freezing orders on Petronas assets in Luxembourg have been reinstated,” he said in an email.

The Luxembourg court could not be reached for comment immediately. The law ministry of Malaysia did not reply to calls for comment.

The issue derives from an 1878 agreement between two European colonists and the Sultan of Sulu for use of his land in present-day Malaysia — an arrangement that Malaysia respected until 2013, giving the monarch’s successors a yearly token fee.

After a deadly incursion by supporters of the previous sultanate who wanted to recover land from Malaysia, Kuala Lumpur halted the payments. The heirs claim that they were not involved in the intrusion and have requested arbitration about the suspension of payments.

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