In <span class="news-text_italic-underline">Heirs of the Sultan of Sulu v Malaysia (RG No 22/04007)</span>, the Paris Court of Appeal annulled a USD 14.92 billion final award rendered against Malaysia, finding that the tribunal lacked jurisdiction due to the invalidity of the underlying arbitration agreement.
The dispute traces back to an 1878 agreement under which the Sultan of Sulu leased the territory of Sabah to the founders of the British North Borneo Company in return for annual payments. Malaysia later succeeded to the lessee’s rights in 1963 but ceased payments in 2013, giving rise to the arbitration.
Before the French courts, the key issue was the effectiveness of a dispute resolution clause incorporated into the agreement in 1903. The clause provided that disputes would be brought before the British Consul-General in Brunei. That office has since ceased to exist.
In earlier proceedings, the French courts refused to recognise a partial award, holding that while the clause amounted to an arbitration agreement, it had become inapplicable and void. The designation of the British Consul-General in Brunei was considered essential to the parties’ consent to arbitrate and the disappearance of that office rendered the agreement ineffective.
In the present decision, the Court of Appeal again examined the validity of the arbitration agreement in the context of an application to set aside the final award. The heirs of the Sultan advanced new factual material, including a complete translation of correspondence between the Sultan and the Consul-General that had featured prominently in the earlier ruling.
Relying on extracts in which the Consul-General referred to the exercise of governmental authority over British subjects, the court concluded that the correspondence confirmed the central role of the office itself in the parties’ agreement. The clause was held to relate to the office of the Consul-General rather than to an individual office holder, establishing a direct and indispensable link to an institution that no longer exists.
In the absence of any subsequent agreement between the parties to replace that mechanism, the Court of Appeal held that the arbitration agreement was ineffective. The final award was therefore set aside for lack of jurisdiction, reaffirming the court’s earlier position in this high-profile dispute.
<span class="news-text_medium">Case:</span> <span class="news-text_italic-underline">Heirs of the Sultan of Sulu v Malaysia (RG No 22/04007)</span>, Paris Court of Appeal, 9 December 2025.
