Spain charges arbitrator who awarded $15 billion to sultan’s heirs in Malaysia dispute

MADRID, Spain – A Madrid court has started criminal proceedings against a Spanish arbitrator who awarded $15 billion to the descendents of a former sultan in the latest escalation of a 19th Century dispute between the heirs and Malaysia over a land deal.

The Spanish state prosecutor and Malaysia accused Gonzalo Stampa of contempt of court, saying he failed to comply with a ruling by a Madrid court to drop the case and instead moved it to a court in Paris, Malaysia’s Law Minister Azalina Othman Said said in a statement on Monday night, December 11. Stampa declined to comment.

The dispute stems from an 1878 deal between European colonists and the late Sultan of Sulu for use of his territory, which spanned parts of the southern Philippines and present-day Malaysia on the island of Borneo. Malaysia paid a token sum annually to the sultan’s heirs to honor the agreement but stopped in 2013, prompting the heirs to seek arbitration.

In February 2022, Stampa awarded $14.9 billion to the heirs, who have since sought to enforce it against Malaysian government-owned assets around the world. Malaysia has obtained a stay on the case in France, but the ruling remains enforceable globally under a UN arbitration treaty.

Azalina said the matter affected Malaysia’s sovereignty, and accused Stampa of evading the oversight of the Spanish courts.

She also raised questions over legal fees paid to Stampa after his ruling.

“The amount he awarded is one of the highest in the world for arbitration. It’s a percentage of our GDP. You’re going to bankrupt a country like ours,” Azalina said.

Stampa’s fees after delivering the award came to about $2.3 million, court documents showed. The heirs’ $20 million litigation costs were funded by Therium, a London-based firm that provides financing for litigation and arbitration cases.The heirs, who suffered a setback in June after a Paris court upheld the Malaysian government’s challenge against a partial award, are also trying to strengthen their case in Madrid.

Last week, they filed a criminal case against the Spanish justice system, claiming a court clerk in Madrid improperly sent an email ordering Stampa to step down from the case.

The email did not include any legal documents, failed to attach the ruling and did not stipulate the possibility of an appeal, said Carlos Aranguez, a lawyer for the plaintiffs.

“There is a crime of prevarication, procedural fraud, false documentation and coercion,” he said. “We are seeking a declaration that there has been interference in the administration of the award.”

The court has not yet decided whether to hear the heirs’ case. Spain´s High Court declined to comment.

($1 = $1.0000)