The Sulu Arbitration Scam: The Biggest Attempted Fraud Case Against Malaysia Ever Perpetrated – Analysis


Can you imagine what would be the consequences if a rogue freelance lawyer misused the good offices of the Malaysian courts and awarded USD 15 billion against Spain or France in an arbitration hearing, without either country participating?

This is what happened to Malaysia in what could be called the most elaborate international legal scam ever perpetrated. 

Malaysia has fallen victim to a scheme by developed by a rogue lawyer Gonzalo Stampa, in a scheme to extort Malaysia. Stampa used the offices of both the Spanish and French courts of law to enact his arbitration charade, clearly without legal authority and sanction, and clearly without jurisdiction. 

The scam was facilitated by taking advantage of the commercial arbitration services provided by European courts, if all parties to any claim are freely willing to accept arbitration as a means to coming to a grievance solution. It is clearly apparent the arbitrator Stampa was very familiar with the system and procedures, using it to his advantage. 

Stampa himself is a commercial lawyer and through his own admission has a limited experience as an arbitration judge. Stampa’s own CV indicates that he has little or no experience in historical treaties and sovereignty issues. Stampa is not a state appointed judge in any jurisdiction, although sometimes appointed as a commercial arbitrator.

The arbitration sessions were only housed within the Spanish and French court houses, and not formal court sessions held under the judgement of nationally appointed judges. 

Acting for the claimants was a contemporary of Stampa, the US lawyer Paul Cohen who according to his Linkedin page is also an international arbitrator. Cohen took on the case of a number of purported descendants of the Sultan Jamalul Kiram II of the long defunct Sultanate of Sulu, with the claim being funded by an opportunistic speculative litigation funder Therium Company.

Although the original agreement between the then Sulu Sultan Jamalul Alam with Gustavas Baron de Overbeck and Alfred Dent in January 1878, granting and ceding the Eastern section of North Borneo should be confined to the annuls of history, Cohen and Stampa constructed a case.

Who the actual descendants of the Sultan of Sulu really are, is a hotly contested issue today and far from being legally determined. Stampa and Cohen totally ignored this. 

According to international law, any foreign affairs and dealings relating to the Sultanate of Sulu should be firmly in the hands of the government of the Republic of the Philippines and not the descendants. If there was a claim to be made, it could only be made by the government of the Republic of the Philippines. 

Back in 2017, eight Sulu claimants sort a renegotiation of the 1878 agreement, claiming it was unbalanced given Sabah’s resource wealth today. The claimants didn’t issue proceedings in the High Court of Sabah, which had hosted claims on the matter previously. They were advised from some unknown source to make a claim in the High Court of Madrid, which appointed a sole commercial arbitrator Gonzalo Stampa on the matter. 

Any court appointed arbitration matter requires all parties to submit to any proceedings. The Government of Malaysia from the onset opposed any such arbitration. The natural successor to “Her Britannic Majesty’s Consul-General for Borneo,” was the British Government, which in 2017 told the claimants to take the matter up directly with the Malaysian Government. 

In December 2019, the Malaysian Government filed a lawsuit against the claimants and the Spanish Arbitrator Stampa. The High Court of Sabah and Sarawak granted nine court orders sought by Malaysia, which include a declaration that the 1878 agreement carries no clause for arbitration. Another order declared that Malaysia does not waive its sovereign immunity to confer jurisdiction to the Madrid Court appointed arbitration. The High Court declared with precedent going back to past cases involving the agreement heard in the High Court of North Borneo, that the High Court of Sabah and Sarawak is the “natural and proper forum.” The High Court also asked the High Court in Madrid to enforce the January 2020 decision.

In November 2020 the High Court of Madrid gave a judicial order affirming the High Court of Sabah and Sarawak’s orders, and required the arbitration to stop. Stampa ignored the orders and continued with the arbitration. Malaysia continued to try and stop the rogue arbitration, gaining a further order from the High Court of Madrid on 29th June 2021, annulling the appointment of Stampa as an arbitrator, ordering the case to stop. 

Stampa and the claimant’s lawyer managed to move the arbitration to the High Court of Paris. Malaysia’s French lawyers immediately gained an order from the Court of Appeals in Paris to suspend the arbitration. Stampa refused to stop the arbitration and continued on defiantly. Legally, by this stage the arbitration was completely illegitimate. 

On 28th February 2022, Stampa issued a 148 page decision which defined the treaty as an international private lease agreement of a commercial nature between a local ruler as the landlord, and international private investors as the tenants. Stampa consequently construed the tenancy passing onto the North Borneo Company, Britain, and finally Malaysia.

Stampa concluded that the original 1878 agreement terminated in 2013 when Malaysia ceased making the annual RM5,300 payment to the Sultan of Sulu’s purported descendants. As it would be impossible for Malaysia to return the territory back to the claimants, a payment to the value of the territory should be paid by Malaysia as remedy.

Stampa through his decision had redefined history in a skewed way that wouldn’t stand up in any proper international court. The decision was in effect, an attempted extortion upon a sovereign nation. 

Fortunately, Malaysia’s French lawyers were able to suspend the US $14.92 billion award made by Stampa in the Court of Appeals in Paris on 12th July 2022. 

In monetary terms, this is the largest attempted case of fraud ever attempted upon Malaysia. The fact that European Courts of Justice could be manipulated and ignored in such as case without authorities there doing anything to stop this attempt to defraud Malaysia is legal imperialism. Malaysia’s sovereign immunity was totally disregarded. Spanish and French authorities were both passive while rogue lawyers were using their legal systems for something they clearly didn’t have any jurisdiction over. This has deeply tarnished Malaysia’s reputation, and undermined Malaysia’s sovereignty, requiring a formal apology to Malaysia from both Spain and France. 

Both Spain and France did not make any criminal investigations into Stampa and Cohen, who have both acted in contempt of two courts. They should have been arrested and charged with contempt of court and investigated for attempted fraud. Only Malaysia has filed criminal proceedings against the two lawyers, were both Spain and France appear to be indirectly protecting them through their passivity to the incident. 

Malaysia should be acting diplomatically by calling in both ambassadors and asking questions. If this happened the other way around, Malaysia would have been treated very harshly. European countries have no business interfering in the internal affairs of other countries. 

Murray Hunter’s blog can be accessed here

Murray Hunter

Murray Hunter has been involved in Asia-Pacific business for the last 30 years as an entrepreneur, consultant, academic, and researcher. As an entrepreneur he was involved in numerous start-ups, developing a lot of patented technology, where one of his enterprises was listed in 1992 as the 5th fastest going company on the BRW/Price Waterhouse Fast100 list in Australia. Murray is now an associate professor at the University Malaysia Perlis, spending a lot of time consulting to Asian governments on community development and village biotechnology, both at the strategic level and “on the ground”. He is also a visiting professor at a number of universities and regular speaker at conferences and workshops in the region. Murray is the author of a number of books, numerous research and conceptual papers in referred journals, and commentator on the issues of entrepreneurship, development, and politics in a number of magazines and online news sites around the world. Murray takes a trans-disciplinary view of issues and events, trying to relate this to the enrichment and empowerment of people in the region.

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