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Federal Court 'no' to Petronas bid
Published on: Saturday, June 23, 2018

Putra Jaya: The Federal Court on Friday dismissed an application from Petroliam National Berhad (Petronas) for leave to commence a legal challenge against the Sarawak Government move to take over the regulatory control of the State's oil and gas exploration and mining activities.

Chief Judge of Malaya Tan Sri Ahmad Maarop, who was the sole Federal Court judge presiding, dismissed the application after ruling that the Federal Court could not hear the matter as the declaratory relief sought by the national oil company was not within the jurisdiction of the Federal Court but the High Court.

He said Petronas had not specifically sought a court declaration that a certain law was invalid, which was required for the matter to be under the jurisdiction of the Federal Court.

"In my view, the declaratory reliefs sought by the applicant (Petronas) do not come under the ambit of Article 4(3) and Article 4(4) (of the Federal Constitution), hence the declaratory reliefs sought by the applicant are not within the exclusive original jurisdiction of the Federal Court," he said.

Article 4(3) states that the validity of any law made by Parliament or the Legislature of any State shall not be questioned on the ground that it makes provision with respect to any matter with respect to which Parliament or, as the case may be, the Legislature of the State has no power to make laws, except in proceedings for a declaration that the law is invalid on that ground or (a) if the law was made by Parliament, in proceedings between the Federation and one or more States or (b) if the law was made by the Legislature of a State, in proceedings between the Federation and that State.

Article 4(4) states that proceedings for a declaration that a law is invalid on the ground mentioned in Clause (3)…shall not be commenced without the leave of a judge of the Federal Court, and the Federation shall be entitled to be a party to any such proceedings, and so shall any State that would or might be a party to proceedings brought for the same purpose.

Justice Ahmad said the Sarawak Government did not dispute Parliament's right to enact the Petroleum Development Act 1974 (PDA) nor did Petronas seek for the Sarawak Oil Mining Ordinance 1958 (OMO) to be declared invalid. He ordered Petronas to pay RM50,000 costs to the Sarawak Government.

Meanwhile, Petronas withdrew its application for a stay order before a Federal Court three-man bench comprising Justices Ahmad, Tan Sri Azahar Mohamed and Tan Sri Zaharah Ibrahim.

The application for stay was in respect to the Sarawak Government's commencement to regulate upstream activities in the State under the OMO on July 1 this year, and requiring Petronas to obtain licences or leases by that date failing which the exploration and exploitation of oil and gas and mining carried out by the company in the state would be deemed illegal and appropriate action would be taken. The court subsequently struck out the stay application after Petronas counsel Datuk Malik Imtiaz Sarwar informed the court of the withdrawal.

Petronas filed the application for leave to commence proceedings against the Sarawak government on June 4 this year and sought a court declaration that only Parliament had the exclusive legislative competence to make laws on upstream petroleum activities or the exploration, exploitation, winning and obtaining of onshore and offshore petroleum throughout Malaysia.

The company also wanted a declaration that the PDA was duly enacted by Parliament which empowered Petronas to be the exclusive regulatory authority for the upstream industry throughout Malaysia, including in Sarawak.

Petronas also sought to declare that the OMO was impliedly repealed by the PDA.

Petronas took the position that the PDA had vested the ownership of petroleum exclusively to the company which would then regulate the oil and gas upstream activities throughout the country, including Sarawak.

The dispute arose when the Attorney-General of Sarawak had, on behalf of the Sarawak Government, informed Petronas by way of a letter dated April 4 this year that as of July this year the State Government would commence regulating the State's upstream oil and gas activities under OMO.

Petronas was informed to comply with the OMO to obtain licences or leases by July 1, this year to carry out exploration and exploitation of oil and gas and mining in Sarawak otherwise its upstream activities would be illegal.

The Sarawak Government took the position that the OMO was still a valid law and the State Government was entitled to exercise its powers under the OMO.

It established a state-owned company called Petroleum Sarawak Berhad (Petros) to fully take over the regulation of oil and gas activities in the State.

Outside the court, Malik Imtiaz said the door was not closed yet for Petronas as the Federal Court only decided on the issue of jurisdiction and did not make any decision on the validity of the PDA.

"We will take instructions on whether to file the matter in the High Court.

According to the judge, if we want to seek those particular declaratory reliefs, we can file in the High Court," he said.

He also explained that the stay application was withdrawn because there was no longer any proceedings before the court since Petronas did not get the leave, adding that he would take instructions from his client whether to file a fresh stay application at the High Court.

Sarawak state legal counsel Datuk Seri J. C. Fong, who represented the Sarawak Government, told reporters the State Government would continue to work with Petronas and hoped the company would continue to work with them at the state level to harmonise the two laws.

"We just only want Petronas to comply with the state laws while we will comply with federal laws," he said, adding that the State Government would not enforce its laws in a manner that would hurt anybody or the oil and gas industry in Sarawak, and Petronas had to trust the State Government.


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