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Bid to nullify the oil royalty deal

Published on: Wednesday, September 26, 2012

Kota Kinabalu: Six Sabahan businessmen filed a suit at the High Court here, Tuesday, seeking to declare the Petroleum Agreement between the Sabah State Government and Petroliam Nasional Berhad (Petronas) signed on June 14, 1976 ultra vires as well as null and void.

Lahirul Latigu (first plaintiff), Mohd Julpikar Ab Mijan (second plaintiff), Zainal Ajamain (third plaintiff), Joseph Wilfred (fourth plaintiff), Duli @ Dullie Mari @ Marie (fifth plaintiff) and Michael Peter Govind @ Mike Govind (sixth plaintiff) named Petroliam Nasional Berhad as the first defendant and the Sabah State Government as the second defendant.

The businessmen were also seeking a declaration that the Petroleum Development Act, in so far as it applies to the agreement dated June 14, 1976 between the first defendant and the second defendant is ultra vires null and void.

They are claiming for damages to be assessed, cost plus statutory interest and other relief deemed fit by the High Court.

In their statement of claim, the plaintiffs said the agreement was null and void and ultra vires to Article 74 of the Federal Constitution and the Ninth Schedule of the Federal Constitution.

"Furthermore the said agreement on 14th day of June 1976 is unenforceable by reason of the Petroleum Act 1974 being in contravention of Article 13 of the Federal Constitution of Malaysia which states that no law shall provide for compulsory acquisition or the use of property without compensation," they said.

Thirdly, they said the agreement on June 14 June 1976 was executed by the executive arm of the State Government of Sabah without approval and consent of the State Legislative Assembly and is therefore ultra vires null and void.

"Fourthly, the said agreement dated the 14th day of June 1976 is merely a vesting deed and to date there is no agreement or contract between Petronas and the Sabah State Government in regard to the sharing and exploitation of the onshore and offshore resources of petroleum belonging to the state of Sabah. In consequence thereof, the said agreement is ultra vires null and void.

Fifthly, the plaintiffs said the vesting of petroleum resources of Sabah under the said agreement dated 14th day of June 1976 by the Sabah State Government into the hands Petronas by which is neither the executive or legislative part of the Federal Government of Malaysia but merely a company incorporated under the Company's Act 1965 is ultra vires null and void.

The plaintiffs also said Pakatan Rakyat's pledge on oil justice that it would raise to 20 per cent the oil royalty for Sabah and Sarawak once it formed the Federal Government as stated in its recent Kuching Declaration if brought into effect would be unlawful ultra vires null and void against Article 74 of the Federal Constitution and the Ninth Schedule of the Federal Constitution.

Under the Ninth Schedule of the Federal Constitution, the Federal have powers except over permits and licenses under State rights, the Federal Government has rights over development of mineral resources, mines, mining, minerals and mineral ores, oils and oil-fields, petroleum products, safety in mines and oilfields.

The Ninth Schedule also stated the following matters to fall in State hands: "Land: Schedule 9 List II, Para 2(a). Under the interpretation Acts, 1948 and 1967, Section 3, land includes "the surface of the earthÉall substances thereinÉall vegetation and other natural productsÉwhether on or below the surfaceÉand land covered by water".

"The territorial waters of Kelantan will come within the definition of "land covered by water". Territorial waters are defined by section 4(2) of the Emergency (Essential Powers) Ordinance No 7, 1969."

"In addition to the income from land, one notes that in Article 110(3a) there is provision for discretionary payment on such terms and conditions as maybe prescribed by or under federal law of the export duty on "mineral oils" produced in the state. Petroleum comes within the meaning of "mineral oils" under Section 10 of the Petroleum Development Act."

In addition to the right of the states, Sabah and Sarawak enjoy some special sources of revenue, which is stated under Schedule 10, Part IV, Paragraph One that assigned import duty and excise duty on petroleum products to Sabah and Sarawak as well as Schedule 10, Part V, Paragraph Three that assigned royalty and export duty on "mineral oils" totalling 10 per cent to Sabah and Sarawak.

"Petroleum", as defined in the Petroleum Development Act, falls within the meaning of "mineral oils" and, therefore, 10 per cent combined royalty and export duty on it constitutes part of the guaranteed revenue for Sabah and Sarawak, the plaintiffs said.

"Furthermore the said Declaration in so far as petrol justice is concerned is unenforceable by reason of being in contravention of Article 13 (2) of the Federal Constitution of Malaysia which states that no law shall provide for compulsory acquisition or the use of property without compensation.

"The said Declaration fails to recognise that the State of Sabah is entitled to one hundred per cent of the proceeds and income from the extraction of petroleum offshore and onshore of Sabah waters," they said.

The plaintiffs also referred to news reports by local politicians and national leaders that Sabah has the potential of becoming the biggest oil and gas producer not only in Malaysia but in the South East Asia region with potential of producing one million barrels a day.

"The estimated reserves from the present Sabah oilfields is 1.4 billion barrels of oil and 7.7 trillion scf of gas."

Sabah politicians, they said had also been calling for a relook of the 1976 Petroleum Agreement.

The plaintiffs also referred to a media report in November 2011, which reported Petronas discovering substantial oil reserves offshore of Sabah, which is at Wakid-1 well, about 100km northwest of the State Capital.

Meanwhile, Zainal, who was the spokeperson of the plaintiffs, when met by reporters after filing the suit through counsel Marcel Jude, said: "It is illegal for the Federal government to take our oil, all 100 per cent of it belongs to the people of Sabah, the Malaysia Agreement 1963 is very clear on this."

He said they are contending that the 1976 agreement is in conflict with the Federal Constitution which for the last 36 years successive State government failed to address.