Rafael Boza and Gary Shaw Explore Unusual 19th Century Arbitration Case Worth $14.9 Billion

The arbitration agreement was signed nearly 146 years ago when Malaysia was split among, and ruled by, local sultans. The 19^th century agreement at issue in the arbitration was between the last Sultan of Sulu, Sultan Mohammed Jamal-ul Alam and Alfred Dent—a British colonial merchant.

According to a recent Law360 article, the claimants say they are the descendants of the sultan and that Malaysia owes them rent on the property since 2013, when it stopped paying.

“Everything in this case is unusual and probably one of a kind,” International Arbitration special counsel Rafeal Boza told Law360. Notably, the arbitrator decided to move the arbitration seat from Madrid to Paris during the proceeding, and without agreement from both parties, which arbitration professionals deemed extremely unusual.

Boza noted that the arbitrator’s decision to change the seat is “one of the critical moments in this arbitration.”

“The place of arbitration determines your applicable law, and changing the place of arbitration obviously changes the applicable law in the middle of the proceeding,” he said. “You cannot do that.”

As a result, Stampa is now slated to face criminal charges in Spain for moving the arbitration seat in defiance of Madrid’s court order. The Malaysian government has maintained its position in refusing to participate in the arbitration.

“That probably was not the best move on Malaysia's part, because a lot of this could have been avoided had Malaysia raised the very valid arguments that it had in the arbitration proceeding,” concluded International Arbitration associate Gary Shaw.

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