AAS: High Court ruling on Petronas-Petros dispute based on banking law, Federal Court to decide constitutional issues

KUCHING (Feb 28): The recent High Court ruling on the bank guarantee between Petroliam Nasional Berhad (Petronas) and Petroleum Sarawak Berhad (Petros) was decided on straightforward banking law, said Advocates Association of Sarawak (AAS) president Gurvir Singh Sandhu.

He said the judge had made clear that the deeper constitutional questions – about which laws actually apply in Sarawak – were outside the scope of that case and must be decided by the Federal Court.

“The Sarawak government has therefore filed its petition under Articles 4(3) and 128(1) of the Federal Constitution, which give the Federal Court exclusive original jurisdiction to determine whether federal laws are constitutionally valid and applicable to a particular state.

“Sarawak has also made clear it will oppose Petronas’s own Federal Court application on jurisdictional grounds, as it does not fall within the scope of Article 128(1)(a).

“Both matters will now be argued before the nation’s highest court,” he said in a statement.

Gurvir said the state government’s decision to file this petition was not an act of defiance but an act of confidence in Malaysia’s constitutional system.

He pointed out that at the heart of the dispute is the question of who has the legal right to regulate Sarawak’s oil and gas resources — the Sarawak government or the federal government through Petronas.

“Sarawak had its own oil and gas laws long before Malaysia was formed. The Sarawak Oil Mining Ordinance 1958 was enacted five years before Malaysia Day.

“When Sarawak joined Malaysia in 1963, the constitutional arrangements agreed at the time — recorded in the Inter-Governmental Committee Report 1962 and given effect through the Malaysia Agreement 1963 (MA63) and the Malaysia Act 1963 — preserved Sarawak’s existing laws,” he said, adding that Articles 162 and 161 of the Federal Constitution expressly provide for this.

He also said that Sarawak has never agreed that those laws were extinguished.

He noted that the federal government later enacted the Petroleum Development Act (PDA) 1974, which through Section 2 handed Petronas ownership and control over petroleum resources across Malaysia.

“Sarawak’s position is that this law, along with the Continental Shelf Act 1966 and the Petroleum Mining Act 1966, does not validly apply to Sarawak in the way Petronas claims,” said Gurvir.

Gurvir said the petition raises three constitutional grounds with the first being that sovereign rights over Sarawak’s petroleum resources were vested in Sarawak — not the Federation — on Malaysia Day by virtue of MA63 and the constitutional instruments annexed to it.

“Second, that the Continental Shelf Act 1966 and the Petroleum Mining Act 1966 were extended to Sarawak only under the 1969 Emergency Proclamation and, following the annulment of that Emergency in December 2011, lapsed in their application to Sarawak by June 2012.

“Third, that the Sarawak Oil Mining Ordinance 1958 was preserved upon the formation of Malaysia and has never been lawfully repealed

“These are questions that go to the heart of Sarawak’s constitutional position within Malaysia. They deserve a clear and authoritative answer from the Federal Court,” he said.

He said the strength of Malaysia’s federation lies not in silencing constitutional questions, but in having the confidence to answer them.

“AAS calls on all parties in government, in the oil and gas industry and in public life to respect the judicial process now underway and to allow it to proceed without interference or escalation.

“We call on the federal government to engage constructively throughout this process. Whatever the outcome, a clear and final ruling from the Federal Court would provide the legal certainty that investors, the industry and the people of Sarawak deserve,” he said.

Gurvir also reminded all parties that honouring MA63 is not a threat to national unity, but it is the foundation of it.

“Sarawak joined Malaysia as an equal partner with rights that were agreed and recorded.

“Seeking to uphold those rights through the courts is an expression of faith in Malaysia, not a challenge to it,” he stressed.