CLOSING REMARKS BY YB FOREIGN MINISTER INTERNATIONAL ARBITRATION COLLOQUIUM 2023: STATE SOVEREIGNTY AND IMMUNITY IN COMMERCIAL ARBITRATION

CLOSING REMARKS BY YB FOREIGN MINISTER

INTERNATIONAL ARBITRATION COLLOQUIUM 2023: STATE SOVEREIGNTY

AND IMMUNITY IN COMMERCIAL ARBITRATION

25 SEPTEMBER 2023, LONDON, UNITED KINGDOM

Yang Berhormat Dato' Sri Azalina Othman Said

Minister in the Prime Minister's Department (Law and Institutional Reforms),

Yang Berbahagia Dato' Sri Amran Mohamed Zin

Secretary-General of the Ministry of Foreign Affairs of Malaysia,

Tuan Yang Terutama Dato' Zakri Jaafar

High Commissioner of Malaysia to the United Kingdom of Great Britain and Northern Ireland,

Yang Berbahagia Datuk Almalena Sharmila Dato' Dr. Johan

Solicitor General II of the Attorney General's Chambers of Malaysia,

Yang Berbahagia Datuk Sundra Rajoo

Director of the Asian International Arbitration Centre (AIAC),

Professor Emilia Onyema

Director of the SOAS Arbitration and Dispute Resolution Centre (SADRC),

Esteemed panel of speakers and moderators,

Excellencies, Ladies and Gentlemen,

First and foremost, I wish to express my sincerest appreciation for this honour and privilege to deliver the closing remarks at this International Arbitration Colloquium 2023: State Sovereignty and Immunity in Commercial Arbitration. My appreciation also goes to Yang Berhormat Dato' Sri Azalina Othman Said, Minister of Law and Institutional Reforms, our strategic partners, distinguished moderators and speakers for your spectacular contribution to this colloquium. I am pleased that this colloquium has attracted a great number of participants and interest, going beyond just the legal fraternity.

1. As the past colloquiums in Malaysia, today's colloquium also witnessed the eloquent discourse on the historical, legal and diplomatic perspective of the Sulu Claims from a wide range of learned speakers. The complexities and nuances on the issue of sovereignty, territorial integrity and rule of law were deliberated in-depth. I believe these intellectual exchanges have provided a valuable opportunity for us to reflect on the way forward in addressing the complex issue at hand.

1. The first session had a very intrinsic discussion on fundamentals in international arbitration, particularly on the roles of international arbitrators in carrying out their functions in upholding the cause of justice. No doubt, the impartiality and independence of international arbitrators are crucial in the effective delivery of justice and upholding the rule of law. These elements are especially important in cases where a sovereign State is embroiled in a dispute as the sovereignty of a State is being put to test.

1. Closely related to the conduct of arbitrators is the thought-provoking issue of third-party funding in international arbitration. The second session went on to discuss third-party funding and the impact of the recent UK Supreme Court decision which could possibly change the landscape of third-party funding regulation. Our esteemed speakers have acknowledged that third-party funding in international arbitration is an emerging area of concern with many issues such as duty of disclosure, confidentiality, conflict of interest and others still remain volatile.

1. Finally, the last session addressed the impact of investment claims on the relationship between Investors and the State. Although the topic of Investor-state investment arbitration is slightly different from our sessions' earlier theme, but in the last session, we were enlightened on how investment claims can be better managed including the possibility of establishing an investment advisory centre for States.

1. I am confident that the London Colloquium has been beneficial to everyone in the local and international arbitration community and that the participants have gained knowledge and better insight on the issues after this colloquium.

Excellencies, Ladies and Gentlemen,

1. As I stand before you, I am certain that the indispensable importance of sovereignty to a nation and its people needs no further introduction, especially in this region. It is no secret that the Sulu Claims, and by extension, the abuse of international arbitration processes, have undermined Malaysia's sovereignty, territorial integrity and interests. Not only that, fundamental rights and long-standing norms on the rule of law and international relations have been jeopardised. A case in point is the Claimants' failed attempt to seize Malaysia's diplomatic assets in France earlier this year - a clear violation of the Vienna Convention on Diplomatic Relations.

Excellencies, Ladies and Gentlemen,

1. The principle of territorial integrity and political independence is an integral part of the international legal order and is enshrined in the United Nations Charter, as well as in other important international legal instruments, including those on selfdetermination. The concept includes the inviolability of the territory of the State, including territory under the effective control and possession of a State. Therefore, it is rather appalling that Malaysia's independence, sovereignty, and territorial integrity within its internationally recognised borders are being challenged by the sham and abusive arbitration process brought by the so-called heirs of the long-defunct Sultanate of Sulu. The purported Final Award, among others, made an unfounded claim that certain part of Sabah or North Borneo is a property possessed under the leasehold.

1. Let me be clear, Malaysia does not recognise and will not entertain any frivolous claims made by any party on Sabah. Sabah is recognised by the United Nations and the international community as part of Malaysia since the formation of the Federation on 16 September 1963. In fact, this colloquium is highly timely since we just celebrated the 60^th Malaysia Day over a week ago.

Excellencies, Ladies and Gentlemen,

1. Despite the landmark rulings by the French and Dutch courts earlier this year that were in Malaysia's favour, we are still facing unprecedented legal battles across multiple jurisdictions in our efforts to overturn the recognition and enforcement of the purported Arbitral Awards. While these legal actions have come at the expense of valuable resources - funds that could have been allocated to support socio-economic development in Malaysia - I wish to reiterate here: Malaysia will not compromise in the efforts to protect its sovereignty and territorial integrity.

1. What is even more upsetting from this sham award is the fact that Malaysia's fate and fortunes are still being decided by individuals - or a sole individual, in this case - with no connection to the region. Why must the survival and fate of Malaysia lie in the hands of a rogue arbitrator in Europe? Unjust does not even come close to defining this new form of colonialism. If anything, it shows that from the very beginning, the arbitration process is erroneous. Or in terms that are more familiar with the crowd today, mala fide.

1. However, as much as I am a representative of the Government of Malaysia, I do not wish to turn this platform into a venue to propagate Malaysia's side of the case. Rather, I wish to see things from a bigger picture. As it stands, there is a larger concern that if existing shortcomings and loopholes in the international arbitration process are not urgently addressed, other countries may face a similar fate as Malaysia. The mere fact that a non-state entity can pursue the concurrent enforcement of fraudulent awards without the consent of relevant parties - or in other words, 'forum-shopping' - should be a wake-up call to all of us here today. How can we, in all conscience, let arbitration be enshrouded by allegations of abuses of process and erroneous actions?

1. At a time where common norms, values and practices are increasingly at stake, we do not have the privilege to stand idle in the face of blatant misuse of arbitration processes that are happening in front of our own eyes. Without a doubt, there are sinister entities that intend to undermine the integrity and legitimacy of the system for their own personal benefits. This will threaten the very fundamental principles of justice and impartiality of a legal system that many of us believe in. With that in mind, it is time that we reform the third-party litigation ecosystem to ensure a fair balance between access to justice and transparency in litigation actions.

Excellencies, Ladies and Gentlemen,

1. Notwithstanding the varied reactions surrounding international arbitration that arose after the Sulu Claims, I wish to echo the statement by my predecessor, the Honourable Tan Sri Anifah Aman, who is also here with us today, that was shared during the previous Sabah edition of the Colloquium last July. Malaysia still believes that arbitration is a crucial instrument to uphold the fundamental principles of statehood: sovereignty, territorial integrity and the rule of law. In fact, Malaysia is a proud host to the Asian International Arbitration Centre, a global hub for alternative dispute resolution within the ASEAN region. In essence, arbitration is intended and geared to provide a fair, simplified and just mechanism for entities to resolve disputes amicably and in a timely manner. It is based on a mutually-agreed framework that focuses on the disputing parties' autonomy. This, ladies and gentlemen, has been, and will continue to be, the key ingredient to the relevance of international arbitration - something that was glaringly missing in the so-called Sulu arbitration.

1. As much as I believe that we must not let perfection be the enemy of progress, I also believe that stagnation can lead to regression. While the victories achieved through the French and Dutch court rulings thus far may imply that the in-built corrective mechanisms of international arbitration are working as intended, we must ensure that the current arbitration processes and frameworks will remain resilient against future exploitation attempts. It is only with the continued deliberation from governments, international organisations and the general public within the international arbitration community that arbitration can retain its legitimacy and effectiveness as a robust and effective mechanism for resolving international disputes.

Excellencies, Ladies and Gentlemen,

1. Malaysia acknowledges the importance of arbitration as part of alternative dispute resolution, the role of international arbitration institutions and their processes in resolving complex issues. As much as the Sulu Claims have shocked Malaysia, and I believe, the world, too, they have also highlighted that the time is now ripe for an overhaul of the system. In this respect, the Government of Malaysia is developing a State Immunity Act with the purpose of codifying the doctrine of state immunity including the principle of reciprocity as part of Malaysian law. This law will reflect the general principles of international law on sovereign immunity, including effective service on foreign States, to uphold the rights and interest of parties concerned, safeguard the sovereignty of States and to preserve and promote friendly relations with other States. It is hoped that reciprocal treatment will be accorded to Malaysia in the event Malaysia is brought to the courts of a foreign State in the future. The State Immunity Bill is currently at the policy stage and we aim to table the Bill soon.

1. It is only through such reforms that we can continue to preserve the delicate balance between the interests of the nation state and those of the larger community. Towards this end, Malaysia calls upon all countries to come together and take this opportunity to shape the future of international arbitration in line with our international obligations - before it is shaped against our favour.

Before I end, I wish to take this opportunity, on behalf of the Government of Malaysia, to once again thank AIAC, SOAS, IDRC and our legal advisers for your support and cooperation throughout this colloquium. I also wish to thank all participants for your presence and active engagement today.

Thank you.

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