Datuk Seri Azalina Othman Said stated in Parliament that Malaysia will continue using legal and diplomatic channels to recover financial losses from the defeated alleged heirs of the Sultanate of Sulu and to fully and protect national interests. Source: Parlimen Malaysia

After years of litigation, speculative claims, and foreign funded legal maneuvers, the country has emerged with a clear judicial affirmation of its sovereignty over Sabah. The focus has now shifted from defense to accountability, with Malaysia exploring ways to recover substantial financial and institutional losses incurred during the dispute.

Decisive Court Rulings End the Sulu Claim Against Sabah

The legal turning point came when the Paris Court of Appeal annulled in full a purported arbitral award that had attempted to impose massive financial liabilities on Malaysia on December 9, 2025. The French court ruled that the arbitrator lacked jurisdiction and that there was no valid arbitration agreement binding Malaysia. This decision followed earlier refusals by French courts to recognize or enforce interim awards, culminating in a decisive rejection of the Sulu claim.

"The outcome left the supposed heirs not only without legal standing but also liable for costs awarded to Malaysia."

The outcome left the supposed heirs not only without legal standing but also liable for costs awarded to Malaysia. The ruling reinforced the principle that sovereign states cannot be coerced into arbitration through dubious historical narratives or private legal arrangements. For Malaysia, the decision was more than a legal victory. It was an unequivocal affirmation that Sabah’s status within the Federation is final, lawful, and internationally recognized.

Malaysia’s Strategy to Recover Legal Costs and National Losses

Following the December 2025 ruling, the government confirmed it is reviewing strategies to recover both direct and indirect losses arising from the prolonged dispute. Minister in the Prime Minister's Department (Law and Institutional Reform) Datuk Seri Azalina Othman Said stated in a written parliamentary response "[T]he Madani Government is studying strategies and measures to recover the direct and indirect costs and losses incurred by Malaysia in this case." These losses include extensive legal fees, diplomatic resources, administrative costs, and reputational harm caused by years of baseless claims promoted across multiple jurisdictions.

"[T]he Madani Government is studying strategies and measures to recover the direct and indirect costs and losses incurred by Malaysia in this case."

Potential legal avenues include cost recovery proceedings, enforcement of foreign court cost orders, and actions against third party litigation funders who supported the failed claim. Malaysia may also pursue declaratory relief in friendly jurisdictions to pre empt further attempts to revive the dispute. Such measures are designed not only to recover financial losses but to deter similar speculative claims against the state in the future.

Importantly, Malaysia has maintained that no payments of any kind have been made to the alleged heirs since 2013. That decision followed the armed intrusion in Lahad Datu, which resulted in the deaths of ten Malaysian security personnel. Since then, the government has consistently held that there are no legal or moral obligations owed to any party claiming rights over Sabah.

International Arbitration, Funding, and Abuse of Process

The Sulu case has also reignited scrutiny over the misuse of international arbitration and third party funding. While arbitration remains a legitimate dispute resolution mechanism, the Malaysian experience demonstrates how it can be distorted when jurisdictional safeguards are ignored and speculative funding drives litigation strategy.

"Malaysia’s recent reforms to its arbitration framework emphasize transparency, disclosure, and ethical oversight."

Malaysia’s recent reforms to its arbitration framework emphasize transparency, disclosure, and ethical oversight. These reforms send a clear signal that while access to justice is important, arbitration cannot be weaponized to challenge state sovereignty or extract settlements through legal pressure. The Sulu claim stands as a cautionary example of how weak claims can be artificially prolonged through funding rather than merit.

Sabah, Penang, and the Constitutional Test of Sovereignty

The collapse of the Sulu claim has had broader constitutional implications within Malaysia, particularly in relation to renewed rhetoric over Penang’s status. Political assertions that Penang belongs to Kedah based on historical leases have drawn comparisons to the Sulu narrative over Sabah.

Penang Chief Minister Chow Kon Yeow has been clear that such claims hold no legal weight. He has pointed to the Federal Constitution, the formation of Malaysia, and subsequent parliamentary legislation as the sole determinants of state sovereignty and boundaries. Just as historical arrangements failed to override constitutional reality in the Sulu case, they cannot be used to undermine Penang’s position within the Federation.

"No further payment obligations will be made to anyone, whether individuals or foreign entities, as Sabah's sovereignty within the Federation of Malaysia is absolute and recognised by the United Nations."

The legal lesson is consistent and clear. Sovereignty in Malaysia is not determined by pre independence agreements, colonial era transactions, or selective readings of history. It is determined by constitutional law, parliamentary authority, and international recognition. Azalina said in her statement that "No further payment obligations will be made to anyone, whether individuals or foreign entities, as Sabah's sovereignty within the Federation of Malaysia is absolute and recognised by the United Nations."

A Warning Against Baseless Historical Claims

Malaysia’s experience with the Sulu claim underscores the risks posed by attempts to resurrect obsolete political entities for financial or political gain. The courts have decisively rejected the idea that a defunct sultanate can assert modern legal rights over a sovereign state through arbitration.

By pursuing recovery of losses, Malaysia is signaling that there will be consequences for abusing international legal systems. The objective is not retribution but deterrence. The government’s approach aims to ensure that national institutions are protected and that future challenges to sovereignty are met with swift and robust responses.

"By pursuing recovery of losses, Malaysia is signaling that there will be consequences for abusing international legal systems."

With the Sulu claim now legally concluded, Malaysia is moving into a phase centered on legal closure, accountability, and institutional continuity. The outcome of the proceedings underscores the importance of established jurisdictional limits and recognized legal processes in resolving disputes involving state sovereignty.

As discussions concerning Sabah and Penang continue in the public sphere, the judicial findings provide a clearer framework for understanding how constitutional and international legal principles apply. Taken together, these developments contribute to broader discussions, both within Malaysia and beyond, on the role of the rule of law, constitutional order, and sovereign equality in maintaining stable state relations.

Ultimately, for the people of Sulu themselves, the priority should lie not in reviving failed external claims, but in achieving continuous growth within the Philippines through stable governance, economic development, and the long term flourishment of their own region.

REFERENCES

Daily Express Malaysia. (2026, January 28). Government reviewing legal action to recover losses: Sulu. Daily Express Malaysia. https://www.dailyexpress.com.my

Free Malaysia Today. (2026, January 27). Failed Sulu claim on Sabah shows why Kedah can’t claim Penang, says Chow. Free Malaysia Today. https://www.freemalaysiatoday.com

New Straits Times. (2026, January 27). Malaysia reviews legal action to recover losses after Sulu claim victory. New Straits Times. https://www.nst.com.my

Malaysian Bar. (2026, January 13). Third-Party Funding, Arbitral Integrity and Lessons from Recent International Arbitration Developments [Press release]. Malaysian Bar. https://www.malaysianbar.org.my

Malaysian Bar. (2025, December 11). Malaysia’s sovereignty is upheld with the resolution of the Sulu claim [Press release]. Malaysian Bar. https://www.malaysianbar.org.my

The Malaysian Reserve. (2026, January 27). Sulu case: Malaysia reviews legal action to recover losses. The Malaysian Reserve. https://themalaysianreserve.com

The Star Malaysia. (2025, December 11). Sulu case is now history, claimants owe Malaysia nearly RM1 mil. The Star Malaysia. https://www.thestar.com.my