The ICSID appointed Stephan Schill, a professor at the University of Amsterdam, as arbitrator in the Sulu v Spain case. Image Source: Jeroen Oerlemans. https://www.uva.nl/shared-content/uva/en/news/professor-appointments/2015/02/stephan-schill-professor-of-international-and-economic-law-and-governance.html

The heirs of the Sultan of Sulu have successfully compelled Spain into arbitration proceedings before the International Centre for Settlement of Investment Disputes (ICSID), a tribunal affiliated with the World Bank. Their claim, amounting to $18 billion, hinges on allegations that Spain obstructed the enforcement of an earlier arbitration award that ruled in their favor.

In a significant procedural step, ICSID has appointed Stephan Schill, a professor at the University of Amsterdam, as the arbitrator tasked with overseeing the case. While Schill’s appointment brings the proceedings into a new phase, the arbitration itself remains fraught with legal complexities and uncertainty over enforceability.

Despite the appointment of a new arbitrator, history suggests that a resolution favorable to the Sulu heirs is far from guaranteed. The case is not merely about the legality of Spain’s actions but also about the viability of enforcing international arbitration awards in politically and legally resistant jurisdictions.

The Long Road to ICSID

The heirs’ pursuit of financial compensation has been marked by years of legal setbacks and jurisdictional challenges. Initially, the case was admitted by Madrid’s High Court of Justice (TSJM), which appointed Gonzalo Stampa as arbitrator. However, Spanish courts later annulled the proceedings, declaring the arbitration legally invalid. Undeterred, Stampa relocated the arbitration to Paris, where the tribunal ultimately ruled in favor of the heirs, awarding them a substantial sum.

However, the award faced immediate resistance from both Malaysia and the international legal community, with its enforcement challenged in multiple jurisdictions. Ultimately, the Paris Court of Appeal ruled that Stampa lacked jurisdiction, effectively nullifying the award and dealing a major blow to the Sulu heirs' case.

With the path to enforcing the Paris ruling blocked, the heirs shifted their legal strategy, this time targeting Spain rather than Malaysia. Their claim before ICSID alleges that Spain’s judicial actions denied them justice and prevented the enforcement of their Paris award. To substantiate their claim, they invoke the 1993 Agreement on the Reciprocal Promotion and Protection of Investments (APPRI) between Spain and the Philippines, which allows investors to seek arbitration if a host government fails to respond to negotiations within six months.

According to the heirs, they submitted a formal request to Spain’s Ministry of Foreign Affairs on December 7, 2023, and, upon allegedly receiving no response, proceeded to file their case with ICSID.

Key Legal Hurdles

The heirs argue that Spain arbitrarily modified notification criteria for Malaysia, in violation of the United Nations Convention on Jurisdictional Immunities of States and Their Property (2004). However, their position faces substantial legal obstacles. The Paris Court of Appeal’s finding that the original arbitrator lacked jurisdiction weakens their broader case, as it suggests that procedural deficiencies plagued the arbitration process from the outset.

Furthermore, Spain’s prior rulings against Stampa’s legitimacy as arbitrator, alongside his criminal conviction in Spain, raise doubts about the legal foundation of the heirs’ case. If Spain successfully argues that its judicial actions were in line with established legal principles, the ICSID tribunal may find little merit in the heirs’ claim of a denial of justice.

Schill’s Appointment: A New Arbitrator, But the Same Challenges

The appointment of Stephan Schill brings a fresh perspective to the case, but it does not alter the existing legal precedents. Unlike Gonzalo Stampa, who ruled in favor of the Sulu heirs before his decisions were overturned, Schill steps into a case already weighed down by adverse rulings across multiple courts.

While his appointment moves the arbitration forward procedurally, it does not necessarily bolster the heirs’ claims. The same jurisdictional, enforcement, and legal credibility issues that complicated their past efforts remain unresolved.

This ICSID arbitration represents the heirs’ latest attempt to secure a massive payout, but its success is far from assured. With Spain ready to challenge their claims and past legal setbacks still looming, the case faces considerable hurdles. As proceedings unfold, Schill’s rulings will be closely examined, particularly regarding whether Spain’s actions constituted legal interference at all, or if the claim is simply an overreach in yet another attempt to extract money. However, given the complexity of the dispute, the legal battle could extend far beyond the heirs’ expectations.

REFERENCES

HuffPost. (2024, September 11). Los herederos de un sultán exigen a España 16.000 millones de euros. ElHuffPost. https://www.huffingtonpost.es/sociedad/los-herederos-sultan-exigen-espana-16000-millones-euros.html

Nardell, G. (2024, February 3). Carry on regardless? The Sulu case, arbitrator authority and principles of recognition. Wolters Kluwer. https://arbitrationblog.kluwerarbitration.com/2024/02/03/carry-on-regardless-the-sulu-case-arbitrator-authority-and-principles-of-recognition/

Parry, R. L. (2024, November 12). Court rules on Malaysia’s $15 billion Sulu saga after 146 years. The Times. https://www.thetimes.com/world/asia/article/court-ends-malaysias-15-billion-sulu-saga-after-146-years-sxz52b3tb

Schwartz, C. (2025, February 11). Los herederos de Sulu fuerzan al Reino de Espana a someterse a un arbitro en el Banco Mundial. CapitalMadrid. https://www.capitalmadrid.com/2025/2/11/68990/los-herederos-de-sulu-fuerzan-al-reino-de-espana-a-someterse-a-un-arbitro-en-el-banco-mundial.html