Assets Seizure In Luxembourg Baseless, Petronas To Defend Legal Allegation

Malaysian state oil company, Petroliam Nasional Bhd (Petronas), confirmed that two of its subsidiaries in Luxembourg were served with seizing orders.

Regardless, it had clarified that these units had already divested their entire stakes in the natural gas project in Azerbaijan and the proceeds from the disposal had been deported.

The actions taken against it were claimed to be ‘baseless’, and the national oil company said it will defend its legal position on this matter.

Petronas stated, "We confirm that our two subsidiaries mentioned in the report have been served with 'Saisie-arret' on July 11, 2022. Petronas wishes to clarify that these subsidiaries, PETRONAS Azerbaijan (Shah Deniz) S.à r.l. and PETRONAS South Caucasus S.à r.l., have previously divested their entire assets in the Republic of Azerbaijan, and the proceeds from the exercise have been duly repatriated."

For context, Petronas had a 15.5 percent stake in the Shah Deniz natural gas project, which in February it sold 9.99 percent of, to Russian oil and gas company, LUKOIL for RM 6,433,650,000.

Despite that, it is unclear exactly when the state-owned oil company divested the remaining 5.51 percent stake in the project.

According to the Financial Times, these two units were seized by the descendants of a late sultan, escalating to a RM 66,540,000,000 legal dispute linked to an agreement signed 144 years ago.

It further stated that the move was part of legal efforts by the Sulu ‘heirs’ to win compensation over land in Sabah. 

Of which, they claimed that their ancestor leased to a British trading company in 1878, before the discovery of vast natural resources in the area.

Petronas has been pulled into this argument as Malaysia does not distinguish the decision by an arbitrator in France, which ruled in March that Malaysia must pay the heirs RM 66,044,250,000.

Foreign Minister Datuk Seri Saifuddin Abdullah stated to Bernama, Malaysia would be sending diplomatic notes to 168 countries.

Significantly, ones that signed the New York Convention as an early notification on possible unilateral legal claims by descendants of the Sulu Sultan.

Said actions taken were to make the 168 countries aware of the unilateral claim, and hoping that the countries involved would inform Malaysia if there were such applications filed in their countries.

As such, the New York Convention applies to the recognition and enforcement of foreign arbitral awards and the referral by a court to arbitration. 

Currently, Malaysia and Luxembourg are contracting states in the convention.