KOTA KINABALU, May 15 — The Court of Appeal here will hear the federal government’s appeal against a lawsuit by the Sabah Law Society (SLS) to compel it to pay the state 40 per cent of derived revenue.

The controversial case is set to be heard tomorrow after a postponement of eight months from September last year.

SLS first filed the application for judicial review on June 9, 2022, to overturn the federal government’s gazette of an RM125.6 million annual grant for Sabah, arguing that it violated the state's revenue rights under the Malaysia Agreement 1963 (MA63).

The federal government is named as the first respondent while the Sabah state government is the second respondent.

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The judicial review is to compel the federal government to pay its 40 per cent share of revenue due to the state since the year 1974 including arrears, and to seek a declaration of the 40 per cent entitlement as enshrined under Article 112C and 112D of the Federal Constitution.

The High Court had on November 11, 2022 granted SLS leave for judicial review, but the decision was immediately appealed by the federal government’s Attorney General’s Chambers (AGC).

The AGC also obtained a stay on the High Court hearing the case pending the appeal.

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The case will now be heard tomorrow in the state capital, and proponents of state rights are trying to muster up crowds to show public interest and support for the efforts.

SLS former president Datuk Roger Chin said the outcome will be significant for the state.

“This upcoming court battle marks a pivotal moment in the fight for Sabah’s rightful constitutional entitlement.

“The outcome will significantly impact the future development of the state and its people, potentially paving the way for long-overdue progress and a brighter future for Sabah,” he said in a statement recently.

What is the significance?

Chin said the SLS was determined to secure recognition and fulfilment of the 40 per cent entitlement, which is two-fifths of the net revenue derived by Malaysia from Sabah. Backdated, arrears could run into the billions for Sabah.

Despite being a major oil-producing state, Sabah’s basic amenities such as water and power supply remain underdeveloped and many villages are still inaccessible by roads. It has been regularly reported that eight of the 10 poorest districts in Malaysia identified in the 12th Malaysia Plan are in Sabah.

“Many think the federal government’s failure to honour the payment of Sabah’s 40 per cent entitlement is one of the reasons why Sabahans are adversely and detrimentally affected,” said Chin.

SLS former president Datuk Roger Chin said the SLS was determined to secure recognition and fulfilment of the 40 per cent entitlement, which is two-fifths of the net revenue derived by Malaysia from Sabah. Backdated, arrears could run into the billions for Sabah. — Picture courtesy of Roger Chin
SLS former president Datuk Roger Chin said the SLS was determined to secure recognition and fulfilment of the 40 per cent entitlement, which is two-fifths of the net revenue derived by Malaysia from Sabah. Backdated, arrears could run into the billions for Sabah. — Picture courtesy of Roger Chin

He said that under the Federal Constitution, it was indisputable that the federal government has “a constitutional duty” to pay the special grant annually to Sabah in accordance with provisions.

The 40 per cent entitlement was due to be paid immediately after the formation of the federation of Malaysia on September 16, 1963, as an acknowledgement of financial provisions to provide for the socio-economic needs of the less-developed Sabah.

Clause (4) of Article 112D also provided that a review of the entitlement should be held no later than 1969, six years after the formation of Malaysia, and then again in 1974.

The SLS also disputed an agreement between the Sabah and federal governments on April 14, 2022 for an “interim” annual grant of RM125.6 million, with increments over a period of five years, 2022 to 2026, while negotiations were continuing on Sabah’s 40 per cent entitlement.

The federal government then published its decision under a federal government-gazetted order, which SLS alleged was in serious breach of the federal and state governments’ constitutional duty to the people of Sabah.

The SLS was concerned that the breach would have several legal repercussions putting Sabah at a disadvantage and ultimately depriving the state of its right to the last 48 years of non-payment.

“SLS was alarmed to read that there was no admission of the failure to hold the Article 112D review by 1974 and thus payment of the 40 per cent entitlement for the lost years.

“There was plainly no redress for the failure to pay the 40 per cent entitlement for the lost years. No 40 per cent entitlement was paid for 48 years to Sabah,” said Chin.

Chin said the SLS had to act urgently as there was a time limit of three months to any judicial review of the public authority’s statutory powers.

As an independent body of advocates that is also non-political, Chin said it had the duty to “uphold the cause of justice” uninfluenced by fear or favour.

“In this case, the people of Sabah would obviously be aggrieved and adversely affected by the Review Order 2022 were the grievances emphasised above not be redressed by the Court.

“SLS views this as a public wrong for which all the people in Sabah suffer. This judicial review is thus public interest litigation,” he said.

In June 2022, 12 elected representatives of Pakatan Harapan in Sabah had also filed a similar suit seeking a court order for the federal government to recognise and fulfil its constitutional duty to Sabah.

When PH came to power after the 15th general election in 2022, the 12 withdrew their case in September last year, ostensibly on the belief that there would be progress in reinstating the state rights to Sabah. They withdrew their case with the liberty to file afresh if deadlines were not met by July this year.

Chin said that the hearing at the Kota Kinabalu Court Complex on Thursday at 9am, was fully open to the public and any member of the public was allowed to attend and follow the proceedings at the hearing.

“If SLS succeeds in resisting the federal attorney general’s appeal against permission to proceed, then the most likely next hearing would be the substantial hearing of the judicial review before the High Court in Kota Kinabalu.

“Apart from participating directly in attending the hearing, each Sabahan can also participate by informing their family, friends and colleagues about this court action. For this case is every Sabahan’s case,” he said.