Petronas units in Luxembourg seized again in $15 billion arbitration dispute

Luxembourg court bailiffs issued fresh seizure orders for two units of Malaysian state oil firm Petronas this week, following a bid by descendants of a former sultanate to enforce a $15-billion award they had won against Malaysia, according to the heirs' lawyer and court documents seen by Reuters.

The Filipino heirs of the last Sultan of Sulu are seeking to enforce a $14.9-billion award granted to them by a French arbitration court last year, amid a long-running dispute with the Malaysian government over a colonial-era land deal.

Malaysia, which did not participate in the arbitration, maintains the process is illegal and has vowed to use all legal measures to prevent its assets, including state-linked companies, from being seized overseas. It obtained a stay on the award in France but the ruling remains enforceable overseas under a United Nations treaty on arbitration.

On Thursday, Petronas confirmed the new seizure order for the two units and their parent company, but reiterated the heirs' actions were baseless and the company will continue to defend its legal position.

The Petronas Azerbaijan (Shah Deniz) and Petronas South Caucasus units were first seized in July 2022, but the Malaysian government said last month that the order had been set aside by a Luxembourg district court.

On Tuesday, Luxembourg court bailiffs issued a second seizure order on the units and related bank accounts, court documents shared by the heirs' lawyer, Paul Cohen, showed.

Cohen, of British law firm 4-5 Gray's Inn Square, told Reuters the Luxembourg district court had indeed lifted the first seizure order on a minor issue that has since been addressed, but had not made a judgment on the merits of the arbitration.

"There was a technical ruling that has now been effectively dealt with, and the freezing orders are once more in place on the Petronas assets in Luxembourg," he said via email.

The Luxembourg court could not be immediately reached for comment. Malaysia's law minister did not respond to requests for comment.

The dispute stems from a deal signed in 1878 between two European colonists and the Sultan of Sulu for use of his territory in present-day Malaysia - an agreement that independent Malaysia honoured until 2013, paying the monarch's descendants a token sum annually.

Kuala Lumpur stopped the payments after a bloody incursion by supporters of the former sultanate who wanted to reclaim land from Malaysia. The heirs say they were not involved in the incursion and sought arbitration over the suspension of payments.