Spain is entangled in an $18 billion international arbitration, the largest in its history, in a case marred by procedural anomalies and controversial judicial decisions. This highly technical legal battle has accumulated complaints, rulings, and appeals, extending for over a year in Spain. At the heart of the conflict is the dispute between the heirs of the Sultan of Sulu and the State of Malaysia.
The controversy dates back to a 1878 agreement, in which the sultan leased certain territories in Borneo in exchange for an annual rent that Malaysia continued to pay until 2013, when payments ceased. In response, the sultan’s heirs initiated an arbitration proceeding in Spain, appointing Gonzalo Stampa Casas as the arbitrator. Stampa later ruled in favor of the claimants. However, in 2021, the Superior Court of Justice of Madrid (TSJM) annulled Stampa’s appointment, citing irregularities in Malaysia’s notification of the arbitration. Despite this annulment, Stampa continued to exercise jurisdiction, moved the arbitration to Paris, and in 2022, issued an award ordering Malaysia to pay $14.9 billion. This led to his conviction in Spain in 2023 for serious disobedience, making him the first arbitrator in history to be convicted for performing his duties.
A Controversial Email Notification
The legal battle did not end there. In July 2021, the Clerk of the Court (LAJ) of the TSJM, Enrique C.V., notified Stampa of the annulment of the arbitration via email. According to the plaintiffs, this notification was irregular and exceeded his authority, as it ordered the arbitration’s termination without formal backing from the court.
In response, Paul H. Cohen, representing the sultan’s heirs and assisted in Spain by Aránguez Abogados, filed a complaint against Enrique C.V. for alleged misconduct, document falsification, procedural fraud, and coercion. The complaint was admitted for processing in January 2024, but in April of the same year, Madrid’s Investigative Court No. 39 ruled it inadmissible, citing insufficient evidence.
From there, Aránguez Abogados embarked on a lengthy appeals process, culminating in an appeal before the Provincial Court of Madrid, arguing that the dismissal was a de facto acquittal and that the alleged irregularities by the Clerk of the Court warranted investigation. However, on December 30, 2024, the Provincial Court of Madrid rejected the appeal, upholding the dismissal of the complaint, thereby closing the ordinary appeals process. The court ruled that Enrique C.V.’s actions were within his duties and that there was no evidence of criminal wrongdoing.
A New International Arbitration Against Spain
With the complaint against Enrique C.V. dismissed by Spanish courts, the dispute now moves to the international stage. Since Malaysia has refused to pay the awarded compensation, the sultan’s heirs have launched a new arbitration against Spain before the International Centre for Settlement of Investment Disputes (ICSID) in New York, arguing that Spain’s judiciary obstructed the enforcement of the arbitral award, causing severe financial damage.
Leading the new legal offensive is Paul H. Cohen, an expert in international litigation and representative of one of the world’s largest investment funds specializing in arbitration. The claim argues that Spain, by interfering in Stampa’s proceedings and creating procedural irregularities, may be held liable for the damages suffered by the plaintiffs.
Implications for Spain
The Sultan of Sulu case represents the largest arbitration in Spain’s history, with potential far-reaching economic and diplomatic consequences. The lack of media and political attention to the case starkly contrasts with the impact that an unfavorable ruling could have on Spain.
If the ICSID rules against Spain, the country could face a multi-billion-dollar penalty, affecting not only its public finances but also its credibility as a hub for international arbitration. The controversy over Spain’s judicial actions, combined with the presence of a dissenting magistrate in the arbitration annulment ruling, reinforces the perception that the process has been neither flawless nor transparent.
