Commented decision: Paris Court of Appeal (Department 5 – Chamber 16), 9 December 2025, n°22/04007[1]
On 9 December 2025, the Paris Court of Appeal annulled a USD 14.92 billion arbitral award rendered against Malaysia in favor of the heirs of the Sultan of Sulu. The Court held that the arbitration agreement contained in an 1878 agreement was inapplicable because a decisive and indivisible element of the parties’ consent—the reference to the British Consul General in Borneo—had disappeared. This ruling is significant for international arbitration practitioners as it illustrates the strict scrutiny exercised by French courts over jurisdiction in annulment proceedings and reaffirms that consent remains the cornerstone of arbitration under French law.
Factual Background
The dispute traces back to an agreement concluded in 1878 between the Sultan of Sulu and two European explorers, Alfred Dent and Gustav von Overbeck. Under this agreement, the Sultan granted rights over part of the island of Borneo, now Sabah in Malaysia, to Dent and von Overbeck, who represented a private company that later became the British North Borneo Company. In exchange, the Sultan and his heirs were to receive annual payments. The region subsequently came under British control in 1946 and later became part of Malaysia upon its independence in 1963. Malaysia continued to honor the annual payments until 2013, when they were suspended.
The 1878 agreement included a dispute resolution clause providing that any disagreement would be submitted to the British Consul General in Brunei for consideration and judgment.
On 22 May 2019, the heirs of the Sultan of Sulu initiated ad hoc arbitration proceedings against Malaysia, seeking enforcement of the 1878 agreement. The proceedings were initially seated in Madrid, where the High Court appointed a sole arbitrator.
On 25 May 2020, the arbitrator issued a preliminary award upholding jurisdiction.[2]
In June 2021, the Madrid High Court annulled the arbitrator’s appointment but left the jurisdictional award intact. To circumvent this annulment, the arbitrator moved the seat of arbitration to Paris.
On 29 September 2021, the preliminary award was granted exequatur in France.
On 10 December 2021, Malaysia filed an application before the Paris Court of Appeal seeking annulment of the order granting exequatur to the preliminary award. Meanwhile, on 28 February 2022, the arbitral tribunal rendered a final award, ordering Malaysia to pay 14.92 billion US dollars to the heirs.[3]
On 3 March 2022, Malaysia filed an application for annulment of the final award before the Paris Court of Appeal and requested a stay of enforcement. On 12 July 2022, the pre-trial judge granted a stay of enforcement of the final award in France.[4]
On 6 June 2023, the Court of Appeal overturned the order granting exequatur to the preliminary award,. The Court of Appeal ruled that the arbitration agreement was ineffective due to the disappearance of the position of British Consul General in Borneo. The Court considered that the choice of this position was indivisible from the parties’ consent to arbitration.[5] This decision was upheld by the Court of Cassation on 6 November 2024.[6]
The annulment proceedings relating to the final award, which had been stayed pending the outcome of this decision,[7] were resumed.
Legal framework under French law
International arbitration in France is governed by Articles 1504 to 1527 of the French Code of Civil Procedure. Under Article 1520, an international award may be set aside on five limited grounds, including lack of jurisdiction. French courts exercise control over the existence and validity of the arbitration agreement in annulment proceedings. The existence and effectiveness of an arbitration clause are assessed based on the parties’ common intention, applying principles of good faith and effet utile.
Annulment of the Final Award by the Paris Court of Appeal
The central issue before the Paris Court of Appeal was whether the arbitration clause in the 1878 agreement remained effective despite the disappearance of the British Consul General in Borneo. The disputed clause, written in Jawi and translated by the arbitrator, provided that any dispute would be brought to the consideration or judgment of “Their Majesties’ Consul-General in Brunei”.
Malaysia argued that the reference to the British Consul General was a decisive element of the parties’ consent to arbitration. Its disappearance rendered the clause inapplicable, as the parties had not agreed to any alternative mechanism. The heirs contended that the reference was merely a method of appointing an arbitrator and did not affect the validity of the arbitration agreement.
The Court sided with Malaysia. It recalled that the existence and effectiveness of an international arbitration clause must be assessed in light of the parties’ common intention, in accordance with the principles of good faith and effet utile, without it being necessary to refer to any state law.
Upon reviewing the dispute resolution clause and historical evidence, including a diplomatic dispatch from 1878 newly produced by the heirs, the Court concluded that the choice to submit any dispute to the British Consul General in Borneo was indivisible from the parties’ consent to arbitrate. The disappearance of this position therefore rendered the arbitration clause inapplicable. The Court emphasized that the disappearance of a decisive element of consent required a new agreement between the parties, which was absent. Consequently, the arbitral tribunal lacked jurisdiction, and the Final Award was annulled in its entirety.
Practical Implications
This ruling underscores the Paris Court of Appeal’s strict control over the existence of consent to arbitrate in set aside proceedings, reaffirming that a party’s consent to arbitrate must be established. Failing such consent, the arbitral tribunal lacks jurisdiction and the award must be annulled.
[1] Paris Court of Appeal (Department 5 – Chamber 16), 9 December 2025, n°22/04007 (Heirs to the Sultanate of Sulu v. Malaysia, Judgment of the Paris Court of Appeal (Department 5 – Chamber 16) 22/04007, 9 Dec 2025).
[2] Preliminary Award on Jurisdiction and Applicable Substantive Law – 25 May 2020, para. 154.B. (Heirs to the Sultanate of Sulu v. Malaysia, Preliminary Award on Jurisdiction and Applicable Substantive Law, 25 May 2020).
[3] Heirs to the Sultanate of Sulu v. Malaysia, Final Award, 28 February 2022, para. 297 (Heirs to the Sultanate of Sulu v. Malaysia, Final Award, 28 Feb 2022).
[4] Order of the Paris Court of Appeal (Department 5 – Chamber 16), 12 July 2022, n°22/04007 (Heirs to the Sultanate of Sulu v. Malaysia, Order of the Paris Court of Appeal (Department 5 – Chamber 16) 22/04007, 12 July 2022).
[5] Paris Court of Appeal (Department 5 – Chamber 16), 6 June 2023, n°21/21386, paras. 77-82 (Heirs to the Sultanate of Sulu v. Malaysia, Judgment of the Paris Court of Appeal (Department 5 – Chamber 16) 21/21386, 6 June 2023).
[6] French Court of Cassation (First Civil Chamber), 6 November 2024, n°23-17.615 (Heirs to the Sultanate of Sulu v. Malaysia, Judgment of the French Court of Cassation (First Civil Chamber) 23-17.615, 6 Nov 2024).
[7] Order of the Paris Court of Appeal (Department 5 – Chamber 16), 9 January 2024, n°22/04007, para. 44 (Heirs to the Sultanate of Sulu v. Malaysia, Order of the Paris Court of Appeal (Department 5 – Chamber 16) 22/04007, 9 Jan 2024).
