A Malaysian state-owned energy company is accusing litigation funder Therium Capital Management of misconduct in a long-running leasing dispute.
Petronas Azerbaijan on Tuesday asked a federal court in Manhattan to order Therium and its parent company to turn over subpoenaed financial documents and communications. Petronas said it plans to sue the companies and their lawyers in Spain, claiming losses from the seizure of assets in Luxembourg.
Therium did not respond to a request for comment.
The underlying dispute involves descendants of a sultan who ruled part of the region—now known as Sabah—in the late 1800s who allege Malaysia breached a contract going back decades. A Spanish arbitrator who sided with the claimants and awarded them $14.9 billion in damages was later convicted on a related criminal charge, adding chaos to the dispute.
Therium funded the descendants’ claim, which has wended its way through multiple European jurisdictions. The company, which has offices in New York, has put $20 million into the claim through nine rounds of funding since 2017, according to Reuters.
Descendants of the Sultan of Sulu filed the claim against Malaysia when it discontinued annual payments of around $1,300 for a lease on their land, which was based on agreements dating back to the 1870s. Malaysia stopped the payments in 2013, after the descendants attacked the area formerly owned by the sultan and killed at least 60 people.
The claim was initially filed in Spain before Spanish arbitrator Gonzalo Stampa moved the venue to France and handed down the award for the claimants. Stampa was later found guilty of contempt of court and sentenced to six months in jail for filing enforcement actions throughout Europe. He was found to have knowingly disobeyed orders from the Madrid High Court of Justice, which ordered him to cease his activities as arbitrator after improperly serving Malaysia.
Stampa’s guilty verdict could make it much more difficult to enforce his findings about the case and jeopardizes Therium’s return on its investment. His conviction doesn’t automatically nullify those findings, but would make enforcement in a new forum challenging.
The claimants attempted to enforce the award in Luxembourg and served the Malaysian state energy company Petronas with seizing orders for its assets in nine banks in 2022, which was set aside. A second enforcement was filed for assets in seven banks last year and it remains pending. The company says a Spanish court will assess the financial damages to show whether it has suffered actual harm from the result of a “rogue arbitration award.”
Petronas alleges that Therium, along with the Sulu claimants and their lawyers, acted with “willful negligence” by ignoring the revocation of Stampa’s authority as arbitrator, requesting he move the seat to Paris and inducing him to commit the offense.
The case is Petronas Azerbaijan, SDNY, No. 1:24-00242, 5/28/24