KUALA LUMPUR, July 12 — Authorities in Luxembourg have seized the assets of two Petronas subsidiaries on behalf of heirs of the defunct Sulu sultanate seeking to enforce an arbitration ruling they previously secured against Malaysia.

According to the Financial Times, bailiffs in Luxembourg seized the holding companies and related assets that were valued at over US$2 billion (RM8.9 billion).

Lawyers acting for the heirs had applied for Luxembourg to seize the assets to enforce an arbitration ruling they secured in France, which ordered Malaysia to pay US$14.9 billion to the descendants of the Sulu sultan.

In 2017, descendants of the Sulu sultanate started legal action for compensation over an 1878 lease for land in Sabah that had been signed with a British trading company.

In February, arbitrator Gonzalo Stampa found that Malaysia violated the 1878 agreement and ordered the country to pay the compensation, which it has refused to acknowledge.

The descendants claim that due to this violation they owned the land and had initially wanted to claim US$32.2 billion from Malaysia.

This was to recover the unpaid cession money along with how much they believe they should have been paid for the oil and gas found in the region.

The case was originally heard in Madrid until the Madrid High Court (Tribunal Superior de Justica de Madrid) annulled Stampa’s appointment on grounds that Malaysia was not properly informed about the case and was thus "defenceless”.

One prominent arbitration lawyer told the FT that the French ruling was unprecedented, as the agreement in dispute predated the formation of Malaysia in 1963.

The FT reported that the two units, Petronas Azerbaijan (Shah Deniz) and Petronas South Caucasus, were managing Petronas’ interests in Azerbaijan and the move to seize them was due to the disputed non-payments of oil royalties.