Tuesday, March 19

State rights and Federal rights on territorial waters


Sarawak has dominion, namely legal ownership, economic and property rights of its oil, gas and other minerals in its Continental Shelf as a coastal state which “comprises the seabed and subsoil of the submarine areas that extend beyond its territorial sea throughout the natural prolongation of its land territory to the outer edge of the continental margin [up to a maximum of 350 nautical miles or 100 nautical miles from the 2,500 metre isobaths which is a line connecting the depth of 2,500 metres]or to a distance of 200 nautical miles from the baselines from which the breadth of the territorial sea is measured where the outer edge of the continental margin does not extend up to that distance”: Article 76 (1), (4), (5) and (6) of the United Nations Convention On The Law Of The Sea (“UNCLOS”) 1982.

This dominion of Sarawak has always been protected under the Federal Constitution, its six protective municipal laws, customary international law, international law, UNCLOS and Malaysia Agreement 1963 (“MA 1963”) as a multi-lateral treaty and a constitutional document, especially for the binding assurances under Article VIII of MA 1963.

Imperium cannot be superimposed on Dominion

However, the Federal Government of Malaysia has imperium, namely political rights and legal sovereignty only in the context of jurisdiction and full administrative control over affairs under International law within the territorial water or boundary or geographical area or limit such as the continental shelf and Exclusive Economic Zone (“EEZ”) of Sarawak recognised by other sovereign nations; but it has no dominion. That dominion is based on Sarawak’s municipal laws. Thus, the federal government does not own the natural resources nor the economic rights nor able to exercise compulsory acquisition of these natural resources of oil and gas onshore and in the Continental Shelves of the Coastal States of Sarawak and Sabah under State List II Items 2(a) (c) and, particularly2(d) of the Ninth Schedule, Articles4, 80(3), 95D and 76(1)(b) and 76(4) of the Federal Constitution (“FC”), collectively called “The Four FCS.”

These Four FCS and particularly items 2(c) on the exclusive right to issue prospecting licences and oil and gas leases, namely the Profit Sharing Contract (“PSC”), the Risk Sharing Contract (“RSC”) and the Enhancement Oil Recovery (“EOR”) under our State List II have formed the six protective municipal laws of Sarawak(“6 PM Laws”) which include the Order in Council 1954 (“OIC 1954”), Land Code 1958 (“SLC 1958”), Oil Mining Ordinance 1958 (“OMO 1958”), Supplementary Deed 1965 (“SD 1965”) and Tun Razak’s binding assurances on August 3, 1962 of “no domination” of “equal partners” of the Borneo Territories which the federal government will “always consult” them, under Article VIII of MA 1963 itself as a multi-lateral treaty and constitutional agreement.This includes the present PM’s assurance to return the powers and rights of Sarawak taken away “by design or inadvertently.”

Putrajaya has only imperium, legal sovereignty only in the context of jurisdiction and administrative control in dealing with other nations at international level on territorial sea, international boundary, the respective Continental Shelf and Exclusive Economic Zone (“EEZ”) of the Coastal States of Sarawak and Sabah. So, it would be the constitutional as well as the international duty of the federal government to protect and monitor them in terms of safety regulations and environmental compliance, navigation, laying of marine cables, security, monitoring pollution, shipping, maintaining international right of innocent passage, preventing illegal fishing, overseeing marine structures and offshore oil operations, petroleum products and exports and maintenance of lighthouses and those specifically stipulated in Federal List I 8(j), subject to (i) Items 2(a), (c) and (d) of the State List II of Sarawak under the Ninth Schedule of FC; (ii) The 6 PM laws of Sarawak mentioned above including the three FCS; and (iii) The Customary International Law, International Law, UNCLOS 1982, Malaysia Agreement 1963 (MA 1963) as a multi-lateral treaty and a constitutional agreement.

Confusion between Dominion and Imperium

After President Truman’s Declaration 1945 on the doctrine of Continental Shelf with the jurisdiction, control and assertion of implied rights over the natural resources of the seabed and subsoil of the Continental Shelf of the coastal states of the Federation, it took several decades for the Supreme Court to clearly separate dominion from imperium in the patchwork quilt of jurisprudence. Unfortunately, the federal courts have originally confused dominion, which is based on domestic law, while sovereignty is based on international law. Canada and Australia quickly adopted the same wrong approach, as all these federal governments historically and politically would tend to over-reach and assert their implied economic rights, controls and jurisdictions on the ownerships and economic rights of the rich oil and gas in the Continental Shelf, contiguous to the territorial waters of each of its coastal state.

Sadly, however, the court failed to acknowledge the development of offshore rights under the common law and exaggerated the federal government authority over extended affairs. The court confused dominion which is based on domestic law, with sovereignty which is based on international law. The courts’ decisions also frustrated the design of federalism in all three constitutional systems. The courts should have relied on their respective common law, rather than on emerging concepts of international law. The adoption of international law by the courts to resolve domestic constitutional disputes deprived coastal states of their petroleum-rich offshore lands.

“As a result, subsequent political settlements were necessary to mitigate the adverse effects of these erroneous decisions. Nevertheless coastal states have continued their struggle in the judicial and political arenas to participate in and share the revenues derived from offshore energy development.” Fizgerald; Edward A : New South Wales v Common Wealth : The Australian Tidelands controversy. (1991)”

Sarawak suffers the same cyclic history

So Sarawak has to suffer also that cycle of history to separate the dominion from imperium now, and indeed, it is the most opportune time to restore its dominion with amends for the last 44 years. Now, the state government under the new visionary, progressive and dynamic YAB is legally and constitutionally right with power to rectify and ratify by exercising its overdue and actual right to reissue all the PSCs and issue new PSCs, RSCs and EORs henceforth. That would include the imposition of 10% royalty by Sarawak government instead by the federal government, as the owner with exclusive economic and property rights on its oil and gas assets onshore and offshore, and therefore rightly as the owner of all the assignments of all the carried interests of 15% to 25% or higher of Petronas/Carigali in all the PSCs under the four FCs and 6 PM laws, by Petronas and Carigali to Petros and/or its subsidiary company under the terms of the Novation Agreements which will have to be signed by the pertinent parties. The state can also levy state sales tax on O&G and oil and gas products produced locally at 6% to 10% or more under item 7 of Part V of the Tenth Schedule per se and used for making up the shortfall for 10% gross royalty, temporarily until the royalty imposed ad valorem (production cost at site) not more than 10% has been amended to “exclude” not “include mineral oils” under item 3 of the same schedule.

Economic rights do not flow from territorial sea

Sarawak and Sabah do not claim on the federal government’s imperium rights, namely jurisdiction and administrative control over their territorial waters or sea, boundaries EEZ and respective continental shelf at international level. But, in fact it is the constitutional and international duty and responsibility of the federal government to assert and defend Malaysia and international sovereignty and jurisdiction over the abovementioned areas contiguous to their territorial waters and continental shelves at international level between the sovereign nations. Under imperium, the legal ownership, economic and property rights do not flow from sovereignty and jurisdiction on international boundary, the continental shelf and territorial waters of the coastal states of the Borneo Territories in the international level or under international law, but only from the 6 PM laws of the coastal states including the Four FCs. Therefore, Putrajaya could not change Sarawak’s boundary under Article 1(1)b of FC on 27th August 1976 without the consent of Council Negeri of Sarawak under Article 2 by reducing unconstitutionally and illegally, and therefore invalid, the Sarawak territorial waters and boundary thereafter from 12 to 3 nautical miles under the Four FCS, Sarawak’s 6 PM laws, customary international law, international law, UNCLOS 1958 and 1982 and MA 1963. It would be fallacious to take over the ownership and economic rights by shifting the territorial waters and boundary by imperium as under Territorial Sea Act 2012 (“TA 2012”).

Economic rights were varied by the original FC

Sovereignty and jurisdiction under international law on international boundaries, territorial seas, even in the Exclusive Economic Zone (“EEZ”) and Continental Shelf of the coastal state of Sarawak between nations do not confer ownership, economic and property rights for the federal government under the Four FCs and the 6 PM laws of the coastal state of Sarawak unless agreed or varied under the FC during the formation of Malaysia. For example, there were the varied economic rights on fishing and fisheries in the Exclusive Economic Zone Act 1984 (“EEZ 1984”) and the Fisheries Act 1985 (“FA 1985”) to the federal government. So, the federal government could not unilaterally superimpose this imperium under international law over the dominion protected under the four FCS and the 6 PM laws of the coastal state of Sarawak.

However, the coastal states of the federation of USA, Australia and Canada never have the same entrenched provisions of the 6 PM law including the four FCs to protect their dominions over their oil and gas in their territorial seas and Continental Shelves extended to 200 or 350 nautical miles. If those municipal laws were available to the coastal states in those federations, their courts would have acknowledged and adopted the dominion based on those constitutional provisions and municipal laws of the coastal states within their respective federations long ago. In that case, we would have a different legal and constitutional history on Truman’s legacy decades ago.

But these early US and Commonwealth federations would never under the Proclamation of Emergency Laws even when the security or the economic life, or public order is threatened or when there is “imminent danger” of such occurrence, take over the dominions of the Continental Shelves with their natural resources of oil and gas and change the issuances of oil exploration licences and oil leases by the federal government as well as to change the boundaries and territorial waters or seas of their respective coastal states.

The views expressed here are those of the author and do not represent the views of thesundaypost.