Alex Ling
REASONS for the fudged Article 95B(3) and Item 8(j) on the Federal List conspicuouslyomitted in IGC Report 1962 and others.
The provablemens rea on the fudgings or slipping in the second part of this Article 95B(3) of the Federal Constitution (‘FC’) on the intentional barring the imposition of State Sales Taxes (‘SST’) on oil and Gas (O&G), minerals e.g. coal, oils and fields, sales of mineral ores (?) and petroleum products on the State List were in serious violations of the IGC Report 1962, MA1963 and its ANNEX A, The Malaysia Act 1963 (‘MACT1963’),called the ‘Three Basic Agreements’ and the FC per se.
In concert was the blundering, self-contradictory, void and illegal ‘rojak’ of the fudged Item 8(j) into the Federal List manifesting the serious violations of Items 2(a), 2(c) though stipulated in 8(j), and 2(d) of the State List 9th Schedule,the Seven Entrenched Federal Provisions (7FCs) and 7 Protective Municipal Laws of Sarawak (7PMs) and later reconfirmed by the United Nations Convention on the Law of the Sea 1982 (UNCLOS),called the (3 Apex Laws) with the foot prints of that fudgings or interpolations.
These fudgings were against the Constitutional taboos prohibiting even the Federal to pass laws touching on the Borneo States’ lands with oil and gas under Items under 2(a), 2(c), 2(d), 9th Schedule,Articles 2(b), 4(1), 80(3), 95D, 76(1)(b)(c) and (4), called the (7FCs) prohibiting any compulsory acquisitions of their O&Gunder Article 13 of the FC ,which is applicable only to the States of Malaya.
Besides, these fudgings are illegal and unenforceable under the 7PMs, namely Sections 3,4 and 34(1) of the Oil Mining Ordinance 1958 (OMO) amended and under Land Code 1958 (SLC) amended, Sections 32(1)(g), 36(2), 209(1) on all leases and 112 for valid registration, Supplementary Deed 1956, Sarawak Interpretation Ordinance 2005, Order in Council 1954 (OIC) and UNCLOS 1982, ratified W.E.F. on 14th November 1996 by Malaysia.
So, these two fudged provisions came on the heels after the IGC Report 1962 signed on 27th February 1963, and execution of MA1963 with ‘ANNEX A’, theMACT1963 on 9th July 1963 in London after the celebration of the birth of Malaysia after 16th September 1963.
The AGs of the Borneo States would find no cause to check them in the final printed FC by Federal.
“A thing antecedent to government, and a government is only a creature of the constitution. The constitution of a country is not the act of its government, but of the people constituting a government”,said Thomas Paine.
In this grundnorm or jurisprudence of the Federal Constitution under Kelsenian Legal Positivism, laws are seen as rules specifically enacted by the authorities in an organized jural society of Malaysia under “the postulated ultimate rules” validating MA1963 embodying the spirit, soul and corpus (body) of the IGC Report 1962, and MACT1963, the Mother of the Supreme Federal Constitution of Malaysia, and the FC itself, superseding the Federal List.
Indeed, Article VIII of MA1963 was designed to be the Constitutional platform to remedy any oversight or mistakes or even fudging, such as these two provisions, when the Federal was sadly bent to usurp, by hook or crook, in violations of the owner ships and the stipulated exclusive right under Item 2(c) of 8(j) for protecting the Borneo States’ oil and oil fields, and petroleum products,purportedly on grounds of ‘national interest’ by exerting political pressure on political alignment to pass the 5 Offending Acts in serious violations of the3 Apex Laws.
I. (1) So, these blundering fudgings must be amended under Article VIII of MA1963 by the Federal Legislature and executive Putrajaya and the Borneo States’ Legislatures to “implement the assurances, undertakings and recommendations contained in Chapter 3 of, and ANNEX A and B to, the Report of Inter-Governmental Council signed on 27th February, 1963, in so far as they are not implemented by express provision of the Constitution of Malaysia”.
(ii) The solutions would be to delete that fudged second part of Article 95B(3), namely to impose on the SST only on the matters under the State List, but not in the Federal List and amend the Item 8(j) of the Federal List, if thought fit, as proposed below:“Subject to Items 2(a) (c) and (d) in the State List and the said Federal Constitution: Regulations of labour and safety in mines and oilfields”, save all the following Items on the Development of mineral resources.. [oil trading]….petroleum products’ shall not be applicable to the Borneo States.”
II. (1) Why the fudged Item 8(j) must be amended?
Firstly, this would Constitutionally and legally be in line with the Federal constitution per se and under Imperium,namely having only administrative control of minerals and oil operations safety and worker regulations by the Federal agencies, though it has sovereignty among nations internationally,but no right to license PSCS by breaching Item 2(c) in Item 8(j) itself as Federal has no dominion nor any licensing rights on the Borneo States’ O&G ever since under the Native Laws, Adat and Brooke’s Laws, OIC 1954, Land Code 1958 and MA1963.
Secondly, as the owners with the sole rights to licenseO&G leases, to extract oil and process petroleum products or produce D2, mazut 100,from imported oil or to export oil, develop or make deals on its ‘oil and oil fields,’ oil trading and other minerals e.g. coal, they are governed by the 3 Apex Laws and entitled to impose SST.
Oil and petroleum products are similar to the Sarawak’s timber and their products.
Thirdly, royalty was locked at 10 per cent ad valorem, 2 ½ lower under PDA1974 than before, not realized by Professor Farouki; that is to be imposed by the Borneo States, as the owners of “mineral oils”, but not by Federal.At production cost at site of RM40 per barrel today, 5 per cent royalty would only be RM2, for half a plate/bowl of ‘kampuamee’ or ‘laksa’! The Federal could have amended royalty based on the sale price instead of ad valorem (production costs at site). Why not?
“Royalty means share of products of proceeds from the oil and gas produced and reserved to the owner of land for permitting another [Petronas] to use the property.”
“In MCculloh vs. Almach (OKA 1941). So, Tun Razak did not want to use the word ‘royalty’, but cash payment, a rose by another name, for the following reasons.
II. (2)(i) That would conclusively confirm legally that the Borneo States are the owners of their O&G when he passed the PDA1974 with the exclusive right to issue O&G licenses reconfirmed under Item 8(j) itself.
(ii) So,Cash payment instead of royalty was deliberately used under Section 4 of PDA 1974 and Clause I of the Oil Agreement (Sarawak) of 27th March 1975 and Sabah’s of 14th June 1976 with no revision Clause nor compensation when Petronas ceases operation.
(iii) Unfortunately, Professor Farouki did not know why royalty was replaced by cash payment and that the Sarawak leaders then knew only the Shell’s languid crude oil pumps on land, nothing offshore, Miri.But Tun Razak and his oil experts and financial advisers knew the vast O&G reserves with data offshore from detailed discussions with Sarawak and Brunei Shell in 1962.
These fudged provisions had laid the surreptitious ‘plot’ of Shakespearean Tragedy to pass the void and illegal Petroleum Mining Act 1966 (PMA), Continental Shelf Act 1996 (CSA) already stand by before Singapore’s Exit Agreement of 9th August 1965, the Emergency Ordinances 7, 10 and 11 of 1969, PDA1974 with Act 354 1976 and the Exclusive Economic Zones Act 1984 (EEZ) and Territorial Sea Act 2012 (TSA), referred to as the ‘5 Offending Acts’.
(iv) In retrospect, the main raison d’état for ‘enticing’ the Borneo States to join in the formation of Malaysia was to usurp the ownership and the exclusive licensing even in serious violations of Item 2(c) in Item 8(j) and 2(c) and (d) on their O&G and petroleum products including exclusion of SST in the State List by fudging Article 95B(3) and Item 8(j).
(v) The Federal contrived political pressure on political alignment under the Federal-lead coalition government under BN or PH now, under ‘national interest’ to pay 5 per cent royalty to the Borneo States but retain 80 to 85 per cent of the O&G revenue initially for protecting Sabah’s costly security against the Sulu’s incursions.On security,the Borneo Territories had no choice then.
The Declaration of Emergency in 1969 for KL’s riots and TSA 2012were used only for usurping illegally the mopping up of the 9 nautical miles of Sarawak’s shallow oil wells from 3 nautical miles offshore when the communists and others were in the jungles, not at sea.
The State’s O&G will run dry earlier than expected with recovery of oil at 29 per cent and gas 40 per cent. The best areas are gone or licensed leaving around 25 per cent with mostly gas with higher CO2 potential.
(vi) Greedy possible if Sarawak gets 80 per cent and Federal/Petronas 12 per cent O&G
The inequitable 5 per cent for the Borneo Territories and 80-85 per cent revenues for Federal/Petronas must include the productions and revenues of the 35 per cent to 53 per cent (split barrels/share profit (SB/SP) of their O&G directly for the Federal Treasury but not reflected in Petronas’ accounts in Malaysia, showing a whopping difference of RM19.298 billion from the net reported profit in SSM in 2017, the new ‘Seven Sisters’ outside OECD.
5 per cent official and 5 per cent unofficial royalty and 10 per cent SST with higher grants budgeted for 2020,negligible in comparison to the O&G revenues,are affordable based on true total productions and revenues to be resolved amicably between them to pre-exempt embarrassment under the Court Order of Discoveries of Petronas’s accounts for the last 43 years filed with SSM, from the International Company auditors and Auditor General.
(vii) Strangely, on “Subject 2(c) of the State List in Item 8(j), on that right of licensing O&G by Sarawak was even not accepted by Professor Farouki and Petronas. In fact, PM Tun Razak beseeched CM Tun Rahman to abort the casein the Privy Council, London, knowing it would be void and illegal based in the QC opinions, as explained in Article Part IX. The consideration was to give another unofficial but oral 5 per cent royalty for development fund, not grant, still traceable under Federal payment system under court discoveries, for fear of leakage to Sabah. Sarawak would win the ownership and exclusive right to license PSCS even under fudged Item 8(j). Petronas would be stuck. DUN would never approve the void and illegal secret Vesting Instrument to Federal under Section 2.2 of PDA1974.
(viii) Professor Farouki has wrongly asserted that the AGs of Borneo States negotiated negligently on these two fudged provisions which were slipped in surreptitiously for the void and illegal PDA1974 used by the Federal Government to usurp the O&G of Borneo States’ rich crown jewels, by hook or crook, with the 5 Offending Acts. PDA1974 has seriously breached Article 2(b) by altering unconstitutionally and illegally the 4 boundaries of Sarawak, particularly its 350 nautical miles of Continental Shelf, amplified in Article Part VIII.
(ix) For 43 years the loss of profits, loss of damages and inaccurate royalty payments to Sarawak would be astronomical. So, an equitable, reasonably balanced and fair legal and political settlement is the best way to ‘walk the talk’ in the shared wealth under the Rule of Law proclaimed by our PM for maintaining their historical good relationship.
III. The solution for amending the fudged Item 8(j) was already stipulated at paragraph I(1)(i) above.
All except the “regulation of labour and safety in mines and oil fields” under the Federal Administrative control would not be the proper stipulations in 8(j) as the restare in serious violations ofMA1963and 3 Apex Laws.
The fudged ‘rojak’ Item 8(j) is self-contradicting.
1. Firstly, for Item 8(j) to be constitutionally and legally correct, it should commence with “subject to Items 2(a)(land, namely its 350 nautical miles of Continental Shelf,) (c) and (d) in the States Lists.
2. The critical Item 2(d) reinforced by Articles 95(D) and 76(4) have forbidden any compulsory acquisition of land and O&G of Sarawak and Sabah under Article 13(2) of the FC.
3. (i) Professor Farouki did not quote the rest of Items 2(a) and 2(D) on land with no compulsory acquisition related to Articles 95D, 76(4), 2(b) and 4(1). Why? Petronas has no case at all.How ridiculous to say, “Sarawak, you can issue the PSCS on the oilfields belonging to the Federal Government”.
(ii) That botched, fudged ‘ROJAK’ of Item 8(j) has confirmed in 1963 the lack of understanding of the FC, federal imperium, trading and mining of minerals,such as water! Stones! Salts! and coal! sanctioned also by the existing State’s laws under Article 162 of the 7 FCs and 7PMs, untouchable by Article 75.
IV.The second part of the fudged Article 95B(3) needs to be repealed under Article VIII of MA1963
1. The fudged second part of Article 95B(3) and Item 8(j) were secretly armed to prevent SST to be imposed on petroleum product by the Borneo States and even oil itself under Item 8(j) or sale of oil fields and oil or mining of ores. The fudged second part of “and any Sale Tax imposed by State law in the State of Sabah and Sarawak shall be deemed to be among the matters enumerated in the State List and not in the Federal List”, under Article 95B(3) was deliberately omitted and never stipulated in Clause 24 (1)(2) and (e) of the IGC Report 1962, MA1963, nor in its ‘ANNEX A’, MACT1963, the mother of the Supreme FC.
2. The words ‘State Sales Tax’ in IGC Report 1962 Clause 24(2) and (e), under Section 45 of MACT1963 with its Fifth Schedule and Item 7 Part V 10th Schedule of the FC have no conditions at all on the impositions of State Sale Tax on oil and petroleum products under the State and/or Federal Lists.
3. (i) The first part of sales tax in IGC Report 1962 Clause 24(1) stipulated as follows: “Taxation, including in particular customs and excise duties, and taxes on incomes and profits, should be a Federal subject but each Borneo States may also make laws for imposing Sales Tax”. This would correspond to the first part of Article 95B(3).
(ii) It is clear on the second part of Article 95B(3) was fudged in concert with Item 8(J) already amplified in paragraph IV (1) to lay the Shakespearean Tragedy ‘plot’ for the epic PDA1974.
Why that second part of 95B(3) was fudged with Item 8(j)? All because of coveting the Borneo States’ O&G purportedly on grounds of ‘national interest’, to get 80-85 per cent O&G revenues, absolutely necessary as the turbo charger for the Rostov-take-off of the Malaysian economy in the early decades of Malaysia, as explained in Article Part III, dated February 17 2019 in thesundaypost and confirmed by the first Federal Minister of Finance, Tun Tan Siew Sin.
(iii) The third part of Clause 24(1), on State Sale Tax, namely “provided that any Federal Sales Tax would take priority over any State Sales Tax” would correspond to “[3] (b) of Article 95B(3). This itself would confirm that the SST of Federal and State would co-exist to be even on the concurrent III List.
(iv) The Fourth Part of the Clause 24(1) on State Sales Tax stipulates as follows: “and provided that discriminatory notes would not be imposed on goods of the same type but of different places of origin” would be in the Proviso, Section 3(a) of 95(B).
4. It is absurd that under Clause 24(2)(a) of IGC Report 1962 Sarawak can impose duty and excise duty on Petroleum product but cannot impose SST for products produced from Sarawak O&G, belonging to Sarawak. That is real discrimination by Federal per se under 95B(3) in the final analysis.
5. This void and illegal fudging of the FC is beyond the statutory and constitutional interpretations of the Constitution, the spirit, soul and body of MA1963. Professor Farouki’s unfortunate assertions in front of judges in attendance were misleading and without explanations why these additional interpolations of the two offending provisions were conspicuously omitted in those three Basic Constitutional Agreements. How could the fudged two provisions not in serious violations of the Items 2(c), 2(a) and 2(d), 3 Apex Laws and MA1963?
6. No doubt, if Professor Farouki’s opinions were correct the tax payers would be delighted to avoid paying Federal Sales Taxes on the State Lists e.g. on land transfer, forestry products and others such as real property gains tax.
Equitable Solutions
We hope parliament and Putrajaya will under the Rule of Law and Article VIII of MA1963 amend these fudged provisions.
With the 35 per cent -53 per cent SB/SP reinstated in Petronas,there will be a new equitable balanced and fair shared wealth of 20 per cent staggered payments for the Borneo Territories in the legal and political settlements, not out of greed, but fair justice for the owners of their O&G suffering for 43 years already waiting to catch up its development left behind.
They will continue their national services with 72 per cent O&G revenues or corollary of ‘Musang king durians’ for the increased grants for the Borneo States, States of Malaya, our King and Country.