North Borneo Federation

The North Borneo Federation, also known as North Kalimantan (Negara Kesatuan Kalimantan Utara), was a proposed political entity which would have comprised the British colonies of Sarawak, British North Borneo (now known as the Malaysian state of Sabah) and the protectorate of Brunei.

Attempts for the establishment
In 1956, the governments of Sarawak, North Borneo and the State of Brunei announced that they would abandon the Malayan dollar and adopt a common currency of their own, but that never came into being.

The idea of the North Kalimantan was proposed by Brunei's People Party President, A. M. Azahari, who had forged links with Sukarno's nationalist movement, together with Ahmad Zaidi, in Java in the 1940s. The idea supported and propagated the unification of all Borneo territories under British rule to form an independent leftist North Kalimantan state. Azahari personally favoured Brunei's independence and merging with British North Borneo and Sarawak to form the federation with the Sultan of Brunei as the constitutional monarch.

However, the Brunei People’s Party was in favour of joining Malaysia on the condition it was as the unified three territories of northern Borneo with their own Sultan, and hence was strong enough to resist domination by Malaya, Singapore, Malay administrators or Chinese merchants.

The North Borneo (or Kalimantan Utara) proposal was seen as a post-decolonisation alternative by local opposition against the Malaysia plan. Local opposition throughout the Borneo territories was primarily based on economic, political, historical and cultural differences between the Borneo states and Malaya, as well as the refusal to be subjected under peninsular political domination. Joining to form Malaysia was seen as a new form of colonialism under Malaya.

The basic concept behind the formation of a union of British Borneo was partly based upon the Federation of Rhodesia and Nyasaland in Southern Africa. After the defeat of the revolutionaries in the Brunei Revolt, the idea was put to rest. Had the federation been formed, the capital city would probably have been chosen from Kuching (capital of Sarawak), Jesselton (present-day Kota Kinabalu, capital of Sabah) or Bandar Brunei (present-day Bandar Seri Begawan, capital of Brunei and the historical capital of the region).

The Sultanate of Brunei has traditionally opposed such a federation. When it was first proposed during the 1960s the Sultan of Brunei favoured joining Malaysia, though, in the end, disagreements concerning the nature of such a federation, and also disputes over oil royalties stopped this from happening.

North Borneo Dispute
The North Borneo dispute, also known as the Sabah dispute, is the territorial dispute between Malaysia and the Philippines over much of the eastern part of the state of Sabah. Sabah was previously known as North Borneo prior to the formation of the Malaysian federation.

The Philippines, presenting itself as the successor state of the Sultanate of Sulu, retains a "dormant claim" on Eastern Sabah on the basis that the territory was only leased to the British North Borneo Company in 1878, and the sovereignty of the sultanate (and subsequently the republic) over the territory was never relinquished. However, Malaysia considers this dispute a "non-issue", as it interprets the 1878 agreement as that of cession, and it deems that the residents of Sabah (including Eastern Sabah) exercised their right to self-determination when they joined to form the Malaysian federation in 1963.

Malaysia inherited the deal in 1963, when the Federation of Malaysia was formed. However, Malaysia halted annual payments of 5,300 ringgit ($1,200) to the sultan’s descendants after the bloody 2013 Lahad Datu incursion, carried out by followers of the self-proclaimed Sultan, Jamalul Kiram III. Years later, eight of these Sulu heirs, who insisted they were not involved in the standoff, hired lawyers to pursue legal action based on the original commercial deal. Since then, Sulu claimants have been accused of “forum shopping".

In 2017, the heirs showed their intention to start arbitration in Spain and asked for $32.2 billion in compensation. In 2019, Malaysia responded for the first time. The attorney general at the time offered to start making yearly payments again and to pay 48,000 Malaysian ringgit (about $10,400) for past dues and interest, but only if the heirs gave up their claim. The heirs did not accept this offer and the case, led by Spanish arbiter Gonzalo Stampa, continued without Malaysia being involved.

In February 2022, Gonzalo Stampa - the arbitrator for the case - awarded US$14.9 billion to the Sultan of Sulu’s heirs, who have since sought to enforce the award against Malaysian state-owned assets around the world. It is noteworthy that the High Court of Madrid had annulled the procedure presided over by Stampa, who then moved the case to Paris, where he announced a verdict against Malaysia. In a crucial recent development, Stampa has been convicted of contempt of court for “knowingly disobeying rulings and orders from the Madrid High Court of Justice”, and sentenced to six months in prison. The proceedings of the case are still ongoing.