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Thursday, March 31, 2011

Kelantan oil royalty suit stays in civil court

March 31, 2011

KUALA LUMPUR, March 31 — The Kelantan government failed in its attempt today to transfer its oil royalty suit against Petronas back to the commercial court after the New Civil High Court (NCvC) here struck out its application.

Judge Zabariah Mohd Yusof decided to keep the case in the High Court’s civil division this afternoon following submissions from both parties in chambers. She also set April 21 for mention of the suit.

The case against the national oil company had originally been placed in the New Commercial Court (NCC) when it was filed last year by Kelantan Mentri Besar Datuk Seri Nik Abdul Aziz Nik Mat.

According to the state government’s representative and state executive councillor Datuk Husam Musa, the transfer was done in January this year and had not been based on any formal application by any party in the suit.

As such, the state’s counsel filed its affidavit at the High Court on March 15, seeking that the case be transferred back to the NCC.

Following the application, Husam told The Malaysian Insider that the state wanted the matter to be heard in the civil court as the suit involved business contracts.

According to Husam’s affidavit, the plaintiff’s counsel was only been informed by the court registrar on January 18 during case management that the matter had been transferred to the civil court because it involved constitutional issues.

But the court decided today that the matter would stay in the NCvC as the transfer was merely court administration, without need for any application by the parties in the suit.

Lawyer Tommy Thomas represented the Kelantan government today while Rishwant Singh and Tan Sri Cecil Abraham represented Petronas. Senior Federal Counsel Datin Azizah Nawawi acted for the federal government.

The Kelantan government claims Petronas owes the state RM800 million per annum from the Kelantan-Thailand offshore area since 2005.

The Kelantan government filed a suit last year in the High Court here against the oil giant for breaching the Petroleum Development Act (PDA) 1974 by failing to pay the state oil royalties.

Petronas and Putrajaya have continued to argue that Kelantan is not entitled to oil royalties, preferring instead to offer only a token goodwill payment.

The Kelantan administration, however, contends that under the PDA, Kelantan Petroleum Agreement and Kelantan Grant, Petronas is obliged to make cash payments twice a year for all oil obtained from Kelantan’s offshore.

The PDA states that in return for vesting of petroleum ownership in the company, Petronas would pay cash payments to the federal government and state governments where petroleum was found.

On May 9, 1975, Petronas had entered into an agreement with Kelantan where it agreed to make cash payments yearly amounting to the equivalent of five per cent of the value of petroleum obtained onshore and offshore Kelantan. In consideration of Petronas’s payments, it was granted exclusive rights and privileges of obtaining petroleum in the state under the Kelantan Grant.

The state government is also seeking a court order that all future cash payments be paid to Kelantan by Petronas for oil produced offshore Kelantan; an account or an inquiry to make a full and frank disclosure of all the relevant facts relating to cash payments payable to Kelantan, including the period from which petroleum has been produced, won or obtained offshore Kelantan; and general damages. - Malaysian Insider

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