Malaysian disaster if Petronas declared illegal
“Personally, I think Petronas was correctly formed. There are many provisions in the Federal Constitution which could be cited to justify Petronas; e.g. one which allows Parliament to make law for the states for the purpose of uniformity.”
Wong Choon Mei, Harakahdaily English Section
It would be a major disaster for Malaysia and could even spark off an international panic if the Umno-BN federal government declared national oil firm Petronas illegal just to escape paying oil royalty to Kelantan and Terengganu, PAS leaders and legal experts said.
“On their own, our courts are not that adventurous though we should not forget the declaration of Umno as illegal in 1987, which effectively helped ex-prime minister Mahathir Mohamad to stay in power,” Abdul Aziz Bari, law professor at the International Islamic University, told Harakahdaily.
“Is it worthwhile for a corporation with the international stature of Petronas to be humiliated this way just to avoid paying Kelantan what is rightfully due to it?” asked Kelantan senior executive councilor Husam Musa.
Devious and untrustworthy
Indeed, given the size of Petronas’s foreign dealings, not just domestic but the international ramifications would reverberate if such an event really took place.
Nonetheless, speculation has swirled of late that this was one of the possibilities being mulled by Prime Minister Najib Razak and his administration to win the oil royalty battle against PAS.
The rumors intensified after the BN-controlled media ran a series of articles by several prominent lawyers that it was possible Petronas was not legally formed.
Yet according to Husam and Abdul Aziz, an illegal Petronas may actually benefit Kelantan although it would destroy Malaysia’s already sinking reputation with the world community.
“During discussion with our lawyers, such a possibility cropped up in the past. But we decided to ignore it as it would only cause damage to Petronas. Instead, we chose a more moderate view in accordance with laws and agreements,” said Husam.
“In fact the entire debate is not doing us any good internationally. This carries the bad message; namely we cannot be trusted and so on. And we are devious; always trying to find ways to avoid responsibility and liability. This is bad for business,” said Abdul Aziz.
Political prodding
It is also unlikely that without any political prodding, the courts would want to declare Petronas illegal even if there were aspects to justify it was improperly formed.
“I believe the courts would save the Petroleum Development Act 1974 instead of declaring it illegal and there are justifiable ways and means to do so. To declare Petronas illegal would be disastrous as many things including payments have been made under that law in the past and that history of transactions has to be considered,” Abdul Aziz said.
“Personally, I think Petronas was correctly formed. There are many provisions in the Federal Constitution which could be cited to justify Petronas; e.g. one which allows Parliament to make law for the states for the purpose of uniformity.”
Despite signing agreements with all the states in 1975 and 1976, the Umno-BN government has steadfastly refused to allow Petronas to pay Kelantan the cash payment or oil royalty that was agreed on.
Although Najib and his predecessors have denied it, it is believed that this was because Kelantan has been ruled by PAS for most of the past three decades. Petronas comes under the direct jurisdiction the prime minister of the day.
Terengganu, which has received royalty payments since 1978, suffered the same fate when Mahathir suddenly ordered Petronas to stop in 2000, after the state government fell to PAS in the 1999 general elections.
Mahathir’s successor Abdullah Badawi agreed to reinstate the royalty payments in early 2009 before he passed the baton to Najib. But so far, nothing has been remitted.
Kelantan and Terengganu have remained among the poorest of Malaysia’s 13 states, despite their enormous oil wealth.
The cash payment that all the states agreed on with Petronas was 5 per cent for all petroleum extracted onshore or offshore in return for surrendering their control of petroleum resources to the national oil company.
