MADRID — The criminal chamber of the Supreme Court of Spain has upheld the conviction of a sole arbitrator who presided over a controversial multibillion-dollar arbitration against Malaysia, ruling that he acted in “serious disobedience” by continuing the proceedings after a Spanish court had annulled his appointment.
The dispute stems from claims brought by descendants of the historical ruler known as the Sultan of Sulu, who sought compensation from Malaysia over territory in what is now the Malaysian state of Sabah. The arbitration gained global attention when the arbitrator eventually issued a final award ordering Malaysia to pay roughly $15 billion.
According to the court, the arbitrator’s authority had already been invalidated earlier by a Spanish court after it determined that the appointment process suffered from defective service on a foreign sovereign. Once the proceedings appointing him were declared void, the court said, the arbitrator no longer had any lawful mandate to continue with the case.
Despite being formally instructed by a court clerk to stop acting in the matter, the arbitrator pressed ahead. He issued a preliminary award affirming his jurisdiction over the dispute, relocated the seat of the arbitration from Madrid to Paris, and ultimately delivered the massive damages award against Malaysia.
In its ruling, the Spanish high court emphasized that the principle of arbitral autonomy does not permit arbitrators to ignore binding judicial decisions. When the appointment was nullified, the court said, the decision that had originally empowered the arbitrator effectively disappeared from “the legal world,” leaving him without authority to proceed.
The judgment underscores the limits of arbitral independence when national courts intervene, marking a significant development in one of the most closely watched arbitration disputes involving a sovereign state.
Legal observers say the ruling clarifies that while arbitration is designed to operate independently of courts, arbitrators must still comply with binding judicial determinations — particularly when those decisions invalidate the very basis of their appointment.