Following this, the Kota Kinabalu High Court will hear the merits of a judicial review over the federal government’s alleged failure to return the money recovered from Sabah to the state government
KOTA KINABALU : -The Federal Court has today dismissed the Attorney-General’s (AG) application to set aside a challenge by the Sabah Law Society (SLS) to proceed with a judicial review involving the issue of the state’s 40 per cent revenue rights.
A three-member Federal Court bench chaired by Justice P Nallini today denied leave to the AG to commence an appeal.
Following this, the Kota Kinabalu High Court will hear the merits of a judicial review over the federal government’s alleged failure to return the money recovered from Sabah to the state government.
The civil action was linked to annual revenue during the so-called “lost years” between 1974 and 2022.
Two years ago, SLS filed a judicial review application to quash the federal government’s gazette of the RM125.6 million annual grant for Sabah, claiming it violated the state’s revenue rights under the Malaysia Agreement 1963.
The Kota Kinabalu High Court then granted leave to SLS to proceed with the action and the Court of Appeal upheld the decision.
SLS claimed that the federal government’s failure to revise the payment in 1974 was a breach of its obligations under Article 112D of the Federal Constitution.
Article 112D states that the federal government’s annual grants to Sabah are subject to periodic review.
The provision for the grant is tabled under Article 112C(1)(a), read together with Part IV of the Tenth Schedule of the Constitution.
Among other things, it states that the federal government shall grant Sabah an annual grant equal to “two-fifths of the total net revenue earned by the federal government from Sabah in excess of the net revenue that should have been obtained in that year”.
However, according to Article 112D, if the federal and state governments agree, they can modify or repeal these grants, or create new grants in place of the grants specified in the Constitution.
Article 112D also outlines various factors to consider in the review, including the financial position of the federal government, the needs of the state government, and ensuring that the state government has sufficient revenue to cover the cost of its services.
The grant was part of a concession given to Sabah for joining Malaya and Sarawak to form the Federation of Malaysia in 1963.
According to news reports, following the first revision under Article 112D in 1969, the two governments agreed on the following amounts in lieu of grants for Sabah under Article 112C(1)(a): RM20 million in 1969, RM21.5 million in 1970, RM23.1 million in 1971, RM24.8 million in 1972, and RM26.7 million in 1973.
The second revision was supposed to be done in 1974 but it is said that it did not materialize.
On the other hand, according to a parliamentary reply on March 6 last year, Sabah was paid RM26.7 million for each subsequent year until the review was carried out in 2022.
The new arrangements after the 2022 revision, according to the Federal Gazette in April 2022 are: RM125.6 million in 2022, RM129.7 million in 2023, RM133.8 million in 2024, RM138.1 million in 2025, and RM142.6 million in 2026.
The amount reached RM669.8 million in five years.
However, Prime Minister and Finance Minister Anwar Ibrahim told Parliament last year in a written reply to Keningau MP Jeffrey Kitingan that there would be negotiations for a new arrangement.
Following this, after a review in June last year, the 2022 arrangement was cancelled in favour of a new agreement gazetted on Nov 22, 2023.
The federal government will pay Sabah RM125.6 million in 2022, RM300 million in 2023, RM306 million in 2024, RM312 million in 2025, RM318 million in 2026, and RM325 million in 2027.
It is RM1.687 billion over a six-year period.
The payment was made in lieu of grants stipulated under Article 112C(1)(a), but Pakatan Harapan in its 2022 election manifesto promised to return it to its “original formula” – Malaysiakini
