1878 deal: ‘freehold’

Former Defense secretary Gilbert Teodoro advised an exhaustive study of the French arbitral court award of $14.9 billion to the Sulu Sultanate in its dispute with Malaysia over Sabah, because therein also lies the key to the country’s territorial claim.

He is right. A copy of the international tribunal’s decision, simply titled “Heirs to the Sultanate of Sulu vs Malaysia,” clearly stated that the nature of the 1878 agreement among Sulu Sultan Jamal Al Alam, British government representative Baron de Overbeck and the British North Borneo Company’s Alfred Dent is an “international private lease agreement, of commercial nature.”

The agreement being a lease deal debunked the claim of Malaysia that the 1878 document was a cession agreement.

Among the records cited by the sole arbitrator Dr. Gonzalo Stampa in his landmark ruling was a 22 July 1878 letter of Carlos Martínez, the then (Spanish) Colonel-General of Sulu, to Overbeck, in which he characterized the 1878 Agreement as a commercial agreement, defined as “an engagement… contracted with you for a lease of Sandakan and its dependencies….”

Overbeck answered his letter on 24 July 1878 and referred to the 1878 agreement as “the agreement executed between His Highness, the Sultan, and myself as representative of British interests, in connection with the assignment of a certain portion of the eastern coast of Borneo….”

Stampa wrote in his ruling: “He himself characterized the 1878 Agreement as an agreement of a commercial nature.”

Mr. Martínez answered this letter on 24 July 1878. Its wording once again, referred to the 1878 Agreement as “a contract of lease with the very Sultan…” and made the reservation that it would be Baron of Overbeck himself who “will understand the value of your contract.”

The ruling provided that the terms in the contract “are the constituent elements of a lease agreement, which created… a sort of perpetual leasehold (instead of freehold)…” over the territory of North Borneo and its adjacent islands.

Moreover, the ruling stated the Sultan of Sulu reaffirms his twofold condition of freeholder and landlord of North Borneo. According to the 1878 Agreement, Dent and Overbeck were allowed “the management of North Borneo and its adjacent islands… the lands that are of my domain… (las tierras que son de mi dominio).”

“Messrs. Dent and Overbeck hence became tenants,” it added.

According to Dr. Stampa, the Sultan’s statement also confirmed that the 1878 Agreement, as a lease agreement, “did not result in the transfer of rights of dominion or ownership or permanent cession of his territorial sovereignty over the mainland of North Borneo and its adjacent islands in favor of Messrs. Dent and Overbeck.”

The exact term used in the award was that the 1878 contract was a “freehold”.

“Freehold is legally defined as permanent and absolute tenure of land with freedom to dispose of it at will. The proprietor of the freehold — the freeholder — owns the property and the land it stands on,” according to the tribunal’s decision.

If a freeholder grants a lease, he becomes a landlord, through the signature of a lease agreement with the tenant, the ruling added.

“The lease agreement does not result in the transfer of rights of dominion or ownership over the land. The lease creates, instead, the leasehold, defined as the right to use and have exclusive possession (but not ownership) of land where it stands by the tenant for a set period — which can be a number of years, decades or centuries — and subject to the fulfilment of certain conditions as recorded in the lease agreement entered into with the landlord,” according to the international court.

The Sulu Sultanate had always asserted that the deal was a lease that makes Sabah part of the Philippine territory.

It is a determination that is as significant as the country’s territorial claim on the West Philippine Sea.

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