Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily on June 22, 2018

PUTRAJAYA: The Federal Court will deliver its decision on whether to grant Petroliam Nasional Bhd (Petronas) its application for leave to commence proceedings against the Sarawak state government today.

After hearing arguments from both parties yesterday, Chief Judge of the High Court of Malaya Tan Sri Wira Ahmad Haji Maarop said the court proceedings had been adjourned until 9.30am today.

The hearing, initially scheduled for June 12, was postponed after the federal government’s Attorney General’s (AG) Chamber asked for more time to look into the case. Yesterday, legal counsel Datuk Malik Imtiaz Sarwar, who represents Petronas, notified the Federal Court that the federal government’s AG will be on watching brief for now.

Petronas is challenging the Sarawak government’s claim to regulatory authority in the upstream oil and gas (O&G) sector. The key issue is whether the extraction and exploration of petroleum resources require mining leases from the state. While Sarawak has repeatedly said it has regulatory authority over such activities, Petronas is now asserting it does not need approvals from the state to undertake upstream O&G activities in Sarawak.

Petronas also said the legal action is to seek a declaration from the apex court that the Petroleum Development Act 1974 (PDA) is the law applicable tor the nation’s petroleum industry. The company is also seeking a declaration that it is the exclusive owner of petroleum resources as well as the only regulator of upstream activities nationwide.

After the hearing yesterday, legal counsel Datuk JC Fong, who represents the Sarawak government, said the case is not about challenging the constitutional power of parliament in making or changing the law in Sarawak’s upstream O&G activities.

“This issue is not within the power of the Federal Court to decide; it is a matter of judicial interpretation by the High Court. Secondly, the Oil Mining Ordinance 1958 (OMO) is a law passed by the state before Malaysia Day. After Malaysia Day, that ordinance remains a good law and applies only to Sarawak. Thirdly, OMO is not about oil and oilfields; it is about regulating the exploration, exploitation and mining of petroleum on land in Sarawak, and OMO covers all these activities on shores or continental shelves. We are of the view that Petronas has to comply with state laws, particularly OMO and the Sarawak Land Code,” he said.

However, Malik Imtiaz said the case does involve legislative power.

“The dispute is whether the subject matter pertains to legislative power or not. Our view is it does because what Sarawak is saying is that OMO is a valid law, which the state is entitled to enforce. We are saying the power to control and regulate upstream activities is something [that] falls within the purview of parliament exclusively. If that is right, the state has no power to enforce OMO because the state power depends on legislative power,” he added, saying the matter cannot be taken to the High Court because his understanding is that interpretation of the Constitution for purposes like this is something within the Federal Court’s jurisdiction.

“The other issue is whether we have applied for sufficient declaratory orders. What we asked for was an order that parliament has the exclusive competence to enact laws on upstream activities. We say that the PDA is a valid law because of that, and consequentially the PDA gives power to regulate throughout the country regardless of offshore or onshore. Accordingly, because of the Malaysia Act, OMO would have become a federal law, but since the PDA was passed, OMO was repealed impliedly,” he said.

 

 

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