Kelantan govt withdraws suit against Petronas but maintains legal action against federal govt

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KUALA LUMPUR (May 21): The PAS-led Kelantan government had last week withdrawn its nine-year-old suit against national oil company Petroliam Nasional Bhd (Petronas) over not receiving oil royalties from oil exploration and mining activities offshore in its borders.

However, the federal government, which stood as an intervener in the suit against Petronas, remains a party in the suit.

This was revealed by parties before High Court judge Justice Datuk Ahmad Bache in chambers today.

Lawyer Aleeya Elyana Ahmad Mahreez, who is acting for the Kelantan government, said her firm had filed a notice of discontinuance on Petronas last May 13.

"However, there are no instructions on (whether to withdraw or maintain the suit against) the federal government," she told reporters after case management before Justice Ahmad.

Federal counsel Siti Asmath Che Man, who appeared for the federal government, had no comment when asked by reporters.

Aleeya Elyana said Justice Ahmad fixed June 21 for further case management.

In March, Economic Affairs Minister Datuk Seri Mohamed Azmin Ali said the federal government will pay oil royalty to Kelantan after the withdrawal of the Kelantan government's lawsuit against it and Petronas are completed.

Azmin claimed that the Kelantan government had begun withdrawal of the proceedings, which he expects to be concluded in April.

"After the proceedings are settled, we will execute what we have promised by making the payment of oil royalty directly to the state government," the minister was quoted as saying.

Then Kelantan Menteri Besar, the late Datuk Nik Aziz Nik Mat, had led his exco members in filing the suit against Petronas on Aug 30, 2010, claiming that the state had been discriminated against for not getting oil royalty payments for activities offshore of its state.

Nik Aziz had engaged senior lawyer Tommy Thomas to act for the state government. Thomas is now the Attorney General in the Pakatan Harapan-led government.

In its suit, the Kelantan state government sought a court order for specific performance of the Kelantan Petroleum Agreement dated May 9, 1975.

The agreement, it said, required Petronas to make annual cash payments to the state government amounting to an equivalent of 5% of petroleum won and saved onshore and offshore Kelantan and sold by Petronas, its agents or contractors.

The Kelantan government accused Petronas of breaching its obligations under the Petroleum Development Act 1974, the Kelantan Petroleum Agreement and the Kelantan Grant.

In its suit, the Kelantan government also said that Nik Aziz had written a letter dated Dec 31, 2009 to the president and CEO of Petronas requesting for cash payments to be made to the Kelantan state government for petroleum won offshore Kelantan.

According to the details of the writ of summons, the Kelantan government said it had received a reply from the president and CEO of Petronas dated Feb 2 and April 12, 2010, which said the state government was not entitled to receive any cash payments.

Through the legal action, Kelantan wants an inquiry be ordered to require Petronas to fully disclose all the relevant facts related to the cash payments payable to Kelantan and for all arrears to be accounted and paid within one month of a court order.

The Kelantan government was also seeking a further order for all future cash payments to be paid for petroleum produced offshore, damages, interest of 8% per annum, costs and other reliefs.

The federal government stood in as an intervener in the suit later in 2010.

Besides the Kelantan government, the then PAS-led Terengganu government had filed a similar suit where Thomas acted as its counsel, but they later withdrew it, according to a report by The Edge Financial Daily on April 23, 2012.

The Terengganu government, Petronas and the federal government reached an undisclosed out-of-court settlement.