Prof James Chin

The federal government’s recent legal manoeuvres to delay implementation of Sabah’s long-overdue 40% revenue entitlement have ignited fresh controversy, underscoring deep-seated tensions in federal-state relations under the Malaysia Agreement 1963 (MA63).

On 17 October, 2025, the Kota Kinabalu High Court delivered a landmark ruling in favor of the Sabah Law Society’s judicial review. The court issued a mandamus order requiring a fresh joint review with the Sabah state government within 90 days and an agreement on the entitlement, including back payments for the “lost years” from 1974 to 2021, within 180 days, with 15 April, 2026 as the deadline for resolution.

Anwar then announced that the federal government accepted the ruling just prior to the Sabah state election, but this was undermined when the Attorney General (AG) pursued appeals on certain “defects” in the judgment’s reasoning.

Then on 3 March, 2026, the AG applied for a stay of the High Court’s order.

This contradictory move (professing support for the 40% ruling while seeking to halt its enforcement) has not confirmed the worst fears of Sabahans. Many were already sceptical of the federal government’s true intentions towards paying the 40%.

You cannot blame people for being cynical towards the federal government since even the Minister for Sabah and Sarawak Affairs, Datuk Mustapha Sakmud, admitted he was not informed in advance and expressed astonishment.

How could such a significant action proceed without looping in the very minister tasked with Sabah and Sarawak affairs?

It suggests decision-making concentrated in Putrajaya’s legal and fiscal corridors, sidelining Sabah voices even among those holding federal positions.

The AG’s Chambers would not file without high-level approval, implying Prime Ministerial awareness at the very least.

This pattern echoes historical grievances since 1963, where federal priorities have repeatedly overridden Sabah’s interests when they conflict with national fiscal imperatives.

Combined with an appeal on aspects of the judgment’s language, these steps appear designed to prolong litigation, resetting the clock and avoiding payment altogether. Sabah politicians across parties have united in warning that failure to reach agreement by April 15 could trigger a political backlash against the federal government that have not been seen since 1985.

For the Gabungan Rakyat Sabah (GRS) state government, which has long touted its “special relationship” with the federal administration as a pathway to favourable negotiations, this development is politically perilous. If Putrajaya is perceived as negotiating in bad faith, using courts to delay rather than deliver, the GRS risks severe political backlash from Sabahans already frustrated by decades of marginalization by the federal government.

All the signs now point to stalled talks and the April deadline will not be met. The technical discussions will continue at a snail’s pace, but no breakthrough on the final figure with disputes over revenue calculations and data transparency complicating matters.

The federal government appears to be willing to carry this high political risk, no matter what Sabahans think.

The pattern is unmistakable. The same thing is happening to Sarawak as well. While the PM and the Sarawak Premier has signed a political deal, Petronas, an arm of the federal government, is still litigating against Petros, the Sarawak oil company. Hence the smart move by the Sarawak to seek a ruling on the PDA 1974.

The lesson is stark: when federal interests clash with court-mandated obligations to Borneo states, hardball tactics prevail. Having Sabah representatives in the federal government has not guaranteed influence on core issues.

Sabah enters uncharted territory if the stay is granted and appeals drag on. The federal government is seeking a protracted litigation rather than resolution.

In this context, I would tell the Sabah government that it would be wise to reject any rushed deal that undervalues the entitlement. Do not give in to federal pressures just to meet the April deadline.

A suboptimal agreement now will lock in disadvantages for generations of Sabahans. Better no deal than a lousy one, preserving leverage for full constitutional enforcement.

Sabah deserves the justice the court affirmed: not promises deferred, but rights honoured. The federal government’s actions test whether Malaysia’s federation operates on equity or dominance and history suggests the latter. This is the sad history of federal-state relations when it comes to Sabah and Sarawak.

About the author:
James Chin is Professor of Asian Studies at the University of Tasmania, and a leading authority on contemporary Sabah and Sarawak.

(The opinions expressed in this article are those of the author and do not necessarily reflect the views or editorial position of this publication.)