Spanish court convicts arbitrator who awarded $15 billion to sultan's heirs in Malaysia dispute

MADRID (Reuters) - A Spanish arbitrator who awarded $15 billion to the descendants of a former sultan in a land dispute with Malaysia dating back to the 19th century has been convicted of contempt of court, it was announced on Monday, a significant victory in Malaysia's efforts to annul the case.

Gonzalo Stampa was accused by the Spanish state prosecutor and Malaysia of failing to comply with a Madrid court ruling to drop the case by instead moving it to a court in Paris.

Stampa was sentenced to six months in jail and barred from operating for one year, according to the ruling.

In February 2022, Stampa awarded $14.9 billion to the Sultan of Sulu's heirs, who have since sought to enforce the award against Malaysian state-owned assets around the world. Malaysia has obtained a stay on the case in France, but the ruling remains enforceable globally under a U.N. arbitration treaty.

"Congratulations to all Malaysians! The efforts by this (government) in addressing and putting a stop to the Sulu Fraud have not been in vain," Law Minister Azalina Othman Said wrote on X, formerly known as Twitter.

The dispute stems from an 1878 deal between European colonists and the Sultan of Sulu for use of his territory, which spanned parts of the southern Philippines and present-day Malaysia on the island of Borneo.

Malaysia paid a token sum annually to the sultan's heirs to honour the agreement but stopped in 2013, prompting the heirs to seek arbitration, which has been funded by Therium, a London-based firm that provides financing for litigation and arbitration cases.

Stampa's fees after delivering the award came to about $2.3 million, court documents showed. The heirs, who suffered a setback in June 2023 after a Paris court upheld the Malaysian government's challenge against a partial award, are also trying to strengthen their case in Madrid.

They filed a criminal case against the Spanish justice system in December 2023, claiming that a court clerk in Madrid improperly sent an email ordering Stampa to step down from the case.

(Reporting by Emma Pinedo and David Latona; writing by Charlie Devereux, editing by Ed Osmond)