The simple version of Sultanate of Sulu.

Malaysia still pays rent for Sabah — to the heirs of the Sultan of Sulu, under a deal signed in 1878.

The Sultanate of Sulu was a Sunni Muslim Tausūg state that, at its height, ruled the Sulu Archipelago, coastal Zamboanga, parts of Palawan, and the northeastern coast of Borneo — including what is now the Malaysian state of Sabah. It was a maritime power built on trade and, by European accounts, raiding: the Iranun and Balangingi fleets of Sulu were feared from Manila to Batavia.

In 1878, Sultan Jamalul Azam signed an agreement with the British North Borneo Company, granting it rights over his mainland Bornean territories. The company agreed to pay 5,000 Malayan dollars a year — a payment Malaysia continued, as the successor state, long after independence. The annual sum, later fixed at 5,300 ringgit, was paid to the sultan’s heirs into the 2010s.

Lease or sale? The question that will not die

The entire dispute turns on one word. The 1878 document’s Malay text uses padjak — which can mean “lease” or “cede,” depending on who is translating and who is arguing. The Sulu side, and the Philippines, read it as a lease: Sabah was rented, never sold, and the annual payment is rent. Malaysia reads it as a cession: the territory was transferred permanently, and the payment is a historical courtesy.

The Philippines has maintained a dormant claim to Sabah for decades, and the Sulu heirs have pursued the money through international courts — winning, in 2022, a staggering arbitration award in Paris (later set aside on appeal) that briefly threatened Malaysian state assets abroad. Malaysia stopped the annual payments in 2013, after the Lahad Datu standoff, when armed followers of a Sulu sultan landed in Sabah to press the claim.

The arbitration that made headlines

In 2022, the dispute exploded back onto the world stage when the heirs of the sultan won a Paris arbitration ruling awarding them nearly $15 billion against Malaysia — one of the largest arbitration awards in history. Malaysia called the proceedings illegitimate and won court rulings setting the award aside, but not before the heirs moved to seize Malaysian state assets in Europe, including oil company subsidiaries. The annual payment Malaysia stopped in 2013 was 5,300 ringgit — about a thousand dollars. The legal fight it triggered is now worth, on paper, fifteen billion.

Why it matters

The Sultanate of Sulu fell to American and then Philippine rule in the early 1900s, but its signature on a 19th-century contract still shapes the map of Southeast Asia. A lease-versus-sale argument over one word has outlived the sultanate itself by a century, survived into international arbitration, and kept two countries in a territorial dispute neither can fully close.

It is also a reminder of what Sulu was: not a minor chiefdom but a state whose sovereignty was recognized by Britain, Spain, and the United States in turn — a maritime empire whose contracts are still being litigated. The heirs of the sultan may never see Sabah again. But the rent checks, for over a century, were real.

Further reading

• Sultanate of Sulu
• North Borneo dispute