A Ruler’s Latest Foibles

[MBM’s note: A few days after my piece below was posted on Malaysia-Today.net, the Special Court on October 15, 2008 unanimously ordered Tuanku Ja’afar to re-pay the US$1mil (RM3.5mil) loan to Standard Chartered Bank.

Chief Justice Abdul Hamid Mohamad sat with Chief Judge of Malaya Justice Alauddin Mohd Sheriff, Chief Judge of Sabah and Sarawak Justice Richard Malanjum and Federal Court judges Justices Ariffin Zakaria and Zulkefli Ahmad Makinudin.

Three additional facts were known after the judgment was released. One, the transaction (loan) occurred on February 12, 1999, during Tuanku Ja’afar’s tenure as the Yang Di Pertuan Agong (King). Two, I tried to “google” the American company involved, Texas Encore LLC, but was unable to find any information. In America, a LLC (Limited Liability Corporation) has the tax advantages of a private partnership while enjoying the legal shield of a corporation. Three, there will be no bankruptcy proceedings as the Court allowed the bank to recover the money owed from Tuanku Jaa’afar’s fixed deposit account with the bank.

The five-man panel also dismissed with costs a counter-suit filed by the former King seeking for a declaration that the bank was not entitled in law to uplift his fixed deposit in settlement of any liability arising from the loan.

Justice Abdul Hamid read out the 32-page judgment over the two suits on his last day sitting on the Bench as the top judge of the country. MBM]

Two recent news items tucked inconspicuously in the mainstream papers caught my attention. One was a column by Shad Saleem Faruqi (“Test Case On Right To Sue Sultans,” The Star, August 20, 2008) on the precedent-setting Special Court trial in which the Yang Di Pertuan Besar of Negri Sembilan Tuanku Jaafar was being sued for non-payment of debts, and the other, an essentially palace social announcement of the same ruler going on leave and naming his son as Regent (“Tunku Naquiyuddin is Negri Regent,” The New Straits Times, September 30, 2008).

The two may be separate news items, but I see a disturbing connection, if not a pattern.

The proceedings of the Special Court, unlike that of the regular courts, are not open. We have to wait for the judgment to be delivered to get the material facts of the case.

This much we do know from Shad’s column. Standard Chartered Bank is suing the ruler over a debt of RM 3.24 M. While that is quite a sum of money, it is considerably less that what the state has to fork out annually to maintain the royal household. Further, that amount represents only a tiny fraction of the ruler’s non-royal or investment income, and an even tinier portion of his total assets, considering that the Negri royal household has considerable business interests.

On the “lack-of-tact” scale, that amount is only a fraction of former Sabah Chief Minister Osu Sukum’s weekend gambling debt in London. I am heartened that our sultans in the peninsular have less extravagant and equally less vulgar taste than those newly-rich Bumiputras of Borneo.

Then there is the announcement of the ruler going on a two-month overseas holiday. I do not know who will be responsible for the tab, but going by past experiences taxpayers will ultimately be left holding the bag. Nonetheless there will still be considerable personal expenses for which the ruler would not be reimbursed from the state (at least I hope so!).

Stated another way, if the ruler had stayed in the country instead of going on an expensive foreign vacation, and diverted the money thus saved towards repayment of his debt, it would have made a considerable dent towards the principle. He would also spare the state treasury a considerable sum, money that could be used to improve the lives of citizens.

Finally, on an administrative matter, the cost of empanelling the Special Court including the legal fees for both parties could easily exceed the amount of the loan.

In a trial over the recovery of a loan, unlike tort or criminal cases, there would be very little disagreement over the material facts. Meaning, there will be no dispute over the fact that money was transferred from Chartered Bank to an entity in which the ruler has an interest, or is liable for. And that sum of money has not been repaid. If there had been any fraudulent transfer, it would be a criminal, not civil case.

The possible point of contest would be for the ruler to deny any liability for the loan. The bank would of course contend otherwise, and that the ruler is either directly or vicariously liable for the loan. I eagerly await the bank’s arguments as those transactional details would inevitably reveal the myriad commercial and other links of the royal household.

Mahathir’s Finest Legacy

One of Mahathir’s finest legacies is his amending the constitution in 1993 to remove the sultans’ absolute legal immunity. With that, our sultans can now be sued over both civil and criminal matters relating to their personal conduct.

If not for that amendment, Standard Chartered would have to swallow its bad debts to the ruler, just like other lenders had pre-1993. Of course the bank would not have made that loan then; its loan officers would not jeopardize their careers, unless of course the bank is one of those GLCs where normal prudent lending practices do not apply, especially when the beneficiaries are “big shots.”

The mistake the ruler made here is in borrowing from a “real” bank, a multinational outfit where its officers are true professionals who put their banking reputation ahead of the prestige of some Third World royal potentate. There was a time however when these foreign banks were not above bribing local chieftains, but enlightened legislations back in their home country put an end to that. Foreign especially Western bankers are now liable for criminal prosecution back home if they were to engage in such activities abroad.

It is to be noted that during pre-amendment times, local bankers and businessmen willingly extended credit to our sultans fully aware that these lenders would have no recourse should our sultans renege on their promises to repay. Those lenders were not stupid; they considered those unpaid loans as part of the cost of doing business in the state. Meaning, their other customers would have to bear those costs of unpaid royal loans. Besides, those creditors now sport fancy royal titles; to them those are payments enough. Those loans are nothing more than barely-concealed and very expensive royal bakshis (corruption).

As Shad noted in his column, the constitutional amendment is silent with regards to the fate of rulers during the trial or once the verdict is delivered. If convicted on matters criminal, the ruler would have to vacate (abdicate) the throne unless pardoned by his brother rulers.

With matters civil, as with non-repayment of loans, the matter is less clear. Regardless, it would be a great shame were the Council of Rulers to pardon the Negri ruler for a measly sum of RM 3M. Surely the council would not risk besmirching its dignity by doing that. Let us hope that their collective judgment is wiser.

The Negri ruler has shown little judgment in risking the dignity of his throne over such a small loan. I do not expect that to change should the judgment be against him. Thus expect even greater assault on the dignity of the throne.

Standard Chartered will undoubtedly pursue the matter vigorously, as well it should. We could thus potentially see the ruler be subjected to bankruptcy proceedings. He would not be the first member of the royal household to be so subjected, but he would be the first ruler. That would be quite a legacy.

Absent a pardon, the country would face the specter of a bankrupt ruler sitting on the throne. Even if the Council of Rulers were to grant a pardon, that would not erase the fact that the ruler was bankrupt, someone who reneged on his promise to repay his loan.

Malay sultans are more than just rulers; they are the head of Islam, Allah’s representative on earth. During khutbas in all the mosques, the sultan is always mentioned and prayers offered for his longevity and wisdom in ruling.

One of the tenets of Islam is that we must be true to our words and contracts. Non-repayment of loans is a breach of that. Specifically in referring to loans, Muslims are advised to settle their debts before the end of Ramadan, so that on Hari Raya day we would start with a fresh slate, clear of debt.

Like Father, Like Son

This brings me to the second news item about the naming of the Regent. This is standard procedure when the ruler is expected to be away for an extended period.

Negri Sembilan is unique in that the throne is not automatically passed on to the oldest son. Instead the territorial chiefs, the Undangs, have the final say. Tuanku Jaafar’s naming a regent does not mean that the person would automatically ascend to the throne. However, there is the universal law of inertia, of things remaining where they are. The aphorism, “possession being nine-tenth of the law” is a derivative of that observation.

I am wondering whether the naming of a Regent now is an attempt to benefit from this law of inertia. I hope that the Undangs will exercise better judgment when selecting the successor to Tuanku Jaafar, and not be bound by the law of inertia.

The other consideration is that the ways and morals of a father inevitably would rub off onto his children. Tuanku Jaafar’s children, including the one he named as regent, are all successful in their own careers. Their individual net worth must be considerable. I would have expected that at least one of them or they collectively would bail out their father. That they did not reveal much about themselves.

At age 86, Tuanku Jaafar is not in the best of health. It may well be that the Special Court’s judgment will be mute. At which point the citizens of Negri Sembilan would have to await the judgment of the Undangs.

This is a time for our Undangs to remember why our ancestors in their wisdom chose to name the ruler of our state not sultan but “Yang Di Pertuan Besar.” Literally it means, “The One We Make Big.” The we refers to the people, as represented by our Undangs.

On a larger scale this is also the title we give the “King” of Malaysia, “Yang Di Pertuan Agong,” meaning, the one we make supreme. Mahathir’s 1993 constitutional amendment gives substance to the meaning of the phrase “we make supreme.” That amendment also made it possible for Standard Chartered to pursue its current suit against the Negri ruler.

First posted on Malaysia-Today.net, October 12, 2008

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