1. From the time it was acquired by the Sultan of Sulu from the Sultan of Brunei up to 24 April 1962 when it was formally ceded and transferred to the Republic of the Philippines under the title of sovereignty, the Sultanate of Sulu had continuously been the rightful sovereign of the portion North Borneo known as Sabah.1.1. In the course of internal armed conflict in the Sultanate of Brunei referred by some historians as civil war, lasting for more than 10 years, the Sultan of Brunei requested the assistance of the Sultan of Sulu, with the promise that in the event of victory he would grant him the territories in North Borneo under his dominion. Following the victory of Sultan Muaddin of Brunei, with the armed intervention of the Sultan of Sulu, accordingly he ceded Sabah to the Sultan of Sulu in 1704.1.2. By the Declaration of 24 April 1962 issued by the Heirs of the Sultan of Sulu, the territory of Sabah as thus required by cession from the Sultan of Brunei was ceded and transferred in sovereignty to the Republic of the Philippines. The Declaration was entitled Recognition and Authority in Favour of the Republic of the Philippines.1.2.1. By this Declaration, the Philippine claim to sovereignty and dominion over a portion of North Borneo became a legal claim. After the cession from the Sultanate, the Philippines acquired the rights over the territory of North Borneo which it was duty-bound as a sovereign to protect and preserve.1.3. This Declaration followed the petition of 5 February 1962 of the Heirs of the Sultan of Sulu addressed to the Department of Foreign Affairs. In this Petition the Heirs expressed their intention to have the portion of North Borneo included in the national territory of the Philippines.1.3.1. By the Instrument of 12 September 1962, the Republic of the Philippines accepted the cession of sovereignty over Sabah proclaimed by the Sultanate of Sabah.1.3.2. On 24 April 1962, congress adopted Resolution urging the President of the Philippines to take the necessary steps for the recovery of a certain portion of the Island of Borneo and adjacent islands which belong to the Philippines.1.3.3. On the basis of the Declaration of 24 April 1962 of the Heirs of the Sultan of Sulu on the transfer of sovereignty over Sabah, Congress enacted Republic Act No. 5446 amending the Baseline Law in Republic Act No. 3046, the amendment providing that the Philippines has acquired dominion and sovereignty over Sabah situated in North Borneo.2. Malaysias claim to sovereignty over Sabah was based on its inclusion in the formation of the Federation of Malaysia. It is a claim of derivative title, based on:(a) whatever interests the British Government had in Sabah, which were derived from(b) whatever interests the British North Borneo Company (BNBC) had in Sabah, which were derived from whatever interests Overbeck and Dent derived from their 1878 agreement with the Sultan of Sulu.2.1. Sufficient evidence has been shown on the side of the Sultan of Sulu that the Deed of 22 January 1878 executed by Sultan Mohammed Jamadul Alam with Gustavus Baron de Overbeck and Alfred Dent was an agreement of lease. In consideration of this (territorial) lease[they] promise to pay His Highnessand to his heirs and successors the sum of five thousand dollars annually to be paid each and every year.2.1.1. Written in Arabic, the agreement had been authoritatively translated by an American and by a Dutch scholar as lease. In the Spanish translation, the agreement has been described as an arrendamento which means lease.2.1.2. In a speech before the House of Commons, the British Prime Minister himself, William Gladstone, made reference to the Deed of 1878 as a contract of lease: We do not see how this Protectorate Agreement [of 1888], viewed in the light of the 1878 contract, can possibly divest the Sultanate of Sulu of the latters sovereignty or dominion. On the contrary, after 1888, the British North Borneo Company entered into a Confirmatory Deed with the Sultan of Sulu, thereby confirming and ratifying what was done in 1878. And we hold the view that far from repudiating the lease contract of 1878, the British North Borneo Company, said to be under British protection, confirmed British protection, confirmed and reiterated in 1903 the existence of lease relationship. (Emphasis added.)2.1.3. Overbeck and Dent as private individuals have no legal status in international law to assume the power of sovereignty involved in the cession of territory.2.1.4. Overbeck and Dent therefore had nothing to transfer in terms of title to sovereignty over Sabah to the British North Borneo Company (BNBC).2.1.5. By Proclamation of 25 November 1957, the Sultan of Sulu declared The termination of the said lease in favour of Gustavus Baron de Overbeck and Alfred Dent, their heirs and assignees, effective the 22nd day of January 1958, and that from and after that date all the lands covered by the said lease shall be deemed restituted to the Sultanate of Sulu.

4.1. Through the Government of Malaya, the British Government announced that its territories in North Borneo, including Sabah, would form part of a new Federation of Malaysia.4.2. The Philippines protested the British decision and called Britains attention to the sovereign rights of the Philippines over Sabah. After protracted negotiations, the British Government agreed to meet Philippine representatives to discuss the problem of North Borneo. Held in London in 1963, the negotiations proved to be inconclusive. In the meantime, the founding date of the new Federation was announced.5. On the initiative of President Diosdado Macapagal, a Summit conference was convened in Manila from July 30 to August 5, 1963. In this conference, on 31 July 1963, President Soekarno of Indonesia, President Diosdado Macapagal and Prime Minister Tunku Abdul Rahman of the Federation of Malaysia approved and accepted the Manila Accord, paragraph 12 of which stipulates as follows:The Philippines made it clear that its position on the inclusion of North Borneo in the Federation of Malaysia is subject to the final outcome of the Philippine claim to Borneo. The Ministers took note of the Philippine claim and the right of the Philippines to continue to pursue it in accordance with international law and the principle of the pacific settlement of disputes. They agreed that the inclusion of North Borneo in the Federation of Malaysia would not prejudice either the claim or any right thereunder. Moreover, in the context of their close association, the three countries agreed to exert the best endeavors to bring the claim to a just and expeditious solution by peaceful meansof the parties own choice, in conformity with the Charter of the United Nations and the Bandung Declaration. (Emphasis added.)5.1 In the same Summit Conference, the three Heads of Government signed a Joint Statement on 5 August 1963, paragraph 8 of which reads:In accordance with paragraph 12 of the Manila Accord, the three Heads of Government decided to request the British Government to agree to seek a just and expeditious solution to the dispute between the British Government and the Philippine Government concerning Sabah (North Borneo)The three Heads of Government take cognizance of the position regarding the Philippine claim to Sabah (North Borneo) after the establishment of the Federation of Malaysia as provided under paragraph 12 of the Manila Accord, that is, that the inclusion of Sabah (North Borneo) in the Federation of Malaysia does not prejudice the claim or any right thereunder. (Emphasis added.)

6. Malaysia had repeatedly acknowledged the Philippine claim to Sabah and that it is a claim that should be settled as soon as possible, including the prospect of settlement in the International Court of Justice. On its part, the Philippines persistently offered the settlement of dispute arising from its claim to Sabah.6.1. In February 1964, the Malaysian Prime Minister had the understanding with the Philippine President to discuss as soon as possible the best way of settling the dispute, not precluding reference to the International Court of Justice.6.2. In August 1964, the two governments agreed in an exchange of aides memoir to a meeting of their representatives in Bangkok for the purpose of clarifying the Philippine claim and of discussing the means of settling the dispute.6.3. In February 1966, in response to Malaysias diplomatic note reiterating its assurance to comply with the Manila Accord and the concomitant Joint Statement, the Philippines proposed that both Governments agree as soon as possible on a mode of settlement that is mutually acceptable to both parties.6.4. In June 1966, the two Governments, in a joint communiqu, agreed once again to abide by the Manila Accord and the Joint Statement; they reiterated their common purpose to clarify the Philippine claim and the means of settling it.6.5. In July 1968, the Philippine delegation presented the Malaysian delegation with a written question, Will you discuss with the modes of settlement of our claim at the conference in Bangkok, irrespective of your own unilateral assessment of the sufficiency of the clarification given? Malaysias answer was unqualifiedly in the affirmative.6.6. In August 1968, again in a joint communiqu, the two Governments agreed that talks on an official level would be held as soon as possible regarding the Philippine claim to Sabah.6.7. The foregoing undertakings assume significance for the reason that they are not unilateral acts of the Philippines; they are commitments jointly made by Malaysia and the Philippines. They repeatedly affirm Malaysias recognition of the existence of the Philippine claim to Sabah and its willingness to settle the dispute arising from this claim.Territorial Grant from Brunei

Baron von Overbeck, Austrian Consul-General at Hongkong at that time, convinced Dent in supporting a venture in Sabah and together they planned to sell their rights to any interested government. With the money he received from Dent to conduct negotiations, the baron sailed to Brunei. He succeeded in persuading the Sultan, who presumably could not resist the tempting compensation offered. On December 29, 1877, the sultan entered into agreement with von Overbeck, in which the latter gained three territorial grant and for which the sultan received a total annual payment of 12, 000 Malayan Dollar.Together with the above-mention grants, the sultan appointed von Overbeck supreme ruler with the title of Maharajah of Sabah and Rajah of Gaya and Sandakan, with delegated powers to govern the territory.The Baron, however, evidently realized that several factors tended to depreciate the value of the grants he had obtained. This is because; more than a century and a half earlier the territory had already been ceded to the Sultan of Sulu who was in actual possession. Moreover, Brunei chiefs refused to recognize the Sultan of Bruneis rights to cede the territory.Von Overbeck, aware of the Sultan of Sulus dominion in North Borneo, found it necessary to entered into negotiation with the sultan for the lease of the territory. Overbeck and William W. Treacher (Acting British Consul-General at Labuan Island in Borneo), went to Sulu in January 1878. The contract dated January 22, 1878, was drafted by Overbeck himself and was written in Malayan language with Arabic character.

Territorial Lease from Sulu.

From Labuan, Baron von Overbeck, Joseph W. Torrey, and William Clark Cowie sailed to Jolo on board the steamer, America, arriving at their destination on January 16. Consul Treacher also reached Jolo on the same day, having sailed separately on the British Warship, Fly.Von Overbeck and his companion were shrewd negotiators and their combined effort brought to bear on the sultan, already hard-press by an ongoing campaign in Sulu, was hardly in a position to refuse. During the bargaining, Cowie, whom the sultan had great confidence as a gun-smuggling partner, contributed his own persuasive influence after having been led to believed that von Overbeck would reward him.Treacher, whom the sultan consulted, said that Overbeck represented a bona fide British company, and intimated to the Sultan that the Spanish Captain-General himself was at the head of the expedition already in Zamboanga poised and ready to destroy Jolo; and that the Sultan of Brunei had recently ceded to them the territory and was already to take possession of it anyway. Evidently a lease of the sultans possession in Sabah, its pertinent provisions read thus:We Sri Paduka Maulana Al Sultan Mohammad Jamalul Alam, son of Sari Paduka Marhum Al Sultan Mohammad Pulalum, Sultan of Sulu and of all dependencies thereof, on behalf of ourselves and for our heirs and successors, and with the expressed desire of all Datus in common agreement, do hereby desire to lease of our own free will and satisfaction, to Gustavus Baron de Overbeck of Hong Kong, and to Alfred Dent, Esquire, of London, who act as representatives of a British company, together with their heirs, associate, successors, and assigns forever and until the end of time, all rights and powers which we possess over all the territories and lands tributary from the Pandasan River on the east, and thence along the whole east coast as far as Sibuku on the South, and including all territories, on the Pandasan River and in the coastal area, known as Paitan, Sugut, Banggai, Labuk, Sandakan, China-Batangan, Murniang and all other territories and coastal lands to the south, bordering on Darvel Bay and as far as the Sibuku River, together with all the lands which lie within nine miles from the coast.The cession (as the Malaysian prefer to interpret it) or lease (as the Sulu Sultanate maintain) of Sabah to the British began in the Treaty of 1878 between Baron de Overbeck and His Highness the Sultan Jamal Al-Alam was signed for an annual payment of 5,000 Malayan dollars.It should be noted that Consul Treacher succeeded in formalizing the participation of his government in the agreement, by affixing the participation of his government in the agreement, by affixing his signature as a sole witness to the transaction. Unlike in the Brunei grants of the previous year, Treachers recommendation were accepted by the Sulu Sultan, namely, that the consent of the British government would first be obtained before any transfer of territory and that its consideration and judgment shall be sought in event of any dispute.Together with the Territorial Agreement , the sultan also appointed von Overbeck as supreme and independent ruler with the title of Datu Bandahara and Rajah of Sandakan, delegating him as a vassal power with which to administer the territory. However, the sultan made it clear that Oberbeck made the title not him.

The Philippines Claim over Sabah and its Arguments.

It is the thesis of the Philippine government that the contract of 1878 was a lease, and not a transfer of ownership or sovereignty. Treacher, was present at the signing of the contract and as witness, he characterized the contract as a lease and referred to the money payment as annual rentals.Contrary to allegations, the Philippine claim had been studied for years before 1962. While serving in the Department of Foreign Affairs in 1946, Diosdado Macapagal, who later became President of the Philippines, advocated the filing of the claim. The official filing of the claim took place on June 22, 1962. The claims are of sovereignty, jurisdiction, and proprietary ownership to North Borneo. Philippines being successor-in- interest of the Sultan of Sulu derived its legal and historical rights in North Borneo.In the early part of the 1960s it became an imperative for the Philippines, aside from the strong historical and legal rights that North Borneo is important to Philippine territory and vital to its security. At this time (1960s), communism in the region was in its height and Philippines were anxious that Malaya would succumb to the potent communist threat from mainland Southeast Asia, creating a scenario in which a communist territory would be immediately at the southern frontier of the Philippines.Philippine anxiety on the communist threat has subsided, but another form of menace developed. From the dynamics of the Muslim separatist movement in the south, there evolved a more terrifying threat. The Sabah state of present Malaysia harbored some of the kidnappers, Abu Sayyaf and Al-Quedah, provoking international concern through widespread violence, state wide terror and their vision of establishing independent states.The British North Borneo Company based their rights from the grant signed in January, 1878. In it, the sultan of Sulu granted certain concessions and privileges to Baron de Overbeck, an Austrian national who was at the time the Austrian Consul-General at Hongkong, and Alfred Dent, a British national, in consideration of an annual rent or tribute of 5,000 Malayan dollars. Dent later bought out Overbeck, and transferred his rights to the British North Borneo Company. The Company was granted a Royal Charter on November 1, 1881.The Philippine government argues that Overdeck and Dent (the leasors) did not acquire sovereignty or dominion over North Borneo. This is because, according to international law, sovereignty can be ceded only to sovereign entities (e.g. government to government agreement) or to individuals acting for sovereign entities (agreement between leaders of nations). Obviously, Overbeck and Dent were private citizens of their respective countries who did not represent any sovereign entities, but instead acted as mere businessmen who only acquired grant of lease from the Sultan of Sulu. Hence, neither of them did not, and could not, acquire sovereignty or dominion.3The above letter was written by the British Foreign Minister to explain and respond to the Spanish protest regarding the grant of Royal Charter to the British North Borneo Company. It was not the Spanish crown who made the protest alone; the Dutch government also protested in the same way. Again, Lord Granville maintained in his letter to the Dutch that the British North Borneo Company was a mere administrator, and that the British Government assumed no sovereign rights whatever in Borneo.The Philippine government, therefore, strongly argues that the transfer of rights, powers and interest by the British North Borneo Company to the British Crown is not possible