Kota kinabalu: Sabah's constitutional entitlement to 40 per cent of federal revenue derived from the state remains intact, despite recent legal developments, according to constitutional expert Emeritus Professor Datuk Dr Shad Saleem Faruqi. The decision by the Court of Appeal to stay earlier High Court directives does not negate Sabah's rights, but instead provides the federal government additional time to determine the appropriate amount through proper mechanisms.
According to BERNAMA News Agency, Shad Saleem Faruqi emphasized that Sabah is entitled to this 40 per cent claim. The Court of Appeal has not denied Sabah's right but has allowed the federal government more time to negotiate, calculate, and pay. He explained that the federal government is not disputing Sabah's entitlement, which is rooted in Articles 112C and 112D of the Federal Constitution. These articles outline Sabah's entitlement to 40 per cent of net revenue growth derived from the state, benchmarked against a 1963 base year, but time is sought due to the complexity of the fiscal calculations involved.
Shad cautioned that the provision is often misunderstood. It is widely believed that Sabah is entitled to 40 per cent of total federal earnings from the state, but this is an oversimplification. The entitlement is based on revenue growth compared to a 1963 baseline, rather than total revenue, with prior payments to the state taken into account. He stressed that the Constitution requires structured negotiations and periodic reviews, with the federal government needing to negotiate the amount due and conduct reviews every five years. If no agreement is reached, an independent assessor may be appointed.
On historical implementation, Shad noted that past practices may not have fully adhered to constitutional requirements. From 1974 to 2021, Sabah received fixed annual grants instead of a distinct segregation of federal revenue. Looking ahead, Shad expressed optimism that resolving the issue in accordance with constitutional principles would strengthen Malaysia's federal system, adding that similar claims by other states must also be grounded in constitutional provisions.
On Oct 17 last year, the Kota Kinabalu High Court ruled that the Federal Government had acted unlawfully by failing to fulfil Sabah's 40 per cent revenue entitlement between 1974 and 2021. The court allowed a judicial review application by the Sabah Law Society and ordered both the Federal and Sabah governments to review the entitlement within 90 days and reach a final agreement within 180 days. However, the Court of Appeal has since granted a stay of that order pending the outcome of an appeal, with a three-member bench led by Judge Datruk Mohamed Zaini Mazlan ruling that special circumstances justified the decision.