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 1960’s 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 (1960’s), 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.3
The 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. North Borneo Cession Order of 1946 took place just six days immediately after the Philippines was declared independent by the United States. In the International Law, a transferee (British Crown) cannot acquire more rights than the transferor (British North Borneo Company). In other words, how can the British Crown exercise sovereign rights in the form of protectorate in 1946, when the British North Borneo Company did not exercise nor assume sovereignty over North Borneo? In other words, how can the British North Borneo Company transfer sovereignty to the British Crown, which the company did not have in the first place?
It has been said that President Manuel L. Quezon of the Commonwealth of the Philippines (the transitional, semi-autonomous government of the Philippines under American sovereignty which preceded the independent republic) “had decided not to recognize the continued existence of the Sultanate of Sulu, particularly in reference to North Borneo.” The Philippine Department of Foreign Affairs was not able to find a written record of this statement. This pronouncement was against the Organic Law of the Philippine Commonwealth, since the power to give and terminate recognition during the Commonwealth Philippines was vested only in the Congress of the United States of America (being the colonial power). Aside from the political technicality, International Law dictates that any withdrawal or termination of recognition does not imply the dissolution of the entity affected by the withdrawal.
The Philippine government believes that Dent, who was granted a Royal Charter in the form of British North Borneo Company by the British government, to which the British Crown derived its claim of sovereignty, was not authorized to acquire sovereignty or dominion. Evidence to this was the official correspondence of Lord Earl Granville, British Foreign Minister at the time, in his letter to the British Minister in Madrid dated January 7, 1882, explaining the character of the Charter Grant of the British North Borneo Company, as follows:
“The British Charter therefore differs essentially from the previous Charters granted by the Crown to the East India company, the Hudson’s Bay Company, the New Zealand Company, and other Associations of that character, in the fact that the Crown in the present case assumes no dominion or sovereignty over the territories occupied by the company, nor does it purport to grant to the Company any powers of government thereover; it merely confer upon the persons associated the status and incidents of a body corporate, and recognizes the grants of territory and the powers of government made and delegated by the sultan in whom the sovereignty remains vested…As regards the general feature of the undertaking, it is to be observed that the territories granted to the Company have been for generations under the government of the Sultan of Sulu and Brunei, with whom Great Britain has had Treaties of Peace and Commerce…
The above letter was done 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; also the Dutch government protested the same. Again Lord Granville maintains, in his letter to the Dutch, that the British North Borneo Company was a mere administrator, and that “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, known as North Borneo Cession Order of 1946 (that took place six days immediately after the Philippines was declared independent by the United States). In the International Law, a transferee (British Crown) can not acquire more rights than the transferor (British North Borneo Company). In other words, how can the British Crown acquire sovereign rights (in the form of protectorate in 1946), when the British North Borneo Company did not exercise nor assume sovereignty over North Borneo? Again, since Overbeck and Dent did not acquire rights of sovereignty or dominion over North Borneo their transferee (British North Borneo Company), also, did not acquire rights of sovereignty or dominion.
