Sabah's 40% Case: What the High Court Actually Decided (and What It Didn't)

What is Sabah's 40% entitlement?

Under Article 112D and the Tenth Schedule of the Federal Constitution, Sabah is entitled to a special grant of two-fifths (40%) of the growth in net federal revenue collected from Sabah. The grant is to be reviewed jointly by the federal and state governments, each review covering five years or a longer agreed period.

Sabah received the formula for 1964 to 1968. The Sabah Special Grant (First Review) Order 1970 replaced it with fixed annual sums for 1969 to 1973, reaching RM26.7 million. The second review, due in 1974, never took place, and RM26.7 million a year stayed the figure for decades. A new order from 1 January 2022 (the Second Review Order) set RM125.6 million for 2022, rising to RM142.6 million for 2026. The 40% grant is separate from the 5% oil royalty; see our MA63 autonomy rights page for the difference.

The Sabah Law Society filed for judicial review in 2022 (Judicial Review No. BKI-25-14-6-2022). On 17 October 2024 the Federal Court dismissed the federal government's application for leave to appeal on the society's standing, and the case went back to the High Court.

What did the High Court decide?

Justice Celestina Stuel Galid allowed the judicial review on 17 October 2025, with written grounds dated 7 November 2025. According to the law report of the judgment:

• The 1974 review: the federal government's failure to hold the second review in 1974 with the Sabah government was "a breach and contravention of its constitutional duty" under Article 112D, clauses (1), (3) and (4).
• The lost years: "The 40% Entitlement remains due and payable by the Federation to the State of Sabah for each consecutive financial year for the period from the year 1974 to the year 2021."
• The review: the two governments were ordered to hold the review for 1974 to 2021 within 90 days and reach agreement within 180 days of the order. The Sabah Law Society had asked for 30 and 90 days; the court lengthened both.
• Payment: the Court of Appeal later noted that the order "not only directs negotiations, but also requires payment from the federal consolidated fund within 180 days of the High Court's order".
• 2022 onwards: the court quashed the part of the second review order (the 2022 grant order) that left out the lost years.

The judge also rejected the federal government's argument that a review had been going on since 1974. She wrote that "one would think that after the lapse of some 48 years, some semblance of evidence would be forthcoming of such on-going review".

What did the court not decide?

Figures in the tens or hundreds of billions of ringgit quoted in the media are estimates by commentators, not numbers from the judgment.

What is the federal government appealing?

On 11 November 2025 the Attorney-General's Chambers said the federal government "has decided not to file an appeal against the ruling recognising the Special Grant based on 40 per cent of federal revenue derived from Sabah". It said it would appeal "with respect to these defects in the written judgment", pointing to statements that both governments "abused their powers and breached constitutional duties" since 1974, and that the 2021 special grant review (which produced the 2022 order) was "unlawful, irrational, procedurally flawed and disproportionate".

Press descriptions of the appeal differ. The Edge reported it is against the judge's remarks on legal and constitutional issues, not the 40% figure; The Star described it as an appeal against the ruling that the federal government acted unlawfully.

Why is the order on hold?

The federal government applied to the Court of Appeal to suspend the High Court's order pending its appeal. On 6 April 2026 a three-judge panel (Mohamed Zaini Mazlan, Ismail Brahim and Muniandy Kannyappan) granted the stay. By then the 90-day review deadline had passed on 14 January 2026 and the 180-day deadline was due on 15 April 2026.

The court said the federal government would be prejudiced without a stay, pointed to "serious financial consequences for public funds", and said the "imposed timelines may not give the parties sufficient opportunity to determine the correct quantum payable".

Chief Minister Hajiji Noor said the state had opposed the stay but respected the decision, and hoped "negotiations will proceed in good faith towards reaching an agreement with the federal government".

What has happened since?

• 30 May 2026: Prime Minister Anwar Ibrahim raised Sabah's interim special grant for 2026 to RM1.5 billion, from RM600 million, describing it as a temporary measure pending the mechanism for Sabah's 40% entitlement.
• 8 September 2026: Hajiji said the federal government had agreed to Sabah's 40% claim but "several technical issues remained to be resolved".
• September 2026: after the MA63 Implementation Action Council meeting in Kota Kinabalu, Anwar said the remaining RM900 million of the interim grant would be paid by late October or early November, and that the RM1.5 billion is an interim payment, not a final settlement of Sabah's claim.

What happened at the 29 October 2026 appeal hearing?

The Court of Appeal heard the federal government's appeal in Kota Kinabalu on 29 October 2026 and reserved its decision. The panel, chaired by Justice Azhahari Kamal Ramli with Justices Ahmad Kamal Md Shahid and Amarjeet Singh, heard more than three hours of submissions (Bernama, in Malay) from the federal government, the Sabah Law Society and the Sabah government. It fixed 12 November 2026 for case management, through the court's e-Review system, to set the date on which it will deliver its decision (Bernama, 29 October 2026; The Star, 29 October 2026). The High Court's order stays on hold until the appeal is decided.

The federal government (senior federal counsel Ahmad Hanir Hambaly @ Arwi) said it does not dispute Sabah's right to the 40% formula under Article 112C or to a review under Article 112D. Its appeal, it said, is confined to the High Court's finding of a breach from 1974 to 2021 and its decision to quash the 2022 Review Order. It argued that:

• the High Court was wrong to find a breach of the Constitution between 1974 and 2021, because the 1970 review order stayed in force until the 2022 order replaced it, so the annual payments made in those years were lawful;
• the 180-day deadline for agreement amounted to "rewriting the Federal Constitution", which sets no time limit, and the deadlock mechanism in Article 112D(6) (an independent assessor) had been bypassed;
• the review continued through correspondence and meetings, and the Sabah Law Society lacked standing because the dispute is really between the two governments.

The Sabah Law Society (David Fung) said no review within the meaning of the Constitution took place for 48 years, that letters and meetings cannot count as one, and that it brought the case in the public interest. Justice Amarjeet Singh asked whether the society, rather than the elected state government, was the right party to seek the remedy.

The Sabah government (State Attorney-General Brenndon Keith Soh) supported the finding that no review had been held since the first one, but opposed quashing the interim 2022, 2023 and 2024 review orders, saying they should stay in force while the case is resolved. Asked why the state never invoked the independent assessor, he said that mechanism only applies to a deadlock during a formal review, and none was ever held from 1974.

How one Sabah lawyer reads the ruling

This section is opinion, not fact. A Kota Kinabalu lawyer we spoke to reads the judgment mainly as an acknowledgement of Sabah's entitlement and a direction to recalculate it, rather than an immediate cheque, since the amount still has to come out of a review. In his view, the Sabah Law Society's main aim in bringing the case was public awareness of the entitlement.

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