• Gonzalo Stampa found guilty of contempt for ignoring Spanish court orders

• UK funder Therium has invested about $20 million in underlying dispute

A court in Spain has ruled Gonzalo Stampa guilty of contempt of court and sentenced him to six months in jail. The ruling Monday was tied to Stampa’s role as arbitrator in a case alleging breach of contract against Malaysia filed by descendants of a sultan who ruled part of the region in the late 1800s.

Stampa awarded claimants $14.9 billion and filed enforcement actions for payment in various jurisdictions throughout Europe. The court banned him from practicing as an arbitrator for one year for knowingly disobeying rulings and orders from the Madrid High Court of Justice.

The case is funded by UK-based Therium Capital Management, which according to Reuters has put $20 million into the claim through nine rounds of funding since 2017. A guilty verdict for Stampa could make it much more difficult to enforce his findings about the case, jeopardizing Therium’s return on its investment.

“A criminal conviction will not be an automatic nullification, but as a practical matter it’s going to make enforcement in any neutral fair forum near impossible,” said James Boykin, chair of Hughes Hubbard’s international arbitration practice, who is not involved in the proceedings.

The heirs to the sultanate condemned the conviction of Stampa, according to a statement provided by

their attorney, Paul Cohen, of 4-5 Gray’s Inn Square.

“The victimization of Dr. Stampa, an innocent, scrupulous and honourable man and one of Spain’s most distinguished arbitrators (with nothing to gain from the arbitration award), is a disgrace to Spain and a stain on its reputation as a venue for neutral dispute resolution,” Cohen wrote in a statement.

Stampa’s attorney, Sofía Parada Cano-Lasso, said, “We consider that the judgment makes an incorrect interpretation of the arbitration sphere, in relation to the jurisdictional sphere.” They will file an appeal, Cano-Lasso said.

Claim Origin

The claim originates from agreements that occurred in the 1870s, when the Sultan of Sulu leased his land in what is now Malaysia to two European explorers. Since 1939, nine descendants of the sultan have received annual payments of around $1,300 for the land.

When Malaysia was established in 1963, the country took over the payments, which continued until 2013, when an armed militia organized by the descendants of the sultan attacked the area formerly owned by the sultan and killed at least 60 people. Malaysia discontinued the payments in response to the attack.

The descendants of the sultan filed a claim for breach of agreement in Spain, after the UK Foreign and Commonwealth Office rejected the request, and appointed Stampa as arbitrator. Stampa has experience as counsel, arbitrator and secretary to arbitration tribunals in over 150 domestic and international arbitration cases, according to his website.

He issued a preliminary award in Spain, which according to the award had sovereignty over the disputed region at the time of the original agreement. But the court of justice in Madrid found that the claimants did not serve the government of Malaysia properly and instructed Stampa to close the proceedings. Instead, Stampa brought the award to France where it was recognized in 2021.

In response, Malaysia filed a criminal complaint to the Attorney General of Spain accusing Stampa of ignoring Spanish court orders.

Stampa Fee

Stampa was paid more than $2 million as an arbitrator, which according to Boykin is an unusually high fee. In reference to the role of Therium in the case, Boykin said, “The idea that a funder could see an arbitrator racking up north of $2 million and not be concerned is trouble.” Therium declined to comment on Stampa’s arbitration fee.

Malaysia won its appeal to challenge enforcing a partial award in France and the court implied that a final award would be annulled. The claimants also attempted to enforce the award in the Netherlands and Luxembourg. Both jurisdictions set aside the award. Whether the claimants will continue

enforcement actions in other courts is not known.

“Malaysia welcomes this landmark ruling as a significant victory for the rule of law that will help preserve the sanctity of international arbitration as an alternative form of dispute resolution,” wrote Malaysia’s law minister, Azalina Othman Said. “Malaysia is also confident that this landmark decision will serve as a further deterrent to the ominous actions carried out by the perpetrators of the Sulu Fraud.”

Therium declined to comment and would not comment on the funding arrangements, citing confidentiality.