Leaked: Sabah’s Nature Conservation Agreement

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By Chris Lang

Earlier this month, REDD-Monitor wrote about a planned two million hectare carbon deal in Sabah, Malaysia. On 30 October 2021, the Sabah State Government signed a 100-year Nature Conservation Agreement with a Singapore-based company called Hoch Standard Pte Ltd. The Nature Conservation Agreement was leaked and posted on several subreddits a few days ago.

The Nature Conservation Agreement is an extraordinary document. The agreement is between the Government of Sabah and Hoch Standard – a company with no record of running REDD-type projects (or any other type of projects, for that matter).

Heated debate and a legal challenge

Sabah’s opposition leader, Seri Mohd Shafie Apda, has called for more transparency regarding the Nature Conservation Agreement. At a press conference on 6 December 2021, he said,

“We are calling for more transparency as this is a matter of public interest. This involves the authority of the state, where land is a state matter.

“How can we allow state land to be managed by a third party? This is against state law. Matters like this should be discussed at the state legislative assembly.”

Shafie has said that the signing of the NCA was like selling land to a foreign entity. “Can you imagine we are handing over our sovereign rights without even tabling it at the state assembly?” he said.

Shafie and Sabah’s Deputy Chief Minister Jeffrey Kitingan have argued about the deal in the Sabah State Legislative Assembly. “There is no issue of selling land or losing native customary land. It won’t happen because these are permanent forest reserves. We won’t lose our rights and control of the land,” Kitingan told Shafie.

Kitingan referred to the letter from Sabah’s Attorney General to Hoch Standard. He argued that the Attorney General had not been told about an addendum to the carbon trade deal. “The matter was resolved after the addendum was presented to the AG,” he said. It’s difficult to know how an addendum could have resolved the Attorney General’s questions, which focussed on the claims made by Hoch Standard about its record, finances, and director.

Adrian Lasimbang, a former senator and Indigenous rights activist, has filed a letter through the law firm Gloria Legal. Lasimbang’s letter names the Forest Conservation Chief as first defendant and the State Government as second defendant. The hearing, in front of High Court Judge Ismail Ibrahim is scheduled for 3 January 2022.

Sabah’s Nature Conservation Agreement

The agreement hands over a remarkable amount of control to Hoch Standard. The agreement makes no mention of the Indigenous Peoples and local communities living in the area of this proposed two million hectare carbon deal. The word “Indigenous” appears nowhere in the agreement.

The word “rights” appears 13 times in the agreement. In every case it refers to carbon rights, property rights, intellectual property rights, or rights to Natural Resources (which the Government of Sabah transfers to Hoch Standard “for the purpose only of monetisation of the same pursuant to the provisions of this Agreement”).

Here are some of the main concerns about the Nature Conservation Agreement – that have already been publicly raised. (In the following, SG refers to the Government of Sabah, HSPL to Hoch Standard, NCMP to Nature Conservation Management Plan, and CCUs to Carbon Credit Units.)

• The NCA is governed by the laws of Singapore and Sabah.
   

  28.1 This Agreement shall be governed by the Laws of the State of Sabah or the Laws of the Republic of Singapore.

• It lasts 100 years, more than three times as long as most REDD projects.
   
  The NCA defines the word “term” as follows:

  “Term” means the duration of this Agreement which is described in Item 2 of the Schedule.

  And item 2 of the Schedule states:

  Term – 100 years

• The Sabah government (or a future Sabah government) cannot cancel the agreement.
   

  10.2 SG covenants, warrants, and agrees that it –

  (a) shall continue to abide by the terms of this Agreement and perform its obligations under this Agreement notwithstanding any change in cabinet or in the composition of the Government whatsoever. It is recited for the avoidance of doubt that the SG’s obligations under this Agreement shall continue notwithstanding any such change;

  (b) shall not take any steps to terminate this Agreement, or do any act or make any omission which would render this Agreement or any part of it, or any of the obligations it creates, null and void and impossible of performance, or contrary to public policy;

  (c) shall not take any steps to assign, transfer or otherwise dispose of its rights and obligations created in this Agreement to any other person, entity, or government agency, whether it be Federal or State;

  (d) except as provided for under this Agreement, shall not take any step, including the introduction or enactment of any law, rule, regulation, or policy whatsoever that would lead to or cause or be likely to cause –

  (i) the termination of this Agreement;

  (ii) the termination of any Related Agreement;

  (iii) the NCMP to be revoked;

  (iv) HSPL from carrying out, implementing or management the NCMP;

  (v) HSPL from carrying out its obligations under this Agreement; or

  (vi) any obligation imposed on any Party or Parties under this agreement being more likely to become impossible of performance, or substantially more onerous to perform.

• The company can sell the rights covered in the NCA without the consent of the Sabah government.
   

  3.2 HSPL may enter into an agreement with a non-Party for the enhancement of monetising the Natural Capital and can do so only on the following basis:

  (a) HSPL has provided SG notice in writing of its intention to enter into an agreement with a non-Party pursuant to this Agreement;

  (b) HSPL warrants that the non-Party is able and willing to continue the delivery of the service of the same or similar nature as that is offered in this Agreement and can maintain the product or service in a manner that commits to maintaining the REDD+ framework and completely supports the SDGs; and

  (c) HSPL has not breached this Agreement or if it has breached this Agreement in any way, has rectified such breach; and

  (d) HSPL pays all costs and expenses incurred by SG in consenting to the transfer and/or assignment of this Agreement.

• The rights covered by the NCA are extensive and vague, and not limited to carbon.
   
  The agreement defines “intellectual property” as,

  all intangible property rights resulting from any activity which is carried out pursuant to this Agreement and includes patents, trademarks, copyright and design rights

  And the agreement hands these rights over to Hoch Standard:

  10.1 (e) Except for pre-existing rights which SG already has, HSPL shall have ownership of the intellectual property generated during the term or in the course of the performance of its obligations under this Agreement.

  The agreement defines “Natural Capital Benefits” as follows:

  “Natural Capital Benefits” means any present or future direct or indirect, or incidental right, interest, credit, entitlement, benefit, allowance, certificate arising from or in connection with the Carbon Rights or Carbon Benefits, Emission Reduction Benefits, benefits such as the enhancement of biodiversity, the reduction of dry land salinity, the conservation of native vegetation or the preservation of water catchment areas.

  And the agreement hands over these “Natural Capital Benefits” to Hoch Standard:

  2.1 SG has engaged HSPL and grants HSPL the exclusive right to develop NCMP for the Designated Area and manage Natural Capital Benefits contained therein.
  [ . . . ]
  2.4 SG hereby grants and transfer to HSPL exclusively and solely all rights to the Natural Resources for the purpose only of monetisation of the same pursuant to the provisions of this Agreement.
  [ . . . ]
  2.5 Subject to clause 7.1 and clause 7.2, SG acknowledges that HSPL shall have the absolute right to the Natural Capital Benefits, including the Natural Capital contained in the Designated Area and CCUs to sell, exchange, transfer or otherwise disposal of, in any manner as it deems necessary.
  [ . . . ]
  5.1 In consideration of HSPL and SG entering into this Agreement, HSPL further covenants that it will: . . .
  (c) sell or otherwise dispose of or deal with the CCUs and/or Natural Capital Benefits;

• The companies are only required to pay the Sabah government within one year.
   

  7.1 HSPL shall transfer the Natural Capital Benefits Revenue which represent the SG’s Revenue Portion to SG within 28 Business Days upon receiving the Natural Capital Benefits Revenue.

  7.2 If HSPL fails to transfer the Natural Capital Benefits Revenue to SG within 12 months from the date HSPL receives such Natural Capital Benefits Revenue, SG shall be entitled to give notice to HSPL to rectify such failure and if such failure shall continue for 6 months from the date of such notice, then SG shall be entitled under this Agreement to issue a notice of termination to HSPL forthwith. However, SG may not rely on HSPL’s failure in clause 7.2, if such failure was caused by SG.

  7.3 If an event in clause 7.2 occurs, HSPL may apply for an extension of time to effect such transfer of the Natural capital Benefits Revenues to SG which application shall not be unreasonably withheld by SG.

• The companies take 30% of gross revenue from the project.
   

  7.4 HSPL shall allocate seventy percent (70%) of the Natural Capital Benefit Revenue to the accounts as SG’s Revenue Portion described in Item 7 of the Schedule.

• The NCA requires Sabah to bear the costs of REDD compliance.
   

  6.1 In consideration of HSPL entering into this Agreement and SG receiving the SG’s Revenue Portion, SG covenants that it shall – . . .

  (f) allocate its Revenue Portion in such manner as to –

  (i) adhere to and comply with the framework and phases of REDD+ and or other international recognised standards;

  (ii) directly support and is in alignment with the SDGs; and

  (iii) directly support best practice standards in relation to the Natural Capital;

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