MA63 explained: what Sabah and Sarawak were promised, and the court case that changed everything

On 17 October 2025, a judge in Kota Kinabalu did something no Malaysian court had done before. Justice Celestina Stuel Galid ruled that the Federal Government had acted unlawfully and beyond its constitutional powers by failing, for nearly fifty years, to review Sabah's entitlement to 40% of the federal revenue collected from the state.

She struck down three federal Review Orders as ultra vires. She ordered the Federal Government to conduct a proper review with Sabah — within 90 days — and reach agreement within 180.

Five months later, in March 2026, Prime Minister Anwar Ibrahim put it about as plainly as a Prime Minister can: "We are not appealing the 40 per cent case and that is final."

If you've spent years hearing "MA63" in Malaysian political arguments without quite knowing what it meant, this is the moment it stopped being a slogan and became a court order.

1. What MA63 actually was

On 16 September 1963, Malaysia came into being through an agreement between the United Kingdom, the Federation of Malaya, North Borneo (Sabah), Sarawak and Singapore.

This is the point most Peninsular Malaysians miss, and it explains why the argument never goes away: Sabah and Sarawak did not join an existing country as new states. They entered a new federation as founding parties to a treaty, alongside Malaya. Singapore left in 1965, but its departure didn't void the agreement.

Their starting position was also different from the Malayan states. Sabah had been a chartered company territory. Sarawak had been a Brooke kingdom, then a Crown colony. Neither had been part of the 1957 Federation of Malaya. So MA63 was far more detailed than a typical accession document — it had to specify what powers these separate polities would keep.

The agreement was given legal effect through the Malaysia Act 1963 (passed by the British Parliament) and the Federal Constitution (Amendment) Act 1963, which wrote the safeguards into Malaysia's Constitution. The Inter-Governmental Committee (IGC) Report set out the detail behind them.

That matters legally: the protections aren't merely promises in a historical treaty. Many were translated into constitutional provisions — Article 161 on Sabah and Sarawak's rights, Articles 112C and 112D on finances — and are enforceable as constitutional law. That's exactly how the Sabah Law Society won in 2025.

2. The safeguards

Broadly, Sabah and Sarawak retained:

• Control over immigration — which is why Peninsular Malaysians still need to pass immigration when flying to Kota Kinabalu or Kuching, and why work permits for West Malaysians remain a state matter
• Control over land and natural resources
• No state religion in either state, unlike the position in the Peninsula
• Native courts and customary law
• Use of English in official contexts
• Special financial provisions, including the 40% revenue entitlement

3. The 40% — what it actually says

The mechanism sits in two articles.

Article 112C, read with Part IV of the Tenth Schedule, provides for special grants to Sabah. The Tenth Schedule expresses the share as "two-fifths" — which is 40%, written into the Constitution itself.

The formula, simplified: Sabah receives 40% of (federal revenue derived from Sabah minus federal expenditure in Sabah).

Article 112D requires the federal and state governments to periodically review the special grant.

Reviews were conducted in the early years, up to 1974. Then they stopped. From 1974 to 2021, no proper review took place — 47 years. Sabahans call this period "the lost years".

Meanwhile Sabah received special grants at amounts set by federal Review Orders, which were considerably less than the constitutional formula would produce.

4. What the High Court decided

The Sabah Law Society brought judicial review proceedings. On 17 October 2025, the Kota Kinabalu High Court granted the application in full. The orders, in plain terms:

Declarations — the Federal Government breached its constitutional duty under Article 112D by failing to hold the second review in 1974; it remains liable to pay the 40% entitlement for each financial year from 1974 to 2021; and the failure breached rights under Articles 5 and 13 of the Constitution.

Certiorari — quashing parts of the Review Orders gazetted in 2022, 2023 and August 2025, which the court found were made without the required joint review and were "unlawful, ultra vires and irrational".

Mandamus — compelling the Federal Government to hold a proper review with the Sabah government to give effect to the 40% entitlement for each year from 1974 to 2021, within 90 days, with agreement to be reached within 180 days.

The judge held that the Article 112D duty was mandatory, not discretionary, and looked to the historical foundation documents — including records of federal revenue derived from Sabah from 1964 to 1968 — in interpreting the constitutional provisions.

Then it got complicated. The Attorney-General's Chambers filed a Notice of Appeal in November 2025. AGC characterised it as a partial appeal against certain grounds of judgment — including findings of abuse of power and breach of constitutional duties — rather than against the 40% formula itself. Sabah figures, including a former SLS president, argued the later notice went further than that, targeting the 90-day and 180-day timelines that were the safeguards against more delay.

Then in March 2026, Anwar stated the government would not appeal the 40% case, describing the commitment as a firm policy decision with no negotiation.

Where that leaves things as of July 2026: the ruling stands, the political commitment has been made publicly and repeatedly, and the practical questions — how the arrears are calculated, over what period, and how they're paid — are still being worked out. Sabah commentators continue to press on exactly those points. Anyone telling you this is fully settled, in either direction, is ahead of the facts.

5. The 1976 amendment, and why it still stings

Article 1(2) of the Federal Constitution originally listed Malaysia's components in a way that reflected the 1963 structure — Malaya, Sabah, Sarawak and Singapore as distinct groupings.

A 1976 amendment changed that, listing Sabah and Sarawak as states in a single enumeration alongside Johor, Kedah and the rest. Legally the effect is debated; symbolically it was read in the Borneo states as a demotion from founding partner to ordinary state, done without their consent.

In 2021, Parliament amended Article 1(2) again, restoring the formulation that Malaysia comprises Peninsular Malaysia and the territories of Sabah and Sarawak — reverting to the 1963 position. The 2021 amendment also extended the Article 160(2) definition of "the Federation" to encompass MA63, not merely the 1957 Federation of Malaya Agreement.

Does it change anything concrete? Legal commentary is fairly consistent that the 2021 amendment doesn't itself confer additional substantive rights. What it does is recognise the asymmetrical constitutional position of Sabah and Sarawak — which matters for how later disputes get interpreted, as the 2025 judgment's reliance on foundational documents shows.

6. What people are still arguing about

Beyond revenue, the live MA63 issues include:

Oil and gas. Sabah and Sarawak have long argued the 5% cash payment arrangement under Petronas agreements is inadequate given they produced a large share of Malaysia's output. Sarawak has pursued its own regulatory framework and pushed for greater control.

Healthcare, education and infrastructure. Devolution of these has been a recurring negotiation.

Immigration autonomy. Retained, and periodically tested by federal policy.

Religious freedom. The "Allah" word controversy and Bible-language disputes touched directly on the MA63 assurance that there would be no state religion in Sabah and Sarawak, where large Christian populations have used Malay and indigenous-language scripture since well before 1963.

Parliamentary representation. Calls for Sabah and Sarawak to hold a fixed proportion of Dewan Rakyat seats — commonly framed as one-third — reflecting their status as founding partners.

An MA63 council brings federal and state governments together on these, and negotiations continue.

On the harder end of the spectrum, some Borneo activists argue the breaches are severe enough to warrant international legal review, and a minority raise self-determination. Federal officials and many constitutional scholars reject that framing, treating the disputes as matters for Malaysian constitutional law and negotiation. We're setting out that these positions exist, not endorsing any of them — this is a genuinely contested area where reasonable Malaysians disagree.

Why this matters even if you're in the Peninsula

Three practical reasons.

It's a live constitutional question about how much money moves between Putrajaya and the states, at a scale that affects federal fiscal policy.

It's the strongest recent example of Malaysian courts enforcing constitutional obligations against the federal government — a rule-of-law development beyond its Sabah-specific facts.

It explains a lot of Malaysian politics you'd otherwise find baffling: why Sabah and Sarawak parties hold the balance of power in coalition arithmetic, why "MA63" appears in every East Malaysian manifesto, and why immigration counters exist on domestic flights.