In 1906 and in 1920, the United States formally reminded Great Britain that North Borneo did not belong to the Crown and was still part of the Sultanate of Sulu. However, the British did turn Sabah into a Crown leased Colony.
The Philippine Constitution of 1941 states that the national territory of the Philippines included, among other things, "all other areas which belong to the Philippines on the basis of historical rights or legal claims." Malaysia was federated in 16 September 1963. Even before Sabah was incorporated into Malaysia, the Philippines sent delegations to London reminding the British Crown that Sabah belonged to the Philippines.
The Sultanate of Sulu was granted the north-eastern part of the territory as a prize for helping the Sultan of Brunei against his enemies and from then on that part of Borneo was recognized as part of the Sultan of Sulu's sovereignty. In 1878, Baron Von Overbeck, an Austrian partner representing The British North Borneo Company and his British partner Alfred Dent, leased the territory of Sabah. In return, the company was to provide arms to the Sultan to resist the Spaniards and 5,000 Malayan dollars annual rental based on the Mexican dollar's value at that time or its equivalent in gold. This lease was continued until the independence and formation of the Malaysian federation in 1963 together withSingapore, Sarawak and the states of Malaya. As of 2004, the Malaysian Embassy to the Philippines had been paying cession/rental money amounting to US$1,500 per year (about 6,300 Malaysian Ringgits) to the heirs of the Sultanate of Sulu. This is an act of British government before the federation and continued to the today's government of Malaysia.
The contract between Sri Paduka Maulana Al Sultan Mohammad Jamalul Alam, representing the sultanate as owner and sovereign of Sabah on one hand, and that of Gustavus Baron de Overbeck and Alfred Dent representing the North Borneo Company, on the other as lessees of Sabah, was executed on January 22, 1878. The Lease prohibits the transfer of Sabah to any nation, company or individual without the consent of His Majesty’s Government (“Government of the Sultan of Sulu”). Less than a decade later, the Sultanate of Sulu came under the control of Spain and was forced to sign a document giving all of the Sultan's Properties in Palawan and Sulu (excluding Northern Borneo) to Spain. In 1885, Spain relinquished all of its claim to Borneo to the British in the Madrid Protocol of 1885.
In spite of that, in 1906 and 1920 the United States formally reminded Great Britain that Sabah did not belong to them and was still part of the Sultanate of Sulu on the premise that Spain never acquired sovereignty over North Borneo [see Madrid Protocol] to transfer all its claims of sovereignty over North Borneo to Great Britain on the Madrid Protocol of 1885. This is so because the Sultan of Sulu did not include his territory and dominion in North Borneo in signing the treaty of 1878 recognizing the Spanish sovereignty over “Jolo and its dependencies.” North Borneo was never considered a dependency of Jolo. However, the British Government ignored the reminder and still annexed the territory of North Borneo as a Crown Colony on July 10, 1946. This was in spite of the fact that the British Government was aware of the decision made by their own mandated High Court of North Borneo in Sabah on December 19, 1939, that the successor of the Sultan in the territory of Sabah was Punjungan Kiram and not Great Britain.
On September 12, 1962, during President Diosdado Macapagal's administration (the father of the former Philippine president Gloria Macapagal-Arroyo), the territory of North Borneo, and the full sovereignty, title and dominion over the territory were ceded by the then reigning Sultan of Sulu, HM Sultan Muhammad Esmail E. Kiram I, to the Republic of the Philippines. The cession effectively gave the Philippine government the full authority to pursue their claim in international courts. The Philippines broke diplomatic relations with Malaysia after the federation had included Sabah in 1963. It was revoked in 1989 because succeeding Philippine administrations have placed the claim in the back burner in the interest of pursuing cordial economic and security relations with Kuala Lumpur. To date, Malaysia continues to consistently reject Philippine calls to resolve the matter of Sabah's jurisdiction to the International Court of Justice.Sabah sees the claim made by the Philippines' Moro leader Nur Misuari to take Sabah to International Court of Justice (ICJ) as a non-issue and thus dismissed the claim.