KUALA LUMPUR, May 30 — The Malaysian government is challenging a UK commercial court decision for closed-door arbitration between its debt-riddled sovereign investment fund 1Malaysia Development Berhad (1MDB) and International Petroleum Investment Company (IPIC) and Aabar Investments PJS (Aabar).
In a statement today, Attorney General Tommy Thomas said both the Minister of Finance Incorporated (MOF Inc) and 1MDB have filed an application for permission to appeal against a London Commercial Court decision to allow arbitration proceedings to be determined behind closed doors.
He said that for now, the arbitration proceedings will proceed under the UK court’s supervision.
He added that if the government succeeds in the UK court, “Malaysia will be able to proceed to seek recovery of US$3.5 billion that was paid by 1MDB subsidiaries to IPIC subsidiary, or in the alternative, reduce Malaysia’s liability to pay interest and principal under the 2012 Bonds that were jointly guaranteed by IPIC up to US$3.5 billion”.
In lieu of the appeal filed, Thomas said the proceedings were steps to recover substantial amounts of money wrongfully paid by the Najib administration.
“As shown by the realisation of assets in recent recovery exercises, the Government’s efforts in seeking justice for the Malaysian people following what has been described as “kleptocracy at its worst” is bearing fruit.
“The Government remains single mindedly focussed in its attempts to ensure that Malaysia’s assets are recovered,” he said.
Thomas also said a judge in the London Commercial Court, Justice Knowles, had described the case before him as “rare and compelling” situation, and agreed that there were underlying issues concerning “massive fraud” between the parties that must be heard first openly before arbitration.
Last year, the Malaysian government filed an order to set aside a consent award that was recorded by an arbitration tribunal on May 9, 2017 between IPIC and Aabar as claimants and 1MDB and MOF Inc as respondents.
Thomas said that under the consent judgment, Malaysia was to pay US$5.78 billion to IPIC and the bond trustee over a five-year period, a sum which he said was obtained through fraud.
In response, IPIC and Aabar applied to strike out or stay this application by 1MDB and MOF Inc,
and initiated another arbitration proceeding against Malaysia to challenge the consent award entered during former prime minister Datuk Seri Najib Razak’s administration.
But Thomas said it was subsequently rejected by the same London Commercial Court.
“The rejection was made under Section 9 of the UK Arbitration Act 1996 to stay 1MDB and MOFI’s application pending determination of parallel arbitration proceedings,” he said.
Thomas said Malaysia has paid US$1.6 billion as at May this year, leaving a balance of US$4.16 billion that represented the remaining interest and principal payable to the bond trustee for the 2012 1MDB bonds.