Malaysia is applying to set aside an agreement to pay US$5.78 billion to an Abu Dhabi sovereign wealth fund as part of a payment dispute over 1MDB bonds.
The original consent award was a result of arbitration conducted under the rules of the London Court of International Arbitration between International Petroleum Investment Company (IPIC) and Aabar Investments PJS as claimants, and 1MDB and Malaysia’s finance minister as respondents.
Malaysia says that it has already paid US$1.46 billion under the agreement, leaving a balance of US$4.32 billion, but the country’s new administration wants to scrap the deal and recoup its initial payment, claiming that the agreement was made after allegations of fraud had been lodged in relation to the 1MDB scandal.
“The court application relates to the knowledge of IPIC and Aabar of the serious allegations made by the United States Department of Justice against former prime minister and finance minister Najib Razak, who was also the moving spirit and ultimate decision maker in 1MDB,” said Tommy Thomas, Malaysia’s attorney general, in a statement.
“Malaysia takes the position that IPIC and Aabar were aware of the fraud of Najib Razak. He was principally responsible for 1MDB and Minister of Finance Inc. consenting to the Award. Every system of law would hold that he could not possibly have acted in the best interests of his country and his company. Indeed, he did not. Fraud is an established ground to challenge the consent award for public policy reasons.”
IPIC parent Mubadala told Reuters it was not aware of the legal action. “There remains in place a legally-binding settlement agreement that was agreed to by the arbitrating parties,” it told the news agency. “The 1MDB group issued US$3.5 billion of notes to various noteholders for which IPIC has given guarantees to those noteholders. As issuer, the 1MDB group has the primary liability to pay the noteholders regular interest coupons and to repay the principal amount at maturity.”