THE 1MDB v IPIC case which involved the Malaysian sovereign fund 1Malaysia Development Bhd (1MDB) and International Petroleum Investment Company (IPIC) – which was owned by Abu Dhabi’s investment fund Aabar – has been nominated as one of the most important decisions for the Global Arbitration Review (GAR) awards which will be held in Paris on July 9.
The case revolves around the fraud perpetrated against 1MDB by IPIC which allegedly involved former prime minister Datuk Seri Najib Razak.
The case, which was decided upon in London, contains an important analysis of the role of the English courts as the supervisory courts of an English-seated arbitration.
1MDB had applied to the English courts to set aside a consent award on the grounds of lack of jurisdiction and fraud, implicating the former Prime Minister of Malaysia, who is now subject to a criminal trial.
Reversing the decision at first instance, the Court of Appeal lifted a stay on the English proceedings and granted the claimants’ application for an anti-arbitration injunction to restrain the pursuit of other arbitration proceedings until the application to set aside the consent award has been determined.
Malaysia wanted to recover US$1.46 bil (RM5.85 bil) paid as part of a settlement award given to the Abu Dhabi-based companies in an arbitration process.
Legal news website Law360 reported that Malaysia’s legal team, headed by Toby Landau QC, argued that the sum was part of a massive fraud.
Landau said a lower court judge had wrongly given priority to an arbitration tribunal over the courts after a High Court judge in London halted two proceedings brought by Malaysia on the settlement.
The government, through 1MDB and Minister of Finance Incorporated (MoF Inc), filed an application in 2018 to challenge the consent award that the two Malaysian entities had recorded under the Najib Razak administration in May 2017 with Aabar Investments.
The consent award was to conclude the arbitration proceedings that IPIC and Aabar commenced against 1MDB and MoF Inc before the London Court of International Arbitration (LCIA) tribunal in 2016.
Under the consent award, Malaysia is obliged to pay US$5.78 bil (RM24.16 bil) to IPIC and the bond trustee over a five-year period.
Law360 said the settlement was negotiated and signed by Najib, who was voted out of office in May 2018. It said the Malaysian entities argue that Najib was acting in his own interest when he reached the deal with the UAE companies and that they are not bound to it.
Under the deal, the finance ministry and 1MDB agreed to pay IPIC and Aabar US$1.2 bil plus interest and to indemnify IPIC for amounts paid under US$4.7 bil worth of bonds.
Landau had submitted before the London Court of Appeal that the “dispute on the validity of the settlement is of the utmost public importance” and the courts have a “heightened responsibility” to intervene in the case. – April 29, 2020
