Malaysia is seeking for an amicable settlement with an Abu Dhabi sovereign fund over a US$6.5 billion dispute with state investment arm 1MDB, as the case is set to begin international arbitration next month, reports Singapore daily the Straits Times.

Second Finance Minister Johari Abdul Ghani told the daily that his ministry which oversees 1MDB, is trying to settle the fund's ongoing dispute with the Abu Dhabi-based International Petroleum Investment Company (IPIC) amicably.

According to the report, reaching a settlement in the case which will be going into case management at the London Court of Arbitration (LCA) next month, will prevent the spectacle from dragging on.

Seventy percent of cases at the LCA take more than 18 months to resolve.

Johari also told the publication that talks with IPIC would help the government decide on legal action against 1MDB's previous management and board of directors, if they were proven to indeed be culpable for the weaknesses and mismanagement that have been noted.

"You must get the complete story, only then can you see if there was any negligence," the publication quoted Johari as saying.

The dispute between the two state funds stems from the supposed diversion of 1MDB funds meant for a debt swap deal with IPIC, and forms part of a financial scandal engulfing Prime Minister Najib Abdul Razak.

The Najib administration faces public pressure to take action against ex-1MDB officials responsible for the alleged mismanagement, as well as calls for the PM himself who was the funds advisory board chairperson, to step down and take responsibility.

"It doesn't look good for two countries to fight over a business transaction. This is all about getting two parties to sit down and thrash out differences," Johari told the daily.

1MDB signed a debt asset swap deal with IPIC May last year, but the Abu Dhabi fund claimed in April that 1MDB has not repaid a US$1 billion advance and applied for arbitration in London.

The 1MDB-IPIC dispute has led to serious concerns over Malaysia's economic health, already hit hard by plummeting oil prices. Concerns over the Malaysian fund's debts largely guaranteed by the government, have lead to downgrades of Malaysia's sovereign standing.