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London court urged to intervene in 1MDB-IPIC settlement
Published:  Oct 30, 2019 2:56 PM
Updated: 2:58 PM

Lawyers representing the Minister of Finance Incorporated (MOF Inc) and 1MDB have urged the UK Court of Appeal to intervene in their 2017 settlement with the Abu Dhabi-based International Petroleum Investment Corporation (IPIC) and its subsidiary Aabar Investments.

According to legal news portal Law 360, the lawyer Toby Landau argued that IPIC and Aabar had only brought an ongoing arbitration suit against MOF Inc and 1MDB in order to ensure allegations of fraud were not resolved in a public venue.

Landau said the terms of the consent award granted in 2017 by the London Court of International Arbitration (LCIA) was wholly unfair, and that the settlement had been part of an attempt to cover up fraud involving US$3.5 billion in payments from 1MDB to a supposed Aabar subsidiary.

The current dispute between the Malaysian government and IPIC and Aabar over the validity of the 2017 settlement is of significant public importance, Landau said, and the court has a “heightened responsibility” to intervene.

“The respondents want to do anything possible to take the proceedings out of the courts and into arbitration. But also there is an attempt here to obstruct the English court process,” he was quoted as saying.

'Legal standards unmet'

The LCIA is a non-profit company specialising in resolving commercial disputes.

Unlike a court of law, its proceedings are confidential even after its conclusion.

In May 2017, the LCIA is said to have acknowledged a settlement where 1MDB and MOF Inc agreed to pay US$1.2 billion and assume responsibility for RM4.8 billion in principal and interests for two bonds that were previously guaranteed by IPIC.

They also agree to enter good faith discussions about funds 1MDB had paid to “certain entities”, which is believed to refer to US$3.51 billion that went to a company bearing a similar name to Aabar but is unrelated to the IPIC subsidiary.

In wake of change in government last year, Malaysia sought a London High Court order on Oct 31, 2018, to set aside the LCIA’s consent award.

In response, IPIC and Aabar had reportedly launched fresh arbitration proceedings last November, alleging that Malaysia’s legal challenge was a bid to the settlement deed and so they should be entitled to demand payment under the deal.

The London High Court has put Malaysia’s application on hold pending resolution of the arbitration case. Malaysia has challenged the stay on proceedings, leading to Tuesday’s proceedings at the appellate court.

According to Landau, the reasoning for the High Court decision does not meet standards of laws governing arbitration proceedings.

Law360 also quoted court documents where IPIC and Aabar denied knowing that the deal was not in Malaysia’s best interests, and said it is “inherently implausible” for the settlement to have been procured by fraud when the parties involved were represented by leading commercial law firms.

It said IPIC and Aabar’s attorney Mark Howard argued that there is no reason for the court to exercise its supervisory powers over arbitration proceedings at this stage.

“The appellant’s contention that all such issues fall to be decided solely and exclusively by the court is simply wrong,” Howard was quoted as saying.

“It would cut across the central policy of English law in the area of arbitration to give effect to the parties’ choice of forum.”

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