IPIC, Aabar fail to strike out Putrajaya’s move to challenge consent award

PETALING JAYA: A London commercial court has rejected an attempt by International Petroleum Investment Company (IPIC) and Aabar Investments PJS to strike out Malaysia’s application to challenge the consent award entered into by the previous administration .

The court has also dismissed an application by IPIC and Aabar to stay 1MDB and Minister of Finance Incorporated’s (MOFI) application pending determination of parallel arbitration proceedings.

Justice Knowles, who delivered the ruling, said he considered the case before him to be one of those “rare and compelling” situations where he should permit the underlying issues between the parties to be first heard in the ongoing arbitration.

However, the High Court said it is ready to proceed with 1MDB and MOFI’s challenges at any time having regard to the circumstances.

Knowles also observed: “I am fully aware that the dispute between the parties is of the highest order of importance, to them and more widely, and financially as well as more broadly, I have weighed carefully what has been said by MOF and 1MDB in their evidence about the importance of the dispute, and the amounts involved, to the people of Malaysia.”

The related arbitration proceedings will now move forward in London but under the court’s supervision.

Attorney-General Tommy Thomas said the court decision, which was determined behind closed door private arbitration proceedings, is not satisfactory to Malaysia.

“1MDB and MOFI have therefore filed an application for permission to appeal against the London Commercial Court decision to the Court of Appeal,” he said in a statement.

1MDB and MOFI filed an application in the commericial court last October to challenge the consent award that the two Malaysian parties had recorded under the Najib Razak administration in May 2017 with IPIC and Aabar.

The consent award was to conclude the arbitration proceedings that IPIC and Aabar commenced against 1MDB and MOFI before the London Court of International Arbitration (LCIA) tribunal in 2016.

Putrajaya filed a challenge on grounds of fraud and public policy.

In response, IPIC and Aabar applied to strike out or stay the application by 1MDB and MOFI and commenced a separate second arbitration proceedings against 1MDB and MOFI.

Under the consent award, Malaysia is obliged to pay US$5.78 billion to IPIC and the bond trustee over a five-year period.

This is because Malaysia is obliged, among others, to take full responsibility for all interest and principal payments under two bonds issued by 1MDB in 2012 that IPIC jointly guaranteed (“2012 Bonds”).

As of May 2019, US$1.6 billion has been paid, leaving a balance of US$4.16 billion which represents the remaining interest and the principal payable to the bond trustee for the 2012 Bonds.

Thomas said if Malaysia succeeds in the UK action, it will be able to proceed to seek recovery of US$3.5 billion that was paid by 1MDB subsidiaries to the IPIC subsidiary.

In the alternative, he said it could 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.

Malaysia’s complaint before the commercial court is that the settlement deeds and the consent award were engineered by Najib Razak as part of a conspiracy to defraud.

Thomas said IPIC and Aabar also knew that Najib was acting contrary to the interests of MOFI and 1MDB.