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 last year to challenge the consent award that the two Malaysian entities had recorded under the Najib Razak administration in May 2017 with International Petroleum Investment Company (IPIC) and 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 billion (RM24.16 billion) 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 billion plus interest, and to indemnify IPIC for amounts paid under US$4.7 billion worth of bonds.
The Malaysian parties are trying to get back the US$1.46 billion they have already paid out under the award, alleging that it was procured through fraud.
Landau 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.
Mark Howard QC, acting for IPIC and Aabar, argued that there is no reason for the court to intervene on the arbitration proceedings at this stage.
He said Malaysia’s appeal to challenge the lower court’s decision was “wholly misconceived”.