This article first appeared in The Edge Financial Daily on May 31, 2019

KUALA LUMPUR: Malaysia is appealing against the London Commercial Court’s decision to put on hold its bid to challenge a US$5.8 billion (RM24.3 billion) settlement awarded to Abu Dhabi’s International Petroleum Investment Co (IPIC) to allow for further arbitration.

In a statement yesterday, Attorney-General Tommy Thomas (pic) said the court wanted the underlying issues between the parties to be heard first in an ongoing arbitration.

The judge, Justice Robin Knowles, considered the case to be one of those “rare and compelling situations” where that should be allowed as a matter of case management, said Thomas, though the court had emphasised it remains ready to proceed with the suit at any time.

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

“Needless to say, the London Court’s decision, allowing the issue of massive fraud that is of public importance to be first determined behind closed-door private arbitration proceedings without public scrutiny, is not satisfactory to Malaysia. 1MDB (1Malaysia Development Bhd) and MoF Inc (Minister of Finance Inc) have therefore filed an application for permission to appeal against the London Commercial Court decision to the Court of Appeal,” Thomas said.

These proceedings are to recover substantial amounts of money wrongfully paid by Datuk Seri Najib Razak’s administration, Thomas said.

“The government remains single mindedly focused on its attempts to ensure Malaysia’s assets are recovered,” he added.

The statement came after Knowles ruled on May 20 that he would grant a “temporary” stay of “indefinite duration” over Malaysia’s claim that its agreement to the US$5.78 billion settlement, made in May 2017, should be overturned because it was “procured by fraud”.

The stay would allow a second round of arbitration, brought by IPIC and its Aabar Investments unit against 1MDB, to go ahead, after the first one was concluded following the consent award.

Malaysia’s application to challenge the consent award was filed in October last year. “Our challenge is brought on the grounds, among others, of fraud and public policy. In response, IPIC and Aabar applied to strike out or stay this application by 1MDB and MoF Inc, and commenced a separate second arbitration proceedings against 1MDB and MoF Inc,” Thomas explained.

The London court had rejected IPIC and Aabar’s attempt to strike out Malaysia’s challenge, as well as their application to stay the country’s application pending the determination of parallel arbitration proceedings, he added.

Meanwhile, under the consent award, Malaysia has to pay the sum over a five-year period, to take full responsibility for all interest and principal payments under two bonds issued by 1MDB in 2012 that IPIC jointly guaranteed. “As of May 2019, US$1.6 billion had been paid, leaving a balance of US$4.16 billion,” Thomas said.

If Malaysia succeeds in its bid to challenge the consent award, he said it will be able to seek recovery of US$3.5 billion paid by 1MDB to IPIC or, alternatively, reduce Malaysia’s liability.