KUALA LUMPUR (Feb 27): Malaysia and Abu Dhabi have reached a settlement regarding the disputes between 1Malaysia Development Bhd (1MDB) and International Petroleum Investment Company (IPIC), with IPIC and its subsidiary Aabar Investments PJS (Aabar PJS) agreeing to pay the Malaysian government US$1.8 billion.
The Ministry of Finance, in a statement, said the settlement was in respect of the legal proceedings in the London Court of International Arbitration and the London High Court.
The sum will be paid to the Minister of Finance Inc and 1MDB. "With this settlement, Malaysia and Abu Dhabi look forward to continue working together for the prosperity and economic benefit of both countries in the future," the MOF said.
The deal was struck after a few rounds of meetings in the past two years that involved the Yang di-Pertuan Agong Al-Sultan Abdullah Ri'ayatuddin Al-Mustafa Billah Shah and Tengku Datuk Seri Zafrul Abdul Aziz, according to sources.
Tengku Zafrul's involvement in the meetings started when he was in the Ministry of Finance. Following the change in government, the new Cabinet tasked him to continue the negotiations, which he concluded as the Minister of International Trade and Industry.
In October 2018, the Pakatan Harapan government filed an application in the London High Court to challenge a consent award recorded by the arbitration tribunal in May 2017 — with IPIC and Aabar PJS as claimants and 1MDB and MoF Inc as respondents — under which Malaysia was to pay US$5.78 billion to IPIC and the bond trustee over five years.
The basis of the legal challenge at the time was that the award was procured by fraud or in a manner contrary to public policy, according to then attorney general Tommy Thomas in a statement.
"The court application relates to the knowledge of IPIC and Aabar of the serious allegations made by the United States Department of Justice (DOJ) against former prime minister and finance minister Najib Abdul Razak, who was also the moving spirit and ultimate decision maker in 1MDB.
"Such knowledge on their part was acquired, inter alia, no later than the time when the DOJ’s press conference was held by the US attorney-general, Loretta Lynch, in July 2016 when she announced the filing by DOJ of several civil suits for the freezing of assets purchased by fraudsters from stolen proceeds and popularly described as the greatest kleptocracy in modern history," Thomas said then.
As such, Malaysia took the position that IPIC and Aabar were aware that 1MDB had been defrauded and the central role Najib had played in the scam, and that Najib was principally responsible in getting 1MDB and the MOF Inc to consent to the arbitration award.
Of the US$5.78 billion, US$1.46 billion had been paid by October 2018, according to Thomas, leaving a balance of US$4.32 billion, with interest payments of US$50 million each to be paid periodically and the final bullet payments — representing the principal and interest of US$1.8 billion each — to be paid in May and October 2022.
In its legal challenge, Malaysia claimed that as a result of the fraud, it should be relieved from any obligation to pay the balance US$4.32 billion to IPIC or Aabar under the consent award, and additionally had a right to recover the sum already paid.