Malaysia wins UK court battle over 1MDB transparency
The saga of 1Malaysia Development Bhd (1MDB) has risen to international fame since the scandal first broke in 2015. Authorities throughout Europe, Asia and the US have since worked to coordinate their investigations into the fund’s money trail; their findings could help identify, and ideally close, loopholes in the global financial system that currently effectively sanction corruption.
Judges at the Court of Appeal in London have granted a public hearing request by Malaysia in relation to a dispute between the now-defunct sovereign wealth fund 1MDB and its counterpart in Abu Dhabi.
Malaysia is currently seeking the recovery of US$3.5 billion in funds designated for development projects, but instead misappropriated and diverted to subsidiaries. The country has slammed plans for private arbitration proceedings as unsatisfactory, citing the need for the case to go ahead under public scrutiny.
The London court also granted a temporary injunction, halting a second round of arbitration against 1MDB pursued by Abu Dhabi’s International Petroleum Investment Company (IPIC) and its Aabar investment unit.
“We are delighted by this outcome,” said Richard Little, a lawyer representing the Malaysian government, “[the UK’s Commercial Court] will now be able to scrutinise an important aspect of the 1MDB fraud as part of an open and transparent process.”
Malaysia alleges that payments by 1MDB subsidiaries to an IPIC subsidiary were made by former Prime Minister Najib Razak as part of a “conspiracy to defraud” public coffers.
“Billions of dollars of taxpayers monies have been misappropriated in the course of the 1MDB scandal in what has been described as the greatest kleptocracy in history,” Malaysian Attorney General Tommy Thomas said before yesterday’s verdict, “bringing the perpetrators to justice is a complex and challenging task.”
The third trial of Najib commenced on Monday, with prosecutors alleging that the former prime minister interfered with a government audit of the 1MDB fund in an attempt to avoid criminal and civil proceedings. His tampering came to naught: the former leader faces a number of corruption charges over the looting of 1MDB, and his coalition suffered a historic defeat in last year’s elections.
Meanwhile, current Malaysian Prime Minister Mahathir Mohamad says the country is trying to recoup some $7 billion of 1MDB’s lost funds. The US Justice Department was able to strike a tentative deal with fund leader and Malaysian businessman Low Taek Jho (Jho Low) last month to recoup just $700 million in assets, including real estate in New York and London.
If Malaysia succeeds in the present UK action, the government will at least be able to proceed to recover the billions of funds paid by 1MDB subsidiaries to IPIC subsidiaries. Failing that, Malaysia will have a reduced liability to pay interest and principal under 2012 bond jointly guaranteed by IPIC.
The law firm representing IPIC and Aabar in the London case, Clifford Chance, has responded that it is considering whether or not to appeal the ruling.