UAE's IPIC takes Malaysia fund dispute to London court, seeks $8.8 billion

DUBAI/KUALA LUMPUR - Abu Dhabi's state-owned International Petroleum Investment Co (IPIC) said on Tuesday it has asked a London court to arbitrate in a dispute with Malaysian state fund 1MDB in which IPIC is claiming about US$6.5 billion (S$8.81 billion).

The submission to the London Court of International Arbitration alleges that 1Malaysia Development Berhad ( 1MDB) and Malaysia's finance ministry (MOF) failed to perform their obligations under a debt restructuring agreement involving the companies last June.

"The failure of 1MDB and MOF to perform their obligations, cure their defaults or put forward acceptable proposals has left IPIC in the position where it must pursue its claims in arbitration," IPIC said in a statement. "The total amount claimed by IPIC/Aabar is approximately US$6.5 billion," it added.

1MDB said in response that it would review the request for arbitration once it has been served with a copy.

Under a deal signed in June, IPIC agreed to loan US$1 billion to 1MDB and assume payments on US$3.5 billion of 1MDB debt. It also forgave an undisclosed amount of debt that 1MDB owed to IPIC, in exchange for assets which have not been identified.

But IPIC said in April that 1MDB was in default of that agreement, after the Malaysian fund failed to repay the loan.

1MDB subsequently defaulted on interest payments on two bonds, which IPIC had guaranteed. The Malaysian fund said it has sufficient funds to make the interest payments but did not due to its dispute with IPIC.

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  • PM Najib is fighting his biggest political battle following a Wall Street Journal report last Friday that funds linked to state investor 1MDB flowed into his personal accounts between March 2013 and February 2015.
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The finance ministry did not immediately comment.

IPIC is claiming the US$3.5 billion bond plus interest that amounts to US$4.8 billion, the US$1.2 billion loan plus interest, and about US$481 million owed to Aabar - adding up to US$6.5 billion, a person familiar with the matter told Reuters.

1MDB, once a pet project of Prime Minister Najib Razak, is the subject of money-laundering investigations in at least six countries.

Problems began when the Abu Dhabi fund denied it owned Aabar Investments PJS Ltd, a British Virgin Islands company which received payments of US$3.5 billion from 1MDB meant for the IPIC.

These fund transfers are now under the scrutiny of global investigators.

Malaysia's finance ministry dissolved 1MDB's board of advisers and took over its remaining assets last month.