The Minister of Finance (Incorporated) and 1MDB’s Commercial Court challenge, which will consider whether an LCIA arbitration was used by the former Prime Minister of Malaysia to help conceal a multi-billion dollar fraud, will now go ahead following a significant win for Malaysia’s government.
The Court of Appeal today overturned the decision of the High Court which had decided that an application under sections 67 and 68 of the Arbitration Act 1996, brought by Minister of Finance (Incorporated) and 1MDB to help recover the misappropriated funds, should be stayed pending the resolution of arbitration proceedings brought by IPIC and Aabar PJS, two Abu Dhabi-owned investment companies.
The Court of Appeal, comprising the Chancellor of the High Court, Sir Geoffrey Vos, Lord Justice Newey and Lord Justice Males, ruled in favour of the Malaysian parties by:
(i) lifting the stay on the grounds that the judge had imposed the stay on the wrong legal basis, and deciding that there were no compelling reasons for the stay to be granted; and
(ii) injuncting the parallel arbitration proceedings since the injunction had been refused on the wrong legal basis, and it was just and convenient that the arbitration proceedings should not proceed until the Commercial Court challenge had been determined.
The Chancellor of the High Court, Sir Geoffrey Vos, giving the judgment of the Court, stated:
“The pursuit of the second arbitrations seeks in terrorem to impose a large financial penalty on the claimants for having sought to exercise their agreed legal rights…The court applications will proceed to determine the validity of the consent award, and it is just and convenient that the second arbitrations should not proceed until that has been determined. The injunction will bring the defendants’ vexatious conduct to an end.”
Richard Little, Litigation & Disputes Partner, observed:
“This decision confirms the primacy of powers of the court contained in sections 67 and 68 of the Arbitration Act 1996. The result is that the Commercial Court will now be able to scrutinise an important aspect of the 1MDB fraud as part of an open and transparent process. We are delighted by this outcome for our clients.”
The Attorney General of Malaysia, Tommy Thomas, commented following the outcome of the case that:
“Billions of dollars of taxpayer monies have been misappropriated in the course of the 1MDB scandal in what has been described as the greatest kleptocracy in modern history. Bringing the perpetrators to justice is a complex and challenging task as these transactions have been carried out over several jurisdictions and involve many persons and entities. The Malaysian government is committed, in the public interest, to setting this right and will unrelentingly pursue those who are responsible for this grievous injustice.”
The Minister of Finance (Incorporated) and 1MDB were represented by Toby Landau QC, Peter Webster and Joseph Sullivan.
The Eversheds Sutherland team, led by Richard Little, included Associates Michael Armstrong, Margrit Trein and Dan Younger.
Link to the full judgment is here.
Link to the Attorney General of Malaysia’s full press statement is here.
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