Abu Dhabi sovereign-wealth fund International Petroleum Investment Co. (IPIC) plans on pursuing arbitration in a London court for about $6.5bn it says it was owed as a result of a dispute with Malaysian state investment fund 1Malaysia Development Bhd. (1MDB).
The arbitration was a fallout of an earlier dispute that erupted in April 2016 when 1MDB reneged on key provisions of a $1bn loan agreement with IPIC, wherein IPIC was responsible for interest payments on some of its debt.
Later, IPIC said that it would only make those payments as an official guarantor on two 1MDB bonds and that it intended to pursue repayment from Malaysia’s Ministry of Finance.
A key point that could impact the arbitration is the exact status of a British Virgin Island based company called Aabar Investments PJS Ltd., which received more than $3.5bn in transfers from 1MDB over several years. These transactions were made as part of agreements struck between 1MDB and Aabar.
IPIC, however, says it did not receive any funds from 1MDB and has said that Aabar, which has a similar name to an IPIC investment company in Abu Dhabi called Aabar Investments PJS, wasn’t part of its corporate structure.
According to sources, 1MDB has argued in private negotiations between the companies that IPIC did indeed own the Aabar company in the British Virgin Islands.
Further, during its business interactions with IPIC in the past, 1MDB was provided with a certificate of incumbency showing the Aabar company in the British Virgin Islands was owned by Aabar Investments PJS.
The certificate, dated 13 April 2012, also listed Khadem Al Qubaisi, former managing director of IPIC, and Mohamed Badawy Al Husseiny, former CEO of Aabar, as directors of the British Virgin Islands-based Aabar.
That the company might have been owned by Aabar is a legal distinction and important for the dispute. But investigators in two countries believe it was created to siphon funds from 1MDB for other purposes.