Two Abu Dhabi state funds mired in the 1MDB financial fraud have agreed a $1.8bn settlement with the Malaysian sovereign fund and the ministry of finance to end a legal dispute in London.
Under the terms of the agreement announced on Monday, the International Petroleum Investment Company (Ipic) and Aabar will pay the agreed sum in three phases: $800mn within seven days of the termination of London proceedings and the remainder within two years. Executives at the Abu Dhabi firms were accused of facilitating the looting of billions of dollars from the Malaysian fund.
In 2018, Malaysia brought the proceedings to challenge a settlement made with the capital of the United Arab Emirates a year earlier when Najib Razak, the former premier at the heart of the 1MDB scandal, was still in office.
The 1MDB scandal, which saw billions of dollars siphoned from the Malaysian sovereign fund, has reverberated around the world, leading to the ousting of Najib as prime minister and triggering a series of cases, including against Goldman Sachs.
Najib was sentenced to 12 years in jail in 2020 after the Kuala Lumpur high court found him guilty on seven charges, including money laundering and abuse of power, in a high-profile case relating to the 1MDB embezzlement. The ruling was upheld by the supreme court last year.
In London, Malaysia had argued that the original Abu Dhabi settlement had been concluded to conceal Najib’s “fraud and dishonesty”.
The settlement draws a line under a longstanding dispute launched five years ago by Malaysia over 1MDB.
The scandal has been an embarrassment for Abu Dhabi, which in 2016 announced that Ipic and Aabar would be folded into Mubadala, another state investment firm. Mubadala declined to comment.
Khadem al-Qubaisi and Mohammed al-Husseiny, two senior executives at Ipic and Aabar, have been convicted and jailed in Abu Dhabi for their role in the fraud.
The Malaysian finance ministry said: “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.”
Zafrul Aziz, minister of international trade and industry, who led the negotiations, said in a tweet: “The close relationship between YDPA [the king of Malaysia] and president of UAE was also a significant factor in ensuring the success of the negotiations.”
The deal comes days after Prime Minister Anwar Ibrahim, voted into power in November, delivered a record budget of RM388bn.
Anwar, who has also taken on the role of finance minister, inherited an economy still weighed down by the 1MDB scandal.
One of his biggest challenges is to restore Malaysia’s international reputation following the long-running corruption scandal. The fund remains the subject of corruption and money-laundering investigations in multiple countries.
Anwar has also put pressure on US investment bank Goldman Sachs Group to honour its settlement amount to the government over its role in the scandal.