PUTRAJAYA (Aug 12): The High Court lacks jurisdiction to hear 1Malaysia Development Bhd’s lawsuit against UK law firm White & Case LLP, the Court of Appeal (COA) ruled on Wednesday.
“London is a literal proper forum given the express English choice of law and foreign process,” said judge K Muniandy. He also set aside the court papers served against the law firm in 2024, noting that the requirements for service of proceedings outside Malaysia had not been satisfied.
The suit was also time-barred, being filed out of time under the Limitation Act 1953 as the alleged losses and fraud involving the state investment fund also known as 1MDB had already been made public in 2015 and 2016, he said.
Under the act, a plaintiff is required to commence proceedings within six years from when the cause of action accrued.
The panel, which includes judges Datuk Alwi Abdul Wahab and Datuk Aliza Sulaiman, also cancelled the High Court's decision to consolidate 1MDB's suit against White & Case with a separate suit filed by 1MDB against several other defendants, including Deutsche Bank and PetroSaudi International.
"We agree with the appellant that the application for consolidation by the respondent was an unequivocal tactical manoeuvre," Muniandy said.
Arguments at COA
During submissions, 1MDB's lawyer Datuk Lim Chee Wee argued that its case against White & Case should be tried by Malaysian judges applying Malaysian law for conspiracy to injure by unlawful means and dishonest assistance.
“White & Case drafted 11 documents connected to the Good Star phase of the 1MDB fraud, which allegedly facilitated and concealed the diversion of US$1.83 billion from the sovereign investment company,” Lim said.
While some of the documents involving the diversion had been executed in London, the instructions, negotiations, execution of documents, payment of funds and resulting losses were closely connected to Malaysia, he noted.
White & Case prepared transaction documents relating to the 2009 PetroSaudi joint venture and the subsequent 2010 restructuring, which the Malaysian investment company claims enabled the diversion of funds to Good Star Ltd and concealed the true nature of the transactions.
1MDB alleged that US$700 million of its US$1 billion investment in the 2009 deal was diverted to Good Star, leaving only US$300 million within the joint venture vehicle, and subsequent documents facilitated further drawdowns and transfers involving hundreds of millions of US dollars.
It has since been established that Good Star, a Seychelles-incorporated shell company, was owned and controlled by fugitive Malaysian financier Low Taek Jho.
White & Case's lawyer Datuk Cyrus Das, in his submission at the Court of Appeal, stressed that 1MDB's case should be tried in London as the cause of action arose in the UK.
“We are not shutting down the plaintiff (1MDB),” he said. “We only want the matter to be heard in London.”
Insisting that the law firm was not trying to avoid the suit, he submitted that Malaysia was not the suited venue for the trial because it was grossly unfair for the trial to proceed against a foreign defendant without a proper basis.
High Court ruling
The High Court had earlier this year denied White & Case's jurisdictional challenge, saying Malaysia is the proper forum to hear the suit.
Judge Leong Wai Hong in his ruling noted that the challenge was akin to a football match between Liverpool and Manchester United in which Liverpool insists on playing only at Anfield, while Manchester United insists on playing only at Old Trafford.
Leong, in his 50-odd page judgement, noted that much had changed due to globalisation where funds can now move easily across jurisdictions, but Malaysia is the forum for the case.
“In my view, Malaysia is the forum that has real and substantial connections with the suit,” he said, noting that 1MDB is incorporated in Malaysia and is a state-owned entity of the federal government of Malaysia.
Funds were misappropriated and siphoned out from 1MDB’s accounts in Malaysia and the company suffered the loss in Malaysia, and the main players in the alleged fraud were also Malaysians, he added.