Investment bank Goldman Sachs has filed for arbitration against the government of Malaysia with the London court of International Arbitration, over its ongoing dispute regarding 1MDB funds.

Unusual

Bloomberg reports that Goldman Sachs took the "unusual" step of suing Malaysia amidst the bank's growing frustration with Malaysia.

Goldman's executives are reportedly frustrated with the government of Malaysia's desire to rework the 2020 agreement between the bank and the government of then-Prime Minister Muhyiddin Yassin.

Current PM Anwar Ibrahim, who is from a different political coalition from Muhyiddin, has said that the Malaysian government intends to review the 2020 settlement, including at the recent Milken Institute Asia Summit.

There Anwar said that Goldman Sachs would not be allowed to "shy away" and treat Malaysia like a "banana republic"

But Goldman Sachs has rejected Anwar's demands for the reworking of the agreement, saying Malaysia was "violating its obligations to appropriately credit assets  against the guarantee provided by Goldman Sachs in our settlement agreement and to recover other assets." 

Quite surprised

The Malaysian government's 1MDB Taskforce Committee responded by saying that it was "quite surprised", according to Bernama.

It added that the two parties were still taking part in "good faith discussions" to resolve any dispute "amicably".

Nonetheless, it intends to ensure that the interest of the Malaysian people "is safeguarded".

Johari Abdul Ghani, the committee's asset recovery chairman, revealed that the Malaysian government and Goldman Sachs disagreed on whether Goldman Sachs was required to pay an interim US$250 million dollars (S$342.3 million).

According to the 2020 agreement, should the Malaysian government not recover US$500 billion worth assets by August 2022, Goldman Sachs would be required to pay them the US$250 million.

Johari added that Goldman Sachs was not yet required to pay that sum of money until November 2023 as the bank had asked for and received four deadline extensions.

As that deadline had not been passed yet, the 1MDB Taskforce considered the bank's initiation of arbitration to be "premature and without due consideration of necessary prerequisites".

1MDB

The source of the dispute is the aftermath of the 1MDB investment fund scandal, where Goldman Sachs is accused of facilitating the disappearance of billions of dollars.

The scandal resulted in the fall of Malaysian PM Najib Razak's government in 2018, and Najib has been convicted of corruption and sentenced to 12 years in jail.

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