Singapore Court bars 1MDB-linked asset recovery suits

Singapore’s High Court has blocked foreign liquidators from suing Standard Chartered and BSI Bank over transactions allegedly linked to the 1Malaysia Development Bhd (1MDB) scandal, ruling that Singapore’s cross-border insolvency framework cannot be applied to deals executed before the law took effect in 2018.

The liquidators of Blackstone Asia Real Estate Partners and Brazen Sky, two companies involved in the multibillion-dollar 1MDB affair, had sought to bring avoidance claims – a legal mechanism allowing liquidators to reverse suspect transactions and recover assets improperly transferred from creditors – against the banks in Singapore.

Justice Aidan Xu dismissed both applications, citing Article 23(9) of the Insolvency, Restructuring and Dissolution Act 2018, which enacted the Model Law on Cross-Border Insolvency in Singapore, Straits Times reported Wednesday.

The provision explicitly bars foreign liquidators from challenging transactions entered into before the legislation came into force.

“That is the law here in Singapore. The court must give effect to what that law lays down,” Justice Xu said, acknowledging that the ruling leaves liquidators with limited recourse despite what he described as “apparently dubious transactions.”

The case centred on competing interpretations of the Model Law.

The liquidators argued that courts have wide powers under Article 21 to grant “additional relief” to foreign liquidators, including permission to sue over past fraudulent transactions.

They said without such permission, wrongdoers could escape responsibility simply because of timing, forcing foreign liquidators to start entirely new proceedings in Singapore, wasting time and money.

The banks relied on Article 23(9), arguing that foreign liquidators cannot sue over transactions entered into before the law took effect. Academic commentary supports this view, noting the provision was intended to protect parties’ expectations and prevent disruption of completed transactions.

Justice Xu agreed, ruling that the plain wording of Article 23(9) bars foreign liquidators from suing over pre-commencement transactions, and that broad powers under Article 21 cannot override this restriction.

He said that while workarounds may exist, they would entail additional expense and time.

He added that any change allowing foreign liquidators to pursue claims under the cross-border insolvency framework must come from Parliament, not the courts.

The liquidators may still pursue claims through traditional court proceedings in Singapore, although such routes lack the streamlined mechanisms available under the cross-border insolvency regime.

Separate proceedings against BSI and certain bankers for claims of dishonest assistance are already under way for Brazen Sky.