Judge acknowledges the ruling leaves the liquidators with limited recourse despite what he describes as ‘apparently dubious transactions’
[SINGAPORE] The High Court has prevented foreign liquidators from suing Standard Chartered Bank 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 embroiled 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.
The applications are part of wider international efforts to recoup assets lost in one of the world’s largest financial scandals.
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.
This provision, unique to the Republic and not found in the United Nations Commission on International Trade Law framework, explicitly bars foreign liquidators from challenging transactions that were entered into before the legislation came into force.
Justice Xu acknowledged that the ruling leaves the liquidators with limited recourse despite what he described as “apparently dubious transactions”. He noted that while workarounds may exist, these would entail additional expense and time.
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The judge recognised that his decision could appear at odds with the Republic’s broader commitment to facilitating cross-border insolvency cooperation. But, he noted that Singapore’s Parliament had deliberately included the 2018 cut-off when enacting Model Law.
“That is the law here in Singapore. The court must give effect to what that law lays down,” he said.
The dispute
The case turned on competing interpretations of Singapore’s Model Law provisions.
The liquidators argued that the courts have wide powers under Article 21 of the Model Law to give “additional relief” to foreign liquidators, including permission to sue over past fraudulent transactions.
Without such permission, they said, wrongdoers could escape responsibility simply because of timing, and foreign liquidators would be forced to start entirely new proceedings in Singapore, wasting time and money.
The banks relied on Article 23(9) of the Singapore Model Law. This provision clearly says that foreign liquidators cannot sue over transactions entered into before the law took effect.
This was a deliberate choice by Parliament, the banks argued, meant to avoid changing the legal status of past actions after the fact. Academic commentary also supports this view, noting that Article 23(9) was intended to protect parties’ expectations and prevent disruption of transactions completed before the law came into effect.
Justice Xu agreed with the banks. He ruled that the plain wording of Article 23(9) bars foreign liquidators from suing over pre-commencement transactions, and that the broad powers under Article 21 cannot override this restriction.
While this may limit the ability of foreign liquidators to recover assets linked to the 1MDB scandal, any change must come from Parliament, not the courts, he added.
The liquidators may still pursue claims through traditional court proceedings in Singapore, though such routes lack the streamlined mechanisms available under the cross-border insolvency regime.
In the case of Brazen Sky, separate proceedings are already under way against BSI and certain bankers for claims of dishonest assistance arising from the same transactions.
