The Royal Bank of Scotland (RBS) hasd been hit by twin blows. After the collapse of its talks with Australia's biggest bank to offload certain assets in the region, the bank has been slapped with a multi-million pound lawsuit by a hedge fund for apparent infringement of an investment agreement.

And coincidentally, both the events involve ABN Amro, which RBS had acquired last year in collaboration with Belgian-Dutch group Fortis and Spanish banking major Banco Santander. (See: Royal Bank of Scotland- Fortis- Santander consortium acquires ABN Amro in world's biggest banking takeover)

On Tuesday, National Australia Bank Ltd, the country's biggest by assets, said it had ended talks with RBS about buying ABN Amro Holding NV's investment-banking businesses in Australia and New Zealand. After first opening negotiations on 11 July, the Melbourne-based bank issued the statement on 22 July that it has withdrawn from negotiations.

RBS, the UK's second-biggest bank, is selling assets and raising capital to bolster reserves depleted by credit-related write-downs and the ABN Amro acquisition last year. The bank, which also wants to sell its insurance unit, needs to raise about £4 billion ($8 billion) in disposals even after raising £12.3 billion in Europe's biggest rights offering last month, to help bring capital ratios in line with peers. It is expecting around $430 million from the sale of its assets Down Under.

In a separate development yesterday, RBS became embroiled in a multi-million pound lawsuit following a decision to withdraw an investment by ABN Amro, which it now owns.

ABN Amro Dutch bank had agreed to invest £199 million in a London hedge fund Merebis Capital Management but RBS withdrew the deal after taking over the Dutch bank. Now Merebis has now filed a case in London's High Court claiming it is owed a penalty fee of £17.8m for the early withdrawal.

In the court documents Merebis claims that ABN Amro agreed not to redeem its investment for three years, subject to exceptions, when it injected £199 million to get the hedge fund started last July - just as an RBS consortium and Barclays were battling to buy the bank.

But in April, six months after RBS took over ABN Amro's investment bank, including its hedge fund holdings, it asked for its money back at the next possible date, the start of this month. After it was paid, Merebis says in the documents, it asked for a 10 per cent penalty fee for early withdrawal to which it claims it was entitled and which has not been paid.

ABN has also been refunded its £20 million investment in the defunct London hedge fund Castlegrove, which closed this year and sold the major portion of its business to a US hedge fund. An ABN joint venture in Australia, Sydney-based Absolute Capital, was placed in voluntary administration late last year.

Merebis was set up by four ABN traders led by Gary Wolens, former head of equity derivatives at the bank. It aimed to match the ABN funding from outside investors before its launch but in the end raised only a small amount.

The fund, which covered seven strategies including equities, convertible bonds and distressed debt, was down 1.7 per cent after fees from launch to the date the redemption was requested, amid falling markets. After selling off its holdings to raise the cash to repay ABN, it was down 5.9 per cent by the beginning of this month.

RBS has denied liability and said it disputed that any amount was payable, but the legal action has come as a fresh blow following the collapse of several high-profile asset sales.