The file->new document menu by default will try to launch office online web to new the document. However office online doesn’t work with the IRM yet, so we can’t even launch office online and as such this code path is blocked.

Below is the workaround suggested
1. Go to library settings->advanced settings
2. Select “open in office client”

This setting will be good for IRM enabled library anyway since office online is not supported. And once that’s on, users can new file in Office client.

Can this be enabled to work in office online as well for the IRM enabled libraries.