A significant judgment earlier this month will help shape Mozambique’s efforts to deal with the fallout from its $2bn “tuna bond” corruption scandal. That outrage against one of the world’s poorest countries — it is ranked 181 out of 189 states on the human development index — caused a collapse of its economy and pushed millions of people further into poverty.
The story involves loans arranged for Mozambique by Credit Suisse, working with a subsidiary of Russian bank VTB, between 2012 and 2016. At that stage the loans amounted to $1bn and were ostensibly intended to finance several major government schemes, among them a fleet of fishery vessels commissioned from international shipbuilding group Privinvest. But there were procedural irregularities involved — for example, the deals were concluded in secret, without the legally required approval of parliament.
It gradually became clear that corruption on an almost unthinkable scale had been involved, and that the country had been the target of immense greed from within and without. In response, key individuals have been prosecuted in Mozambique, while former finance minister Manuel Chang has been extradited from South Africa to the US to face related charges.
But there have been other international ramifications. For example, Credit Suisse, since bought by UBS, faced enormous fines in the US for fraudulently misleading investors and breaking bribery laws. It has now agreed to pay $475m to UK and US authorities for bribery and fraud, and to “forgive” $200m in debt owed by Mozambique in terms of the original deal.
As part of that original deal, Mozambique granted sovereign guarantees in relation to the funds borrowed. These guarantees are governed by English law, with dispute resolution to be heard in UK courts.
This explains why several matters related to the scandal have already been heard or filed in the UK, where a major case is due to begin shortly. In that matter, Mozambique alleges it is the victim of a conspiracy involving Privinvest, its co-owner Iskandar Safa, Credit Suisse and others that, it claims, exposed the country to a potential liability of about $2bn.
The deals were concluded in secret, without the legally required approval of parliament
Open justice
To prevent the case from going ahead in court, Privinvest argued that the parties were bound by an arbitration agreement and that any dispute should be referred to arbitration. If this argument had been successful, the issues involved would have been heard and determined in secret.
On September 20, however, five judges of the UK’s highest court rejected that argument, finding that Mozambique’s stated dispute could be dealt with in court rather than by arbitration. The supreme court decision means that the case, originally begun in February 2019, will now go ahead as scheduled on October 3, and be heard in court and in public. It’s something anticorruption activists have welcomed, saying an open hearing is essential.
But a victory for open justice wasn’t always certain. While the high court held that the arbitration agreement didn’t apply to the case, the court of appeal agreed with Privinvest, finding that “all of the republic’s claims fell within the scope of the arbitration agreements”.
Mozambique then challenged the appeal court outcome at the supreme court, where the five judges trawled the jurisprudence of countries that had ratified or acceded to the New York convention on recognising and enforcing foreign arbitral awards before concluding that the appeal should succeed, and that the matter should be heard in court as planned.
But this is not the only recent legal decision on the case. Privinvest had wanted Mozambican President Filipe Nyusi joined as a defendant in the case against it, saying he should be included as a party to the “alleged unlawful means conspiracy”. On September 4, however, the high court in London decided that Nyusi cannot be sued in the UK while he is head of state.
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