Mozambique loses latest round in London ‘hidden debts” case – AIM report

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Mozambique loses latest round in London ‘hidden debts” case – AIM report

8:08 CAT | 15 Mar 2021

File photo: Lusa

Mozambique has lost the latest round of a court case in London, where the British judges ruled that the London High court was not the appropriate jurisdiction for Mozambique’s complaint against the Abu Dhabi based group, Privinvest.

Last Thursday, the appeals court ruled that the case should go to arbitration – which means it accepted the claim by Privinvest that the correct jurisdiction is the International Arbitration Tribunal in Switzerland.

The court thus overturned the initial ruling (by Justice Waksman) who argued that the English courts were competent to hear the case.

The legal battle between the Mozambican government and Privinvest arises from the scandal of Mozambique’s “hidden debts” – a term referring to the loans of over two billion US dollars made in 2013 and 2014 by the banks Credit Suisse and VTB of Russia to three fraudulent Mozambican companies, Proindicus, Ematum (Mozambican Tuna Company) and MAM (Mozambique Assets Management).

The loans were only possible because the banks carried out no due diligence on the three companies, which had no business record and were effectively run by the Mozambican security service, SISE, and because the Mozambican government of the day, under President Armando Guebuza, issued illegal loan guarantees, in violation of the 2013 and 2014 budget laws, and of the Mozambican constitution.

Massive corruption was involved in the loans, as was admitted by the three Credit Suisse managers who negotiated them, Andrew Pearse, Detelvina Subeva, and Surjan Singh. These three people were among those charged by American prosecutors, who took a close interest in the case because the US financial system had been abused, and US investors were swindled. According to the prosecutors, at least 200 million dollars of the loan money was diverted into bribes and kickbacks.

Privinvest was closely involved in the bribery as became clear in the 2019 trial in New York of Privinvest official Jean Boustani. Privinvest was very much an interested party since it became the sole supplier to Proindicus, Ematum and MAM. An independent audit into the two companies in 2017 showed that Privinvest had vastly inflated the prices it charged for the fishing boats and other assets it supplied. This over-invoicing was estimated at around 700 million dollars.

The Mozambican Attorney-General’s Office (PGR) began proceedings in London in 2019 against five companies in the Privinvest group, and the owner of the group, the Lebanese bilonnaire Iskandar Safa. It is also suing Credit Suisse and the three Credit Suisse officials who have admitted taking Privinvest bribes, Pearse, Subeva and Singh.

The key demand from the PGR is that the London court should declare null and void the government guarantee on the 622 million dollar loan arranged by Credit Suisse for ProIndicus, on the grounds that this debt, along with the rest of the loans were part of a gigantic fraud.

However, on Thursday, the Appeals Court found that the supply contracts under which Privinvest sold assets to Proindicus, Ematum and MAM are governed by Swiss law, and contain arbitration agreements.

It did not accept the PGR argument that the supply contracts should be separated from the bribes paid to Mozambique’s then Finance Minister, Manuel Chang to ensure that he signed the loan guarantees. Without the guarantees, the banks would never have paid the money, and the whole corrupt scheme would have collapsed.

But the Appeals Court refused to make this distinction. Instead it found “one cannot sensibly divorce bribes paid to procure the Guarantees from bribes paid to procure the Supply Contracts. The bribes are alleged to have been paid in furtherance of the alleged fraudulent scheme involving all three transactions.This is the substance –or the reality -of the dispute, including the bribery claims”.

All the bribes allegedly paid by Privinvest formed part of the same fraudulent scheme, the court said, and thus fell within the scope of the arbitration agreements.

The immediate implication of this decision is that the case is now removed from the jurisdiction of the London High Court.

But there may still be grounds for appeal in London and, according to a report by the anti-corruption NGO, the Centre for Public Integrity (CIP), the PGR is now considering this.

Source: AIM