Mozambique: Portugal’s BCP bank lent $100M in good faith in hidden debts case – lawyer

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Mozambique: Portugal’s BCP bank lent $100M in good faith in hidden debts case – lawyer

8:35 CAT | 23 Oct 2023

File photo: Lusa

Portugal’s BCP bank argued on Friday in London’s Commercial Court that it lent money in good faith to Mozambique, refusing to be prejudiced by the country’s attempt to cancel debts incurred by alleged corruption. “BCP is an innocent bank that, like others, lent money in good faith,” said Stephen Midwinter, the lawyer representing the institution in the ongoing trial of the “hidden debts” case in British justice.

In his opening arguments, BCP’s lawyer disputed the Mozambican state’s assumptions that the guarantees given by former minister of finance Manuel Chang are not valid, and refuted that the alleged corruption is enough to invalidate and cancel the contract. Midwinter emphasised that BCP had no knowledge of the bribes or suspected irregularities, and recalled that it was VTB that negotiated the terms of the loan. “It’s unrealistic that a syndicated lender could have known,” he emphasised. In 2014, the Portuguese bank participated in a syndicated loan together with the Russian bank VTB to finance the Mozambican state company MAM to buy goods and services from the naval group Privinvest to build shipyards for the construction and local maintenance of ships. BCP contributed $100 million towards a total loan of around $535 million.

The scheme was part of a series of projects to buy security equipment and fishing boats to protect Mozambique’s exclusive economic zone and exploit fishing resources, for which two other state companies were set up, Proindicus and EMATUM. However, these companies stopped paying back the loans and in 2016 it was discovered that the sovereign guarantees for the financing had been signed by the then minister of finance Manuel Chang in defiance of parliament and the rules in force. The debts were estimated at around $2.7 billion (around €2.55 billion), according to the indictment filed by the Mozambican public prosecutor’s office, whose scandal led the International Monetary Fund (IMF) and other international donors to suspend support to the country.

In 2019, the Mozambican ombudsman (PGR) filed a civil suit in the London Commercial Court on behalf of the Mozambican state to cancel part of these debts, claiming that they were the product of bribes from the shipping group Privinvest and its owner, Iskandar Safa, to public officials, including Chang.

The start of the trial in London’s Commercial Court was postponed for a fortnight following an agreement between Mozambique and the banking group UBS, owner of Credit Suisse, and other financial institutions, which financed the other loans.

The trial is expected to continue until the end of December.

Source: Lusa