Mozambique: Resolution of hidden debts on the razor’s edge

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Mozambique: Resolution of hidden debts on the razor’s edge

6:16 CAT | 31 Jan 2023

FILE - Baltazar Fael, lawyer and CIP researcher. [File photo: DW]

Mozambique wants to see Privinvest, accused of bribing state officials, judged by a common court and not an arbitration court, where companies usually win the case, analyst Baltazar Fael told DW Africa.

Last year, a London Court of Appeal ruled that, unlike the sovereign guarantees given to contract loans to Credit Suisse and VTB banks, which are regulated by British law, contracts with companies in the Privinvest shipping group are subject to arbitration in Switzerland. The Mozambican state appealed the verdict.

If the Supreme Court confirms it, legal proceedings in the United Kingdom against Privinvest, which is accused of corruption of Mozambican public officials and politicians, could be suspended.

In an interview with DW, lawyer and researcher at the Center for Public Integrity (CIP) Baltazar Fael argues that history has shown that cases in arbitral tribunals are mostly won by companies. The trend leaves the Mozambican state “fearful” and eager to reduce the damage caused by the hidden debt scandal.

DW Africa: What is at stake in this UK Supreme Court review, and what can we expect?

Baltazar Fael (BF): What is at stake is clearly the forum that is competent to judge the case. Then there is the matter of the contract itself. It is necessary to clearly know what the contract says, in case of dispute between the parties, [to know] where the case will be resolved. Often, in these international situations, the parties prefer that cases be resolved in an arbitral tribunal, due to the speed, due to the fact that the arbitrators are people who know the subject very well, who know the area very well, and also often because this speed favours companies compared to the slowness that happens in traditional courts or common courts.

DW Africa: If the court decides that the case should be resolved by arbitration in Switzerland, will this be beneficial for Mozambique?

BF: An arbitral tribunal has its own rules and, many times, companies have preferred resolution there. It is clear that the Mozambican state has always shown some aversion to this case being resolved in an arbitration court. While companies, who know that they often win this type of case in arbitration courts, make an effort in this regard. The Mozambican state is currently afraid that the case will go to arbitration and prefers that it be resolved in a British court. Because the historic thing that happens at international level is that companies often beat states in these arbitral tribunals.

DW Africa: And in the case of the arbitration in Switzerland, what could happen is that the legal proceedings in the United Kingdom against Privinvest was suspended?

BF: That’s why the state is making every effort to have the case heard in a court that can give it some comfort in terms of winning this case. It is not saying that, if the case is taken to an arbitral tribunal, Privinvest will necessarily win. It’s not that. But tradition has shown this tendency.

DW Africa: In any case, the decision of the Supreme Court will affect the trial at the Commercial Court in London, which should only take place in October.

BF: Exactly. And, as they say, the time of Justice does not belong to us. And this issue, too, is linked to companies’ preference for arbitration courts, which are much quicker to deal with issues than ordinary courts or state courts. Even at the London court the process has been going on for some time and we have no regular information about the stage it is at. So we have no other way out. Both the Mozambican government and Privinvest will have to wait until the London court decides which jurisdiction will hear the case. Because without that being decided, the case will not move forward, and will continue in the doldrums where it finds itself.

DW Africa: Mozambique is trying to cancel part of the more than US$2,700 million in debt contracted with international banks. Do you believe it will be possible?

BF: The state clearly wants to recover these amounts and somehow mitigate the damage caused by hidden debts. What I think is that if it is in fact proven that state agents, in this case SISE (State Intelligence and Security Services) officials and others were involved, and they, by Mozambican law, act on behalf of the state, the state will have little chance of this debt being annulled, even in part. Now, if it is proven that there are elements that induce the accountability of these state agents involved, in quotes, “up to their necks”, in this plot, I think that maybe the state can recover part of these funds or, who knows, even get that debts are cancelled.

Internally, the Constitutional Council of Mozambique has already ruled in some way in favour of the non-payment of these debts. But this decision is not binding on international institutions. The eventual annulment of these debts or the recovery of these amounts is decisively at play in the Court of London. I think we have to wait for justice. And the decisions that come out of there also depend a lot on the assessment that the judges make of the facts. In the case of Manuel Chang [former Mozambican finance minister detained in South Africa] it was an ordinary court that decided on the extradition to the US and we clearly saw what happened.

Source: Deutsche Welle