Mozambique wins $3.1bn tuna bond case

Mozambique last week won its $3.1bn lawsuit at London's High Court against Emirati-Lebanese shipbuilder Privinvest for allegedly paying bribes in relation to the decade-old ‘tuna bond’ scandal. Legalbrief reports that the scandal battered the nation’s finances and triggered one of Africa’s biggest graft scandals. The lawsuit relates to Mozambique's hidden debts scandal after Credit Suisse and VTB of Russia granted $2bn in loans to three shelf 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. In addition, the government of the day, under President Armando Guebuza, issued illegal loan guarantees, in violation of the laws. 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.

The court ruled ‘substantially in favour’ of a claim that the country was defrauded in loans used to fund tuna boats and other maritime projects. BusinessLIVE reports that the boats supplied by Privinvest rusted in harbour and the projects were looted of hundreds of millions of dollars after Mozambican state companies used sovereign guarantees to issue debt arranged by Credit Suisse and other banks from 2013. The borrowing spree collapsed after its full extent was revealed in 2016, unleashing a financial crisis and ultimately a government debt default as the IMF and key donors to Mozambique pulled direct budget funding. The Financial Times reports that Mozambique had sued Credit Suisse in the same case, but settled with the bank before the trial started last year. The bank separately paid $475m in fines and agreed to forgive a part of the debt in 2021. The country also recently settled with Russia’s VTB, another arranger of the borrowing. ‘Mozambique was hustled to buy what it couldn’t use properly and didn’t need and wasn’t prepared for,’ Justice Robin Knowles said, finding that Privinvest had bribed Manuel Chang, the former Finance Minister, to approve loans. The FT notes that Mozambican claims of bribes to other key officials and politicians could not be substantiated but Iskandar Safa, Privinvest’s late CEO, ‘was the individual ultimately behind each promise and payment’ to Chang, he said. Safa, who also owned a right-wing media empire in France, died in January. Chang, who denies wrongdoing, is currently awaiting trial in New York over a US criminal prosecution into the scandal. In addition to the damages from Privinvest, Mozambique was also awarded a $1.5bn indemnity over remaining payments on the tuna bond debts.

Full BusinessLIVE report

Full Financial Times report

Legalbrief reports that Privinvest said it would appeal an ‘unfair and unjustified’ ruling that it said was marred by the failure of President Filipe Nyusi’s Government to disclose critical documents to the court. The company has denied bribing any Mozambican official, including Chang, and has said that any payments were part of lawful investments. ‘Privinvest trusts that more senior courts will correct what Privinvest perceives as a trial having taken place in circumstances that the Republic failed so completely to fulfil its own obligations and ignored orders of the court,’ it said in a statement. Helen Taylor, senior legal researcher at Spotlight on Corruption, a UK watchdog, said that while the judgment was a significant victory for Mozambique, ‘this case has brought only partial accountability and partial compensation for the devastating harms caused to the country’s economy and its people’.