Mozambique is set to seek $1.5bn of damages in a London trial next month for the alleged $2bn “tuna bonds” fraud, which has wrecked its finances over the last decade. This comes after the UK’s highest court ruled that a civil suit could be brought in London.
The loans were allegedly looted of hundreds of millions dollars.
The UK Supreme Court ruled on Wednesday that Mozambique can continue to seek to recover losses from Privinvest – a Gulf shipbuilder who supplied boats and equipment under the deal – and Credit Suisse – which arranged a large part of the debt. They deny this claim.
The court reversed an earlier Court of Appeal decision in Privinvest’s favor that the case be arbitrated. This sets the stage for the complex trial to begin on October 3, which will shed light on what is one of Africa’s largest ever corruption cases.
This case is one of the most difficult cases that UBS, as the new owner, will inherit. UBS has already paid out $475mn to Mozambican authorities and agreed to waive $200mn in debts.
The IMF and other international donors cut their budgetary support for the Mozambique government in 2016, causing a financial crisis whose effects still linger.
Mozambique accuses Privinvest, as part of its claim, of paying $136mn to officials of state and Credit Suisse bankers who worked on the debt. In US criminal proceedings, three former Credit Suisse bankers admitted to receiving kickbacks in the debt scandal.
Privinvest denies paying bribes, and says it only makes legitimate payments such as donations made to Mozambique President Filipe Nyusi’s ruling party and the government.
In its Wednesday judgment, the Supreme Court stated that Mozambique also claimed damages of more than $1bn due to the withdrawal from international financial assistance, as well as over $260mn to cover higher debt costs and approximately $100mn on fees for the loans.
“These are substantial amounts, but they must be seen within the context of a case in which the Republic is trying to get out of or recover damages for an estimated liability of $2bn under the guarantees,” said Lord Hodge.
UBS declined comment. Privinvest didn’t immediately respond to our request for a comment.
The Mozambican government has resisted a bid by Privinvest to add Nyusi to the lawsuit in order to cancel the debt guarantees of $2bn and to seek damages. The UK High Court has ruled Nyusi is entitled to immunity because he is a foreign leader.
Last week, Mozambique almost doubled its annual interest payments on a bond it issued to restructure an old tuna loan in 2019.