Mozambique’s quest for justice and financial recovery takes center stage as the nation prepares to seek approximately $1.5 billion in damages during an upcoming trial next month. This legal battle is a response to the alleged $2 billion ‘tuna bond’ fraud that wreaked havoc on the country’s finances over the past decade. The United Kingdom’s highest court has granted approval for Mozambique to pursue a civil claim in London, marking a pivotal moment in the ongoing scandal.
Origins of the Scandal
Back in 2013, Mozambican state-owned entities issued debt, purportedly to support tuna fishing and other projects. These debts were guaranteed by one of the world’s poorest nations. However, this financial endeavor quickly turned sour as the loans collapsed into default, surrounded by accusations of embezzlement involving hundreds of millions of dollars.
UK Supreme Court Ruling
On Wednesday, the UK Supreme Court delivered a landmark ruling that paves the way for Mozambique’s pursuit of restitution. The lawsuit targets Privinvest, a Gulf-based shipbuilder that supplied boats and equipment under the deal, and Credit Suisse, which played a significant role in arranging the debt. Both entities vehemently deny the allegations.
This decision overturns a prior Court of Appeal ruling in favor of Privinvest, setting the stage for a complex trial scheduled to commence on October 3. This trial promises to shed light on one of Africa’s most significant corruption cases to date.
UBS Entangled
The ramifications of this scandal extend to UBS, the new owner of Credit Suisse, which already paid $475 million and agreed to forgive $200 million of Mozambican debt as part of a settlement in 2021 with regulators from the US, UK, and Switzerland.
Impact on Mozambique
The true extent of the tuna bond debt came to light only in 2016. This revelation prompted the International Monetary Fund (IMF) and international donors to withdraw budgetary support from Mozambique’s government, precipitating a financial crisis whose effects continue to reverberate.
Accusations and Claims
As part of its claim, Mozambique alleges that Privinvest paid $136 million in bribes to state officials and Credit Suisse bankers involved in the debt arrangement. In parallel, three former Credit Suisse bankers pleaded guilty in US criminal cases related to receiving kickbacks in connection with the scandal.
Privinvest vehemently denies making illicit payments, asserting that it only engaged in legitimate transactions, including donations to Mozambique’s President Filipe Nyusi and his ruling party.
In addition to damages sought for alleged bribes, Mozambique’s claim encompasses over $1 billion in damages arising from the withdrawal of international financial support, more than $260 million in higher debt costs, and approximately $100 million in loan-related fees, as outlined by the Supreme Court.
Seeking Justice and Recovery
“These are substantial sums, but they have to be seen in the context of a dispute in which the republic is seeking to extricate itself from or obtain damages for a potential liability under the guarantees of approximately $2 billion,” noted Lord Hodge, deputy president of the court.
UBS declined to comment, while Privinvest had not responded to requests for comment at the time of this report.
Legal Developments
In a recent legal twist, the Mozambican government successfully fended off Privinvest’s attempt to include President Filipe Nyusi as a party in the lawsuit aimed at canceling the $2 billion debt guarantees and seeking damages. The UK High Court ruled that Nyusi was entitled to immunity as a foreign head of state.
Continuing Fallout
The scandal’s repercussions continue to affect Mozambique’s financial landscape. Just last week, the country witnessed a nearly twofold increase in annual interest payments on a sovereign bond issued in 2019 to restructure the old tuna debt, underscoring the enduring economic fallout from this complex saga.
Photo Source: Google
By Delino Gayweh
Serrari Financial Analyst
20th September, 2023
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