Mozambique wins UK lawsuit against Privinvest over 'tuna bond' scandal

A fisherman walks toward his boat during low tide, in Maputo, 28 September 2010. Reuters/ Goran Tomasevic/File Photo

The southeast African country sued Privinvest and its now late owner Iskandar Safa, alleging they paid bribes to Mozambican officials and Credit Suisse bankers to secure favourable terms on three projects in 2013 and 2014, including one designed to exploit Mozambique's tuna-rich coastal waters.

Judge Robin Knowles on Monday ruled "substantially in favour" of Mozambique, which he said had been exploited by highly developed institutions and corporations that should have known better.

In his written ruling, the judge said Mozambique is entitled to payment of just over $825m from Safa and companies in the Privinvest group, plus an indemnity in relation to $1.5bn it is liable to pay lenders and bondholders, less around $420m already recovered by the country.

The trial centred on deals struck by state-owned companies with Privinvest for loans and bonds from banks including Credit Suisse for fishing boats and maritime security, projects backed by undisclosed state guarantees.

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But hundreds of millions of dollars went missing and, when the government debt came to light in 2016, donors such as the International Monetary Fund temporarily halted support, triggering a currency collapse, defaults and financial turmoil.

"The scale and nature of what was able to happen in this case presented systemic threat to Mozambique's economy," Knowles said in his ruling, although he was also critical of the country's own officials.

Mozambique's case was brought against Credit Suisse, since taken over by UBS, three of the Swiss lender's former employees – who had pleaded guilty in the United States – Privinvest, Safa and others.

Credit Suisse agreed an 11th-hour settlement with Mozambique in October before reaching a deal with Privinvest during the trial, allowing the lender to draw a line under the scandal which had already seen the bank pay out hundreds of millions.

Mozambique 'hustled'

Mozambique's case continued, with the focus now on Privinvest and Safa, who denied any wrongdoing and said any payments were lawful. Their lawyers argued the case was a politically-motivated attack to deflect blame from Mozambican President Filipe Nyusi and other senior officials.

Knowles ruled largely in Mozambique's favour, finding that Safa and Privinvest were prepared to promise or pay "whoever it took" and paid bribes to then Finance Minister Manuel Chang – who is currently on criminal trial in New York.

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"Mozambique was hustled to buy what it couldn't use properly and didn't need and wasn't prepared for," Knowles said.

A spokesperson for Mozambique's Attorney General's Office said the government will continue working to eradicate corruption and organised and transnational crime and hold accountable those involved.

In a statement, a spokesperson for Privinvest said it intends to appeal against the finding it paid bribes to Chang and that it was unfair that it may face the burden of hundreds of millions of dollars of damages.

The tuna bond or "hidden debt" case has also triggered criminal investigations from Maputo to New York.