Today Mozambique substantially won its $3.1 billion claim against Abu Dhabi shipbuilder Privinvest over its role in a corrupt conspiracy to secure government-backed loans over a decade ago for a failed maritime project that “had no chance from the start”.
The High Court in London ruled that bribes of at least $7 million were paid to Mozambique’s former finance minister, Manuel Chang, to deliver sovereign guarantees that left the country on the hook for billions in debt. Known as the “master of kickbacks”, Privinvest’s recently deceased owner Iskandar Safa was found to be “the individual ultimately behind each promise and payment” to Chang, who is currently standing trial in the US.
Today’s judgment holds that Mozambique is entitled to payment from Privinvest and Safa of just over $825 million and indemnity for an estimated $1.5 billion that the country still owes to banks and bondholders over the coming years.
The scandal was only uncovered in 2016 after Mozambique defaulted on these hidden debts, prompting the International Monetary Fund and international donors to halt funding and plunging the country into an economic crisis. Until 2016, Mozambique had been one of the world’s 10 fastest-growing economies for two decades, but the country once hailed as a development success story has now been left among the 10 countries with the lowest GDP per capita as a result of the tuna bond scandal.
Today’s ruling recognises that the “scale and nature” of the deal posed a “systemic threat to Mozambique’s economy”, prompting the judge to raise serious questions about what international banks could and should do differently when engaging with public loan contracts in countries with high corruption risks. While the bankers working on the tuna bond transactions at Credit Suisse and VTB Capital were the front line of defence for financial crime risks within the banks, the dodgy deals were pushed through in spite of red flags for corruption.
In his incisive and considered judgment, Judge Robin Knowles described the scandal as “nothing short of a tragedy”, with the project focused on what “banking could make out of Mozambique” rather than helping the nation pursue opportunities to develop. In addition to making clear findings of corruption, the judge criticised the “overall lack of standards” by those who “set their sights on self interest and personal financial reward” in a way that enabled “ultimate consequences that were truly serious”. Commenting on these ethical failings, the judge rightly observed that “Those who did the worst may suffer legal or regulatory consequences, but what about the others?”
While Mozambique has largely won its claim today, this case has only scratched the surface of the corruption that was concealed through these hidden debts. On the eve of the trial in October 2023, Mozambique reached an out-of-court settlement with Credit Suisse that gave the country a partial release from an unjust debt but came at the cost of leaving key allegations untested and unaccounted for in public court proceedings.
The remaining legal claims were contested in a scaled-back trial that was missing key protagonists including President Filipe Nyusi, who enjoys immunity as a sitting head of state. Even after the trial wrapped up, the court delayed its judgment so that Mozambique and VTB could sign off on a further settlement in June.
Today’s ruling brings welcome vindication for the Mozambican people who have been saddled with an unjust debt, but it has also highlighted the accountability deficit which must be addressed if there is to be justice for one of the biggest bribery scandals in the world. As Judge Knowles himself reflected in his ruling, “My findings about some do not mean there were not others – institutional, corporate and individual – with much to answer for”.
Dr Helen Taylor, senior legal researcher at Spotlight on Corruption said:
“Today’s ruling puts beyond doubt that an unjust debt was inflicted on the Mozambican people through a corrupt conspiracy designed to benefit a handful of political elites, international bankers and greedy businessmen. While the judgment is 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. The court’s scathing criticism of the bankers who pursued their own profit while enabling grand corruption should be a wake-up call about the need for stronger safeguards in public loans to high-risk countries.”
