- Case brought by the government of Mozambique also seeks damages from Credit Suisse and shipbuilding company Privinvest
- Credit Suisse given deadline of 21 January to file and serve their defence
Documents obtained by Jubilee Debt Campaign show that the government of Mozambique is seeking the cancellation of a $622 million debt on the grounds that it was unconstitutional and illegal under Mozambique law. In a civil case lodged at the High Court in London, Mozambique is also seeking damages which could run into billions of dollars from Credit Suisse, Privinvest and individuals associated with the case.
The claims arise from three loans totalling over $2 billion made by the London branches of Credit Suisse and Russian bank VTB to state-owned companies in Mozambique in 2013 and 2014. The loans were guaranteed by then Finance Minister Manuel Chang, but the Mozambique government claims he “did not have authority to sign the sovereign guarantees, which were unconstitutional and illegal under Mozambique law” because the Mozambique parliament did not approve the loans.
The complaint submitted by the government of Mozambique alleges that “the three transactions involved the payment of large bribes to government officials … including to Mr Chang”. Defendants are Credit Suisse, three former employees of Credit Suisse and five companies in the Privinvest Group. The Mozambique government alleges that “the three transactions involved a conspiracy on the part of the Defendants to injure the Republic and thereby enrich themselves at the expense of one of the poorest countries in the world”. A report in 2017 by forensic auditors Kroll found that of $1.2 billion of the loans, around $700 million was unaccounted for.
Through the case Mozambique is seeking:
- A declaration that it is not liable to pay any debt on one of the three deals, a $622 million loan to the company Proindicus.
- Losses covering all debt payments it has or will make that have arisen from any of the three loans (and restructured loans in the case of the Ematum bond)
- All fees and expenses incurred in the restructuring of the Ematum bond
- Compensation for macro-economic losses as a result of the financial crisis which followed the revelations about the loans in 2016 and loss of donor funding
In total these claims amount to billions of dollars. However, for reasons not explained the case is not being brought against the Russian state bank VTB. VTB was involved in two of the three loans (Proindicus and Ematum) and were the only lender involved in the final loan, MAM.
Tim Jones, Head of Policy at Jubilee Debt Campaign said:
“The people of Mozambique should not have to pay one cent on these loans, two of which were kept secret, and none of which were approved by the parliament of Mozambique. It is outrageous that the UK Serious Fraud Office and National Crime Agency have not launched an in-depth investigation into these loans, and nothing has yet resulted from the Financial Conduct Authority’s investigations. The efforts of the US Department of Justice have been hamstrung by the lack of link to the US. It is past time for the UK authorities to properly look into a case originating with banks in London.”
Denise Namburete from the Mozambique Budget Monitoring Forum said:
“It is unacceptable for the people of Mozambique that the government is not including VTB in this case. VTB were involved in all three of the loans which were given without Mozambique parliamentary approval. These loans have led to a social crisis in Mozambique which has pushed people deeper into poverty. All those involved need to be questioned and held to account.”
His Honour Judge Pelling QC has given Credit Suisse until 16:00 on 21 January 2020 to file and serve their defence.
Credit Suisse declined to comment to Jubilee Debt Campaign about the case. Privinvest did not respond to a request for comment.
The three former Credit Suisse bankers named in the case have submitted their defences.
Andrew Pearse and Detelina Subeva’s defences state that they are “presently awaiting sentencing in the US on charges connected to the subject matter of these proceedings. In order not to prejudice their position they do not propose to plead fully to the claim until such time as the criminal proceedings are concluded”. Both deny involvement in “any wrongdoing with the intention of inuring the Republic [of Mozambique]”or that either “received any payments as part of a conspiracy to injure the Republic”.
Mr Surjan Singh has admitted that he “received secret commissions (or “kickbacks”) in a total sum of US$5,699,960 million directly or indirectly from the Privinvest Group for his support in securing Credit Suisse’s agreement to (a) the upsizes to the Proindicus loan provided by Credit Suisse and (b) the provision of the EMATUM facility”. However, Mr Singh has denied that the government of Mozambique “is entitled to bring any claim for bribery in respect of any payments by the Privinvest Group to Mr Singh” and that “The victim of any such conduct was Credit Suisse”.
In a further case, VTB is suing Mozambique at the High Court in London for claims relating to the loan to MAM. While documents have not been released in the case yet, it is presumed they are seeking payment of the $535 million debt, which has been in default since 2016.