Privinvest action against Mozambique

Privinvest has demanded arbitration of a $200 mn claim against Mozambique, in a case that seems unlikely to succeed. This follows a legal action in London by Mozambique against Privinest and Credit Suisse (after Mozambique changed its legal team in London) and the December New York indictment of senior Mozambican, Privinvest and Credit Suisse officials.

The $2 bn secret loan was promoted by Credit Suisse and the Abu Dhabi based shipbuilding company Privinvest, owned by the French-Lebanese businessman Iskandar Safa. All of the money, less very large commissions, went to Privinvest at the start of the project. Officially Mozambique did not receive a penny, but Privinvest was to provide coastal protection, fishing boats, etc. The US and Mozambican indictments allege that Privinvest then paid substantial bribes to Mozambicans, Credit Suisse staff, and their own key people. The Kroll forensic audit said that much of the money could not be accounted for, and what could be explained usually involved overcharging by Privinvest (which denies the allegation).

Most global business contracts include the option of arbitration of disputes. In private, a mutually agreed arbitrator chooses between the cases presented by the two sides. (This is different from mediation, where a mediator tries to help the two sides reach agreement.) On 14 March Privinvest went to the Swiss Chambers Arbitration institution filing a demand for $200 mn claiming the Mozambique had not carried out its side of the contract, including providing facilities for Privinvest shipyards. Subsequently Privinvest filed a similar claim with the International Chamber of Commerce in Paris. These are civil, not criminal, claims.

The contract and claim are unusual. Normally Mozambique would have received part of the loan for its costs, such as land preparation, but it did not. Normally, even if the money went directly to Privinvest, as sometimes happens, it would have been in stages to allow Mozambique to confirm that work had been done. With this unusual loan, neither happened. Not only did Privinvest get all the money up front, it is now asking for more.

The contracts with Privinvest remain secret, but normally arbitration is not allowed to resolve a dispute involving criminal actions, and both Mozambique and the US accuse Privinvest of bribery.

By Joseph Hanlon