Demands US$817.5 million

The Russian bank VTB has filed a lawsuit in London demanding $817.5 million, plus interest, from the Mozambican state for failing to pay instalments on ‘hidden debts’ loan contracted by MAM (Mozambique Asset Management) in 2014. The Russian bank argues that the Mozambican state “irrevocably and unconditionally guaranteed that the debtor would have a timely and adequate financial performance and that all obligations would fall on it [the State], so that when the debtor fails to meet any deadline, the guarantor will, in a maximum of three working days, pay the amount in question as if the guarantor were the debtor himself”. Following the non-payment of loan repayments since May 2016, a month after The Wall Street Journal published a report on the existence of the loan contracted outside the public accounts, the case jumped sprang onto the world’s front pages as an example of corruption at the highest level in Africa. The matter of the “hidden debts” embargoed Mozambique from international donor financing and saw its credit rating cut to ‘financial default’, the lowest possible level. According to the indictment filed in the London court, which is only now available for consultation, following further non-payments from 26 May 2016 to 2019, the VTB, on the 26th of November last year, warned the Mozambican government, through its lawyers, that the amount owed on the MAM loan amounted to US$817.5 million (€746.8 million).

“In breach of the terms of the loan agreement and government guarantee, MAM and the Republic have failed to make these payments, and any other sums, so that the VTB has consequently suffered damages and losses,” the Russian bank’s lawyers argued. After the November warning, lawyers acting for the Mozambican state responded on January 6, stating that the Mozambique “did not accept that MAM’s government guarantee was valid, binding and applicable”, and that they had several reasons to believe that this was the case.

In addition to the outstanding amounts of US$817.5 million plus interest on late payments, the VTB also demands a statement from the Mozambican state confirming that the loan of US$545 million (€497.9 million) to MAM is “legal , binding and applicable”, and that the same applies to the state guarantee issued at the time. The term ‘hidden debts’ relates to loans of around US$2.2 billion (two billion Euros) contracted between 2013 and 2014 in the form of credit with the British branches of investment banks Credit Suisse and VTB by state-owned Mozambican companies Proindicus, Ematum and MAM. The loans were guaranteed by the Mozambican government of the time, without the knowledge either of parliament or the country’s Administrative Tribunal.

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