Court of Appeal: Mozambique Hidden Debts UK Ruling Rejects Safa Appeal

• Mozambique is seeking to recover $1.9 billion from "hidden debts" incurred through illegal government guarantees on loans to state-owned companies.
• The loans, totaling over $2 billion, were secured from UBS (which acquired Credit Suisse) and VTB by fraudulent entities Proindicus, Ematum, and MAM.
• The Court of Appeal of England and Wales recently rejected an appeal by Clara Martinez Thedy de Safa, allowing Mozambique to pursue assets from the estate of her late husband, Iskandar Safa, founder of the Privinvest group.
• This UK ruling enables Mozambique to target Safa's estate and Privinvest companies for the $1.9 billion recovery.
• The Mozambican government views these legal victories as crucial for restoring its international image and securing compensation for a fraudulent banking scheme.

The primary judgment in the case is considered final and binding, solidifying the obligation to compensate the State and unequivocally demonstrating that Mozambique was the victim of a fraudulent banking scheme.

The Mozambican government is actively pursuing the recovery of $1.9 billion stemming from what are widely known as the nation's "hidden debts." This financial scandal originated from over $2 billion in loans secured by three state-owned companies—Proindicus, Ematum (Mozambique Tuna Company), and MAM (Mozambique Asset Management)—from UBS (which acquired Credit Suisse) and Russia's VTB Bank. These entities, operated by the security service SISE, were ultimately fraudulent in their operations.

The loans were made possible through state guarantees provided by the Mozambican government under then-President Armando Guebuza. Crucially, these guarantees, signed by then-Finance Minister Manuel Chang, were deemed illegal. They significantly surpassed the limits on loan guarantees established by the country's budget laws for both 2013 and 2014. Predictably, the three companies failed to repay their obligations and subsequently declared bankruptcy, leaving the Mozambican state responsible for the full amount of the debt.

A significant development in the ongoing legal battle occurred on October 21, when the Court of Appeal of England and Wales issued a ruling favorable to Mozambique. This decision rejected an appeal filed by Clara Martinez Thedy de Safa, the widow of businessman Iskandar Safa, and upheld a lower court's judgment. The lower court had previously authorized her inclusion in the legal proceedings initiated by the Mozambican State.

This particular UK ruling allows Mozambique to pursue assets belonging to Iskandar Safa's estate, in addition to those of companies within the Privinvest group. Safa, a French-Lebanese businessman and founder of the Privinvest group, passed away in January 2024, and his sons had previously renounced their inheritance. The Court of Appeal's decision reinforces a 2024 judgment that also favored the Mozambican State, though this latest ruling may still be subject to further appeal in London.

According to a government source, these appeals, including the one by Clara Martinez Thedy de Safa, were viewed as mere "dilatory tactics." The Mozambican government maintains that the core facts of the case have been established, and payment is now due. The primary judgment in the case is considered final and binding, solidifying the obligation to compensate the State and unequivocally demonstrating that Mozambique was the victim of a fraudulent banking scheme.

Maputo officials have expressed confidence that the various court rulings in their favor in the "hidden debts" case have played a crucial role in restoring the country's international image. The government has reiterated its commitment to exhaust all avenues to recover the $1.9 billion, emphasizing that every effort will be made to ensure justice and financial restitution for the nation.

This development signals the increasing success of sovereign states in pursuing international asset recovery against individuals and corporate entities implicated in large-scale financial fraud, even posthumously or through their estates. Lawyers advising clients on international finance, particularly in emerging markets, should note the precedent set for cross-jurisdictional liability and the long-term exposure for those involved in illicit financial schemes.

Source: Original reporting via LUSA, as cited by AIM