The Supreme Court has ruled that a US$2bn bribery case brought by Mozambique against Privinvest Shipbuilding SAL (Holding) (a ship builder based in Abu Dhabi) can be heard in England rather than being bound by an agreement to arbitrate in Switzerland.
Between 2013 and 2014 SPVs (owned by Mozambique) entered into loans and bondcontracts with the Privinvest group, used to finance a series of tuna fishing, maritime security and shipbuilding projects that pushed the country into financial crisis. Two of the contracts contained a dispute resolution clause providing for arbitration of “all disputes arising in connection with” the project. The third contract set out that disputes would be decided by arbitration of “any dispute, controversy or claim arising out of, or in relation to” the contract.
Mozambique claimed that Privinvest paid substantial bribes to corrupt Mozambique officials and to employees of Credit Suisse (CS) who were involved in the funding of the transactions and therefore Mozambique was the victim of a conspiracy and bribery.
Privinvest stated that Mozambique was bound by the arbitration agreements and on that basis sought a stay of all its claims per section 9 of the Arbitration Act 1996.
The Court of Appeal found that the entire claim should be arbitrated because Privinvest's defence to the liability could be an arbitral matter. The Supreme Court held that Privinvest's defence to the bribery allegations—that the contracts were valid, and negotiated fairly on commercial terms, was not relevant to its potential liability for bribery. The Supreme Court justices said that the validity of the contracts was relevant only in quantifying Mozambique's potential loss and therefore did not trigger Section 9.
Lord Hodge concluded: “A defence that the supply contracts were valid and were on commercial terms would not be a relevant defence in relation to the unlawful means asserted. The validity of the contracts is no longer in question. In the context where it is alleged that very large bribes were paid both to senior Mozambican officials and to the CS team, it would be fanciful to suggest that the uncontested payments, which the Republic claims were bribes and Privinvest asserts were legitimate, did not enhance the price of the supply contracts.”
Mozambique's claims are therefore not bound by agreements to arbitrate. A trial is set for October 2023 when Mozambique will accuse Privinvest, Iskandar Safa—the billionaire owner of the shipbuilder, and Swiss investment bank Credit Suisse of bribery and conspiracy.
'As the validity and commerciality of the contracts are not essential to any relevant defence, the Supreme Court holds that they are not "matters" under section 9 of the 1996 Act in relation to the question of Privinvest's liability', Justice Patrick Hodge