“Mr Adkin KC: You were involved in the negotiation of the EMATUM [supply] contract and you discussed the project with Mr Boustani and gave him instructions on it, didn’t you? Mr Safa: No, I was not involved in the negotiation. Mr Boustani and Mr Hankach actually gave me – told me what the summary of the project was and I agreed at the end. I told them to do it but I didn’t negotiate it with anybody. Mr Adkin KC: You were the final decision-maker as to what was to go into the contract weren’t you? Mr Safa: No. I was the final decision-maker to say whether I approve the transaction, the way it is done or not. But I’m not the one who puts the content of what the contract is. The one who discussed the contract, the content is the one who discussed with the customer what their needs are and it is not me.”
“… I asked everybody if they agree with this and if everyone’s okay and I’m okay, we suggest go ahead.”
“… I kept Mr Safa informed of the general, general very high level parameters of the project but this project is mine. I was handling it. I was on the ground. I was the one they called me, in the United States they called me the mastermind, so I, if you want to call me the mastermind, I am the mastermind and this project, practically the whole details and everything was mine.”
“By the time Privinvest appeared in the scene around June 2011 looking to create investment opportunities in Mozambique, it was not just for what would turn out to be the supply contracts but a wider scale interest in investing in the country. But it was linked with the Mozambique recognition of their need to develop some system for protecting and exploiting its fisheries, its hydrocarbons resources because it occurred at a time when … internally that analysis was well advanced.”
“The genesis of this dispute today started with the realisation by Mozambique back in 2010 that it was ill-equipped to protect its Exclusive Economic Zone in respect of the discovery of hydrocarbons offshore together with its extensive fisheries and in general the protection and exploitation by Mozambique of commercial activity in its Exclusive Economic Zone. … The solution was an enhanced protection of the EEZ combined with the provision of commercial services by the state, a two-pronged approach. Make the area safe for hydrocarbons and fisheries, make the area within the commercial control of the Republic and it could exploit valuably the hydrocarbons work that was being done, it could enhance the hydrocarbons work that was being done and it could profit significantly from it. There was [a] defence element to that and a fisheries element to that and a supply services element to that and when you combine that package together, it was recognised that linked to that there was a need for servicing vessels, support, training, transfer of knowledge, intellectual property, all of these measures form a package, but it was recognised by the Republic internally at the time that this was something they needed to do and that if they did do it they could significantly increase their, effectively, GDP.”
“To secure that the project is granted a go-ahead by the [Head of State], a payment has to be agreed before we get there, so that we know and agree, well in advance, what ought to be paid and when.”
“I am very glad that we are now talking openly …. A very important issue which needs to be clear: we had various negative experiences in Africa. Especially related to the "success fees" payments. Therefore, we have a strict policy in the Group consisting of not disbursing any "success fee" before the signature of the Project Contract …. The "success fee" disbursements will be also divided proportionally to the Project payment instalments.”
“Let us [agree] and look at project in two distinct moments. One moment is to massage the system and get the political will to go ahead with the project. The second moment is the project implementation/execution. I agree with you that any monies can only be paid after the project signing. This has to be treated separately from the project implementation. I will tell you why. Because for the project implementation there will ... be other players whose interest will have to be looked after eg ministry of defence, ministry of interior, air force, etc ... At the present moment, all these people are not directly involved. Our task at Mulepe is to ensure that the project is given a formal go-ahead, and a success fee for that has to be guaranteed. Of course we will not walk out of the project, as we will continue to offer our support and ensure that nothing is compromised.”
“You will agree with me if I say that in democratic governments like ours people come and go, and everyone involved will want to have his/her share of the deal while in office, because once out of the office it will be difficult. So, it is important that the contract signing success fee be agreed and paid in once-off, upon the signing of the contract. … The project implementation fees/commissions can be paid as monies are being paid to your organization.”
“…Brother, I am being frank and open with you. We have people to pay to ensure that the project is given a go-ahead. I am begging you to understand this and come in my support.”
“Mr Adkin KC: What I am going to suggest to you, Mr Safa, and you can agree or disagree, is that the Privinvest Group had at the time Mr Boustani sent this email a policy in relation to payment of bribes. That policy was that it would pay bribes but only do so by adding the amount of the bribe payment to the contract price and only after the contract for the project had been signed, and that that had been brought about as a policy because you had previously had experiences in Africa when bribes had been paid but the contract hadn't eventuated. Now, there is a lot in there. I am going to invite you to agree, disagree or comment. Mr Safa: I say it again, Mr Adkin. Privinvest does not pay bribes full stop. Mr Adkin KC: And I am going to suggest that the original plan was to make bribe payments to the necessary Mozambican officials through a company called Mulepe. Do you want to comment on that? Mr Safa: My answer to that is that Privinvest does not pay bribes, so there were no policy or whatever you mentioned it to pay bribes to anybody.”
"Good morning brother, This is good news. However, there is an element of 'marriage' between us which must be cemented. Brother Teo, I want Mulepe to be our local partner in Mozambique. Ultimately forming a joint venture between ADMAR [the Seventh Defendant in the Republic Claim] and Mulepe for the execution of the Project. Mulepe imperative and paramount role is to ensure that it acts as ... 'the one and only hub' for the disbursement of all 'success, lobbying, and other Projects related fees'. We will not and simply can not deal with various parties in Mozambique for this subject. It has to be managed and controlled by Mulepe as the sole interface between ADMAR and the Mozambique Authorities/different Project actors. So the 'success fees' agreement has to enclose from now all actors. I am sure that you will fully endorse this issue. Awaiting the delegation list and passport copies ASAP. Take care brother, …"
“Mr Safa: I didn't read it Mr Adkin. I don't read it that way. Mr Adkin KC: And when Mr Boustani – Mr Safa: I didn't read it – Mr Adkin KC: When Mr Boustani was making clear to Mr Nhangumele in this exchange, and you can see it on the page: "We will not and simply cannot deal with various parties in Mozambique for this subject", and saying "We will not ... deal with various parties in Mozambique ... for the disbursement of all 'success, lobbying, and other Projects related fees", and it had to be done through a central hub, the "we" that Mr Boustani was talking about was the Privinvest group, wasn't it? Mr Safa: I cannot comment on this. On the Privinvest group side, Mr Adkin, we don't pay bribes full stop. Now what Boustani and Nhangumele wanted to say here, I'm very sorry, I cannot comment on it. I was not part of it. They should be asked. Mr Adkin KC: And I am going to suggest to you, Mr Safa, that Mr Boustani was not on a frolic of his own and that you were fully aware of the discussions going on between Mr Boustani and Mr Nhangumele and indeed were giving directions to Mr Boustani about them? … Mr Safa: No, I don't agree with what you believe. I was not directing Boustani on how to handle Teo and Mulepe and I was not the one who was saying to him do this or do that. So your suggestion is wrong.”
“Fine brother. I have consulted and please put 50 million chickens. Whatever numbers you have on your poultry I will add 50 million of my breed”
“Mr Adkin KC: Let's go up to the response. You have told -- just to reorientate ourselves. You have told Mr Nhangumele that you need a percentage or a figure and you can't push your board to publish any figure without adding, to use, your words, the stakeholder's portion. Then Mr Nhangumele responds to you: "Fine brother. I have consulted and please put 50 million chickens. Whatever numbers you have on your poultry I will add 50 million of my breed." And what he meant by that, as you understood it, was that he had consulted with the Mozambican officials and their representatives and that the result of that consultation was that the total cut from which the bribes would have to be paid was$50 million , didn't he? Mr Boustani: So Mr Adkin, since, as you have said, this email is extremely famous and I'm very familiar with it, so again, answering again with the context of this email. So first of all, you see that I have put "LOL" in -- sorry, I was sending it first to Ms Basetsana Thokoane and saying "LOL". Now, what is the context of this email? So here we are at the visit of Kiel, and I met the son of the President of the Republic and the official SISE officer who was later on then officially tasked and ordered by the President of the Republic to be the focal point for these projects, and I mean here António Carlos do Rosário, I meet these two gentlemen in Kiel. We spend two or three days. We exchange numbers and emails. Nobody mentions anything to me. Nobody from these two people. By the way also, there was a huge incident before that -- this trip to Kiel which also is very important to mention for the course of the truth. So Mr – and this is that cemented in my mind, that Mr Nhangumele is like a total liar and even I would say a charlatan, and that's why eventually he was completely knocked out of this project in January 2013 and he totally disappeared after. They even -- Mr Nhangumele wanted me to pay for the travel tickets of even the whole delegation coming. And I remember at that time I spoke about this with Mr Boulos Hankach and as I recall also maybe, maybe, even Mr Safa, like he's -- like this remark came to him from Boulos Hankach. And the issue was like saying this guy, I'm talking about Teofilo Nhangumele, is like a total joke, you know. So these guys are not serious. This man is not serious, okay. This man is definitely lying. So fine. I mean, he's coming on this trip. Let's see what will happen. We don't believe anything will happen, okay, especially with this such kind of conduct. But anyway, you want to keep liaising with him, keep doing it and good luck, Mr Boustani, because nobody believes, nobody from Privinvest, nobody, starting from Boulos Hankach up to the whole board, up to the chairman, nobody believed that these projects would ever happen. And that's why they have allocated or asked me to liaise with an outside consultant and this was Mr David Harpazi and his son, Mr Moran Harpazi. So all this context come to again to -- I described all this context -- to come to the spirit of this email where at the end he is saying, okay, I consulted again with we don't know who, the stakeholders, and we want 50 million. So I've said "LOL" and I said fine, you know, without any kind of belief in this man. Because we were really certain, I -- I mean I am talking Privinvest, but me, I was definitely doing my best and utmost and I was desperate for the project, myself, me, personally, but Privinvest never believed in the project.”
“… this will not happen…because my policy and the way we work, we don’t work like that. If this means that we are talking about bribery”
“In Mozambique prevalence of corruption remains an area of concern for both the public as well as donors, who support almost half of the state’s budget. Corruption manifests itself through various forms, including political, petty and grand corruption, embezzlement of public funds, and a deeply embedded patronage system. Corruption also affects several sectors in the country, such as the police, public administration, judiciary, and public financial management … … The Mozambican procurement system is also considered a high risk area for investors. Procurement laws are not fully enforced, creating many opportunities for abuse (Global Integrity Report, 2007). Common corruption schemes in public procurement are: gifts and kickbacks, conflicts of interest, collusion bidding, false or duplicate invoices by contractors, manipulation of bidding process by public officials, purchase of personal use, among others (USAID, 2005) ….”
“1. In relation to our franco-russian friends, I would like to share and have your insight on our mode operandi. Our critical success factor in the gas and oil deals is Junior, who talks directly to senior for a decision. All oil and gas deals take place at the highest level. 2. What I have seen so far is that in order for the companies to win the tender there is some money changing hands at some stage. And, it is invariably big money e.g. I am talking about hundreds of millions of dollars. Well, this is a sector which involves a lot of money, so I am not surprised that such monies are involved. 3. However, it is important for us (you and me) to ascertain what is the practice our friends are used to. In line with that, it is important you also know when such monies change hands e.g. at the beginning of the process, during or at the end, as a success fee. 4. Junior will not be in a position to discuss any partnership …, that is not his spirit. He might take partnership, but above all he will want cash into his pocket as well. I fully understand their position since they in power for a certain amount of time, and once [out] of power they will have not other chance of doing this kind of deals. If they partner with a foreign investor, they might be invited to "sell" their shareholding by the incumbent in the state house. So, my brother this is the real world politics. …”
“…Whether it is the Franco Russians, or us ([Abu Dhabi Mar] / [Mr Safa] / our [Head of State] ... etc...) we are used to these kind of deals and businesses. And we understand very very well. We have done mega deals in many continents. We have not been lucky yet in Africa because of incidents which I have told you earlier. But we are looking forward to go full throttle in Mozambique and subsequently in Africa with you guys. Brother, cash success fee is basic. We will need to discuss how much, when and how. But the concept is basic. No worries. Also, I have a message to pass to [President Guebuza] (through you and [Mr Ndambi Guebuza] / or if you see it proper that I meet him for 5 min) that our [Head of State] is ready for MEGA projects in Mozambique ASAP. Also, political & strategic ties. EEZ [the First Project] is the start. It is a cash cow in time (I believe you have the numbers by heart) + there is a hefty "down payment" which we are both aware of (the 50 chickens). [Smiling face]).”
“Mr Adkin KC: … You say, don't you, that you at [Abu Dhabi Mar] and your boss are used to the kind of transactions that Mr Nhangumele has been talking about, yes? Mr Boustani: Mr Adkin, what I was saying here, the oil and gas sector and other big projects and investments, we are used to it, yes, so he's trying to preach me about hundreds of millions of dollars and money changing hands in all these matters so I was trying to answer him again raw. Like please, Mr Nhangumele, don't lecture me about these things. We know how to do projects. Mr Adkin KC: No, Mr Boustani, he is asking you whether your Franco-Russian friends would be surprised to hear that it was necessary to pay bribes in order to win concessions in Mozambique and you were telling him that both you and they understood that very, very well. That's the position, isn't it? Mr Boustani: No, no, no, Mr Adkin, with all due respect, not at all. Again, the bribe is never mentioned in this email or in general at all. We never pay bribes. We never talk about bribes, I never meant this and it was never ever part of any kind of discussion.”
“Mr Adkin KC: When you referred to the 50 chickens as a "down payment", you see in … your email, what you meant and what Mr Nhangumele will have understood is that that money was hoped to purchase not only the Mozambican officials' loyalty for the initial transaction but also for future transactions, didn't you? Mr Boustani: Not at all, Mr Adkin. I want to mention that I put the 50 chickens and then I'm putting this smiling face like I was being sarcastic at that time and not at all I was mentioning or meaning or thinking about paying or buying any kind of public officials, as you were saying. Not at all, Mr Adkin, not at all.”
“… there are some “palms that need to be greased” as we move along, in order to secure expedite processing of paperwork and decision making”
“Mr Adkin KC: You say: "We could add the extra chickens in the contract [with Abu Dhabi Mar].” "And meanwhile, Jr could confirm to the new comers that their chunk is secured." What you meant there is that President Guebuza's son, Junior, could tell the people who were now holding their hands out to have their palms greased that their chunk was secured. That is right, isn't it? Mr Boustani: Mr Adkin, I thank you for this and yes, I was answering Mr Nhangumele with the manoeuvre. And for information and for the truth and for the fact, Mr Armando Ndambi Guebuza, I was in constant communication with him. And even on that purpose I remember so well I called him, I told him, Armando, this is -- I am bringing with me like a potential group who wants to invest in oil and gas, okay. So any particular things, ideas, etc, so I was even calling him for me to see if any kind of word will be mentioned by him even related to payment of a lunch, and this never ever happened. Okay? So what I'm trying to say, this man for me in my mind, okay, this man is continuing to be involved in this project, I don't know why, I don't know how, but fine, he's still in communicating -- in communication. I'm in contact with the son of the President and the official from SISE. None of them is mentioning absolutely nothing about what this guy is claiming. So for me he's lying, he's manoeuvring, I will keep the manoeuvre, let's see where it will reach. And the course of events, and here if we go up to January 2013, proved me right and the truth right. Mr Adkin KC: If you were in direct contact with the son of the President, what are you doing having continuing email communications with somebody you regarded as a liar and a cheat? Mr Boustani: Because, Mr Adkin, because the son of the President did not tell me do not communicate with Nhangumele. I didn't ask him about him. He didn't tell me about him. Mr Nhangumele was, when the two visits occurred of due diligence, one in Kiel in Germany and the other one in Abu Dhabi, United Arab Emirates, in the beginning of 2012 Mr Nhangumele was part of the delegation, okay, as a consultant. So for me it was confusing what I was saying to myself, and again, this is part of call it manoeuvring. If I cut him off today, okay, and stopped communicating with him, okay, so what do I do now in terms of seeing where do we reach with this project? What I'm saying to myself is like, okay, keep communicating with this guy, let's see what we will reach.”
“49M$, 13M$ to SPV, and 56M$ to the people = 118M$”
“Mr Adkin KC: Mr Boustani, by this date, 21 January [2013], the term sheet with Credit Suisse had been signed, the supply contract between Proindicus and Privinvest had been signed, …. Is it your evidence that all of that happened without the involvement or knowledge of Mr Safa? Mr Boustani: Mr Adkin, my evidence is very simple, as I have said it before and I'm saying it again. Mr Safa, I kept him aware about the general, the general high level figures of the project. The issue of 50 million I have never discussed with him. The only thing eventually I discussed with him, I'm saying okay, there is now a consultancy fee that we need to pay, okay. And at the end of the day this is where the figure of 5% of the total contract value of 372 which came to 18 million was at the end paid, half of it to Teofilo Nhangumele and half of it to Bruno Langa. So I kept Mr Safa informed of the general, general very high level parameters of the project but this project is mine. I was handling it. I was on the ground. I was the one they called me, in the United States they called me the mastermind, so I, if you want to call me the mastermind I am the mastermind and this project, practically the whole details and everything was mine.”
“… or [Mr Safa] personally will be holding for [Ndambi Guebuza], in trust, the sum of 33,000,000 US$ (thirty three million US$).”
“Mr Adkin KC: … Mr Boustani, you sent from your email address this document to Mr Safa in order to be able to satisfy Mr Armando Guebuza and the other Mozambican officials that you had promised to bribe that they would get the monies when the Proindicus contract monies hit Privinvest and that is the truth, isn't it? Mr Boustani: No, Mr Adkin, not at all. I have just answered the whole truth and facts around this document. Typed on my laptop by Teofile Nhangumele, sent to Logistics, printed there. I have explained the whole context of it.”
“Mr Safa: … I don’t know what this document is but it is a phoney document, because first of all, it is Jean Boustani sending it to Logistics. Why he’s addressing Mr Guebuza? And there is my name in it, and nobody puts my name in a letter if it’s not me. So all of this, all of this for me, this is phoney, Mr Adkin. Yes, so I'm hearing, I don't know what this email is and it's a phoney email. And moreover, it's Boustani to Logistics. Why it is addressed to Mr Armando Guebuza and my name is put as signatory? In a normal email, if it is me writing to Guebuza I should write to Guebuza, not Boustani writing to me for Guebuza. I don't know, it is a phoney email. Mr Adkin KC: Mr Safa, I suggest to you it is perfectly obvious what this is. This is a draft of a letter that you were to send to Mr Guebuza which Mr Guebuza was to countersign, promising Mr Armando Guebuza that Privinvest or you would hold and then pay a$33 million cut of the monies Privinvest was to receive under the Proindicus transaction to him if and when they were received. That is obvious and that is the truth, isn't it? Mr Safa: No, it's obvious to you. I never signed letters of that sort. Never. In my 33 years, 34 years of shipbuilding never signed a letter of that sort. Number two, I don't need anybody to write a letter for me. I know how to write letters and I can assure you my English is at least as good as Boustani's English.”
“Mr Adkin KC: … I think we are agreed, aren't we, the EEZ didn't change, the size and shape of the EEZ didn't change? Mr Kuhn: That's correct. Mr Adkin KC: So, did you then when you got on the ground in Mozambique realise that you had been proceeding on a misapprehension as to the size and shape of the EEZ, is that what happened? Mr Kuhn: That is what I wanted to express, I think. Mr Adkin KC: And is that because you had failed to take account of Europa Island? Mr Kuhn: Yes. Mr Adkin KC: Because I am curious, if we just have a look there is a reference to Europa Island and had that -- that had just been overlooked, had it, in the original supply contract negotiation? Mr Kuhn: I think so. The EEZ normally is defined as a line or an area stretching 200 nautical miles out of the coastline of a country. If you see the distance between Madagascar and Mozambique, the distance is less than 400 nautical miles. And especially that there is Europa Island in the middle and France is taking advantage of that and giving an own EEZ around that, so the EEZ of Mozambique is a little bit less than 200 miles in these areas.”
“Mr Boustani: No, Mr Adkin. Again, you're asking me about an Excel sheet and a theoretical model, and this is completely different to what effectively happened. So I'm very happy to answer on actual facts and payments and not on a theoretical Excel sheet that I was printing myself for myself. Mr Adkin KC: Mr Boustani, this is the document that was produced after the supply contract had been signed, the financing agreement and guarantee has been signed and the conditions precedent had all been fulfilled. So this is after the deal is all done, the money has come in, the thing is executed. And let's just keep focused on that 56 million figure. 6 of it was to Ms Thokoane. 17 million, you told us, was to Mr Nhangumele and Mr Langa, 8.5 each, yes? Mr Boustani: Correct, Mr Adkin. Mr Adkin KC: So 56 minus 6 is 50 million, 50 million minus 17 is 33 million, and the 33 million was what we saw in the email that you sent to the Logistics address, what was secured by a promise to pay Mr Armando Guebuza, yes? Mr Boustani: No, Mr Adkin. Again, so the 33 million alleged payment to [Mr Ndambi Guebuza] never ever happened and never was the 33 million paid to [Mr Ndambi Guebuza] and we did not bribe anybody. Again, this is a theoretical Excel sheet that I made for myself and after the signature of the procurement contract whereby the scope of supply of the procurement contract is completely different, completely, to [an earlier proposal of 2011]. Mr Adkin KC: And that 33 million was the figure out of which the Mozambican officials to whom you promised to pay bribes were to be paid, yes? Mr Boustani: No, Mr Adkin. Again, we did not pay any Mozambican official. We did not bribe any Mozambican official. And the 33 million itself, Mr Adkin, were never paid. So I'm saying -- yes, excuse me sir? Mr Adkin KC: I was going to ask you a further question. I was going to ask, you have no other explanation as to where the 33 million that adds to the 17 million to Nhangumele and Langa and the 6 million to Thokoane, where that comes from in this spreadsheet? Mr Boustani: But Mr Adkin, this is a spreadsheet, an Excel spreadsheet which I sent to myself to be printed. So this is not a document I'm communicating with anybody. So I was myself doing a spreadsheet because I was, let's say in a way, putting all -- doing all my files, putting the whole train of the story from A to Z. The 33 million never ever had been paid. Nothing has been paid out of this 33 million to [Mr Ndambi Guebuza]. And again, I say it again, the proof on his trial personally in Mozambique where your client was prosecuting him, the fundamental part of his indictment in Mozambique was he received 33 million and in specific bank accounts. These bank accounts, when his lawyer produced these bank accounts, it was the balance zero from inception. The result, his lawyer, he was then persecuted and threatened with his life and he run away in the middle of the trial. So Mr Adkin, this is a theory, this is a spreadsheet, nothing of that happened. I'm very happy to answer facts and actual payments but not the spreadsheet.”
“Just to remind you please of the payments this month: // [Mr Matusse]: 450K$ as per attached document. Last month we did 450K$ to the wrong account (attached slip). // [Mr Leão]: 1 million $ to the same account as last time (I guess we corrected the IBAN) // [Minister Chang]: 1 million $ to the same account number// [Ms Lucas]: 750K$ (to reach the balance of 1 million$ to the same account number. Last month we did 250K$ I guess) Thanks”
“… made significant efforts to aid in closing the Proindicus upsizes and EMATUM loan [discussed below] because I had agreed with Boustani that Privinvest would pay me a substantial sum of money for helping close those transactions.”
“… our role will be to bring the financing and the technical expertise + management to Mozambique.”
“… manage and or oversee all shipyards as needed in Maputo and in other locations to be determined”
“Mozambique does not have a long history of fishing tuna as a directed offshore commercial fishery. Consequently, Mozambique has relied on foreign fleets to harvest this fishery for the last two decades or more and has benefitted from the license fees recovered from this activity. In recent years, Mozambique has become very interested in redirecting the benefits of this fishery to Mozambique and its socio-economy. This was one of the reasons for its decision to become a member of IOTC in 2012. The first industrial tuna fishing vessel flagged to Mozambique entered the fishery for its new flag State in 2011.”
“In summary, without prejudice to Mozambique’s Coastal State Rights "for exploring, exploiting, conserving and managing the living resources, including the highly migratory species, within a zone of up to 200 nautical miles under its jurisdiction ", Mozambique’ s tuna fleet development plan includes: 1. as a first step, a phased replacement of current foreign tuna fishing capacity with Mozambican capacity; 2. enhanced tuna data collection mechanisms to better organize and equip the small scale tuna fishers; 3. enhanced infrastructure to address both the industrial and small scale tuna fleets operating in Mozambique’s Fisheries Waters; and 4. expansion of its national fishing capacity in accordance with the opportunities available to it under sustainable limits. The first step of the Fleet Development Plan for the Industrial Fishery for the next fifteen years is the replacement of the current tuna fishing fleet with vessels fishing directly for Mozambique, either under charter, or re-flagged, noting that for this first phase the target of 130 vessels, and without prejudice to further fleet expansion, is as follows: [the figures for 2014, 2015 and 2016 were 15, 15 and 10.]”
“Mozambique’s goal is to regain the control of the tuna fishery in its waters and maximize the socio-economic benefits from this fishery, consequently subsequent phases will include better data and development of a small scale fishery, and where appropriate and scientific advice supports, expansion of its tuna fishery and issuance of further licenses in future years.”
“It seems we can reach a volume of 750 million USD. So kindly adjust the number of trawlers to 45 instead of 30”
“The approach of saying how much money you have and let me or let us try to fill this amount with boats is not our approach.”
“My only concern is too many trawlers. No problem at all if we limit to 25 tuna boats of 23m and spend rest on patrol boats, barges etc. We will struggle to make the feasibility study self sustaining but we knew that anyway and we can probably fudge that. I have been thinking also about the structure and we shld include a reserve to pay interest for the first 18 months. This will take circa 50mn from the bond, so suggest we raise a 800mn bond, 750 for boats and 50 to pay interest. Ok with you habibi?”
“Let me discuss it with [Mr Safa] and the frogs today. The issue is that we have is already designed. So manufacturing will be swift and easy. The 33 [metre] is designed for other operations. Can be surely modelled for fishing, but we will need time. How about a "marine industry bond"?? Chang asked for transportation vessels. Plus there is the INAMAR dimension. Maybe talking also about the ENH Logistics? I am just throwing ideas bro.”
“Probably worth a discussion bro as 45 trawlers is too many. At the max there were 100 ships fishing tuna off moz. Now the number is 50. So we will be doubling the fleet. Wld look odd. Can we make fewer bigger ones? A few 33m is definite non?”
“Mr Boustani: “Bro Just had a long chat with [Mr Safa]. Best is to keep the 45 trawlers for 750 and not complicate our lives at this stage. Will prepare extra docs and annexes for "tuna capabilities". Once we finish, we can make amendments and put other vessels. Are you ok with that?”
“We will go for 800 million$ so we keep a cushion for Proindicus interest payment next year”
“It says Moz wants to reach up to 130 vessels from 2014 to 2028… assuming a mix of purse seiners (very big vessels) and longliners ... I am sure since we can only finance longliners … clearly we have room to increase the ship numbers!!!”
“And we need the [OPVs] for protection and surveillance. Story makes perfect sense.”
“Frogs said average price is 5$ per kg !!!!”
“We will only catch yellow fin and sell to Nobu!”
“Let’s say they contacted South African yards and Spanish and Portuguese. Without naming.”
“The Republic of Mozambique has identified the need to develop a modern and efficient fishing industry as a critical step in the social and economic development of the country. [EMATUM], wholly owned by relevant ministries within the Republic of Mozambique, has been granted authority to acquire and operate: a) A land operations coordination center; b) 3 Trimarans; c) 21 longliners; and d) 3 bait fishing trawlers. For the benefit of the Republic of Mozambique. Abu Dhabi Mar LLC … is willing to supply the required vessels (and defined equipment for the coordination center) and to provide basic operators training and support to [EMATUM] to help further develop the fishing industry in the Republic of Mozambique.”
“[Abu Dhabi Mar] shall … subject to due compliance with all applicable laws, grant or procure the grant to [EMATUM] of a non-exclusive, non-transferable and royalty free licence to [EMATUM] to use relevant intellectual property related to the Vessels. This licence will incorporate terms pursuant to which the prior consent of [Abu Dhabi Mar] will be required if products, utilizing the intellectual property, are to be supplied (directly, or indirectly) to countries other than the Republic of Mozambique (“Licence”). The associated technology transfer related to the Vessels will be provided. This technology transfer will be structured and designed so as to enable [EMATUM] to have the capability to build the same vessels at an agreed site within Mozambique (which [Abu Dhabi Mar], in its absolute discretion, deems appropriate). The technology transfer will include start up – on-site (including from engineers from or on behalf of [Abu Dhabi Mar] support in Mozambique during initial ship-building, “on-the-job” training for appropriately qualified and key (and to be determined) Mozambique engineers at the site where the Vessels the subject of this contract will be made and support for procurement and contract and equipment management and acquisition. The last sentences of Clause II read: “As part of this process [Abu Dhabi Mar] will provide technical data packages but will not provide any equipment or infrastructure. Each of the Vessels will be supplied with such on-board base spare parts as [Abu Dhabi Mar] deems appropriate.”
“I am sure they are not”
“Just spoke with Antonio [do Rosário] on the financial model and overview of all the points in my email so he should be in a good shape. Told him again if too specific, to write down the question and revert.”
“The contract with EMATUM was already in place prior to VTB Capital’s proposed involvement in the transaction.”
“Mr Adkin KC: Now, just sticking with Mr Chang. The reason these credits are shown in this EMATUM spreadsheet and the reason the first is described as “Ph 1 EMATUM” and the second one is described as ”
“… insisting on having the invoices (previous and future) Try to convince them to do so”
“But we can’t stop the transfers till then. We need the[m] hap[p]y clap[p]y :-)”
“[f]or Chopstick he said no.”
“Mr Boustani to Mr Allam: Hi I guess we did another: l million to DG? So total is 3 now? Please let’s stop now, because he wants to change the "address". For Chopsticks, please let’s do 1.5 today. It is very important. Chopstick total will be all in all 7 (2 for ProIndicus and 5 for Ematum). FYI, inchalla by Friday we will receive the remaining 350 million of Ematum. Last: please can you send me a full statement of Rosário up to date (date and amount of each transfer)? Thanks m3alem.”
“I expected ematum 2 to fund next week. Once that is done, can we schedule a trip to moz?”
“i) cover the operating expenses of the Project, ii) service the financing related thereto, and iii) generate additional funds for the Government.”
“… [w]e need a very quick turnaround on this. [Credit Suisse] is trying to do it but if we quick like last time it is ours.”
“The transaction is very similar in nature to the last one, in the sense that we would join an existing transaction rather than lend the funds independently. Also, like last time, it consists of a 100% State owned Mozambican company … benefiting from an explicit irrevocable and unconditional guarantee from the Ministry of Finance.”
“looking at it from compliance perspective it was straightforward that the client here, for VTB Capital Plc is Proindicus as the borrower”
“… the precise nature of how the interaction was between Mr Abboud and Proindicus and Mr Abboud and Privinvest”
“Mr Smouha KC: “Let me try and put the question slightly differently. If in the course of doing basic due diligence on credit risk issues in relation to IMF restrictions the reasonable banker obtained information that raised questions, suspicions about whether the proposed additional debt was being concealed from the IMF, that would be suspicious and would be a financial crime concern as well? Mr Berman: Absolutely. Any intention to conceal the IMF, conceal anything from the IMF, whether the country is inside or outside its limits, would be very suspicious, yes.”
“compromising email from the Mozambique contractor with reference to the use of proceeds which brought into question our integrity toward the clients of the firm and this is something I was not comfortable with.”
“Indeed, it appears that most of the government was caught by surprise by the bond issue. And in a surprisingly pointed interview in the Notícias economic supplement Friday 8 November, the Bank of Mozambique administrator Waldemar de Sousa warns that debt service payments have risen 25% in the past year. Mozambique must be careful to only take loans for projects which will generate enough profit to repay the debt, he cautions. … Donors argue that such a large government guarantee given without parliamentary discussion and inclusion in the budget violates the budget law. Donors are also appalled at the total lack of transparency; even the IMF was not informed before its recent visit, and only discovered through its banking contacts.”
“[Mr Singh] is now 4.5m$ after we completed the last 118m$ [the VTBC Proindicus Upsize, received by the Privinvest Group on15 November 2013 ]. But Iskandar will confirm to you anyways.”
“In light of the scale of this borrowing ($850 million or 6 percent of GDP), the authorities intend to delay the contracting of other non-concessional debt in the pipeline to remain within the PSI external debt ceiling (US$1.2 billion ).”
“… as long as some other non-concessional debt in the pipeline for 2013-14 is delayed”
“… staff noted concerns, shared in the donor community, about the lack of transparency regarding the use of the funds and the secretive manner in which the project was evaluated, selected, and implemented outside the government's macro-economic strategy and PARP [Poverty Reduction Strategy] priorities. …”
“… send through any key changes or, alternatively, a confirmation you are happy with the docs ideally today or by mid-day tomorrow.”
“as you may have heard, Moz is back…”
“$500m for servicing some boats? Can we look into it a bit more at this stage?”
“In addition to concerns that funds are going to be used for military purposes, budget support donors are appalled that Mozambique is borrowing such a large amount of money with no apparent plans as to how it is to be used, and in semi-secrecy. Donors argue that such a large government guarantee given without parliamentary discussion and inclusion in the budget violates the budget law. Donors are also appalled at the total lack of transparency; even the IMF was not informed before its recent visit, and only discovered through its banking contacts.”
“… explained to the contractor and the Govt that we just see too much correlation amongst the trades to pay no attention to the comments that have been made recently (most particularly by the IMF last month)”
“[t]his lack of any technical scope is worrying me. It will not fly for the financing.”
“… design a commercially viable proposal that encompasses the required infrastructure to meet the needs of the Mozambican Government”
“… has focused on designing a Project that addresses the immediate requirements of the Government of Mozambique, but importantly in a financially profitable way that allows MAM to repay the financing and generate meaningful profit for the Government once the financing is repaid”
“… how do you get to that? That is great growth. How do you get there?”
“I just want to emphasise again that in some cases with a government guarantee on offer and a 100% state-owned entity the banker would not investigate the commercial aspects for the lack of credibility in great detail. They might roll their eyes, they might say this is a great shame, we wish state-owned entities were properly managed and were financially viable, it would be a good thing for the country if they were, but we operate in a commercial reality, we are just going to accept the Government guarantee.”
“WHEREAS: (1) Certain entities owned by the Government of the Republic of Mozambique (,,GoM") are contracted to acquire, inter alia, the Government Vessels (as defined below). Such vessels are being built for [Proindicus] and [Ematum]. (2) The Government Vessels require regular maintenance and servicing to remain operational and to meet the financial business plans of each of Proindicus and Ematum (3) The Rovuma Basin and the ports of Pemba and Palma (the ,,Rovuma Infrastructure") are undergoing significant capital investment to exploit the off-shore gas reserves. (4) The policy of the GoM is to encourage the use of Mozambican companies and resources in the development of the Rovuma Infrastructure. (5) [MAM] (the "Customer"), a company wholly owned by the GoM, has been granted authority to acquire appropriate land and infrastructure in Pemba to construct a shipyard (the ,,Shipyard") at which certain vessels can be made locally using Intellectual Property licenced to the Customer as well as other equipment for the off-shore oil and gas industry and to offer maintenance and servicing of the Government Vessels and certain supply and support vessels associated with the offshore oil and gas industry in Mozambique ("O&G Vessels"). (6) Privinvest Shipbuilding Investments LLC, of Abu Dhabi … (the "Contractor") is willing to supply or procure the supply of the Shipyard, the Local Vessels (as defined below) and the associated onboard base spare parts and to provide or procure basic training to train Mozambique nationals to undertake the necessary maintenance and servicing of the Government Vessels and O&G Vessels. (7) To contribute to the maintenance and servicing of the Government Vessels the Contractor will make available to the Customer the Dual Purpose Vessel, and will provide the Dual Purpose Vessel Services on the terms set out in this agreement.”
“Delivery times (of [Privinvest Group]) are indicative only and are not of the essence of the Contract. Notwithstanding the generality of the foregoing [MAM] acknowledges that there being an appropriate number and quality of local workers, site preparation (paving, access, security, connection to utilities etc. is its sole responsibility and any delay in such matters will cause substantial delay in the Project. Further, [MAM] acknowledges and agrees that the order in which the Shipyard becomes operational is in the sole discretion of [Privinvest Group]). … .”
“Meeting with the Minister of Finance; main take away is that the Minister confirmed that the projects (Proindicus/ Ematum /MAM) were consistent with the Government’s economic objectives of creating local added value in key industries and this underpins the provision of financial support for the project. One of the main purposes of the trip was to establish that there is involvement, acknowledge and ownership of the projects by senior government officials besides those directly involved in the projects. This was ascertained during the meetings.”
“The [Ministry of Finance] is very relaxed about both donors and the IMF with whom there have been some public controversies in the past. Whilst they want to keep good relationships with both they don’t really think they are going to need them for long because the see themselves as fiscally independent in a few years when offshore LNG takes off”. “The approval and disclosure process whilst in compliance with local regulations is not as transparent as it could have been (neither the expenditure on the new project nor the guarantee will be included in the budget because these are regarded as commercial rather than fiscal operations and by presidential decree the Min Fin is authorised to issue guarantees for commercial projects).”
“The supposed reason for non-inclusion in the budget was that this was a commercial rather than a fiscal operation. However, if it would not in fact be self-funding, and the debt would in fact have to be serviced and repaid by the government, it would have fiscal implications, for which there was no budgetary provision.”
“We would like to include the obligation to formally notify the IMF about the Project and the proposed financing prior to disbursement with sufficient time for IMF to manifest any concerns.”
“Have you considered any notification to the IMF or do you know of plans to increase the current cap on non-concessional loans? Need to understand the previous comment on the call that IMF limits would be raised. Also, is there a plan to include the liability of the Guarantee in the Government’s budget?”
“Please can you make enquires as to the payments that will be made to Palomar. // Two of the UBO's Iskandar Safa (33%) and Akram Safa (33%) own Privinvest, who are the shipbuilders in the previous Loan Transaction. Why are they being paid a fee and what is it for? In view of the Mozambique Government Involvement we need to obtain some comfort that any fees being paid are not used in any potential corruption or as bribes. // This is obviously very delicate and would suggest we discuss this rather than put anything in writing to the front office. Happy to be involved if required.”
“Mr Howe KC: You considered that you were paying these amounts to Mr Nyusi as campaign contributions? Mr Boustani: Yes, he has requested from me a campaign contribution. Mr Howe KC: But for his benefit personally rather than to the party account? Mr Boustani: So Mr Howe, what happened is like he -- there was the party who was conducting the campaign and he's the candidate of the party, and then he has requested also the ability himself to have also campaign contributions outside the control of I would say the whole administration of the party that was running the campaign.”
“ Following the correspondence and meeting between us and given the obvious need for naval teaching, your acknowledged inability to provide the envisaged land and infrastructure at the agreed location and of the agreed size and given your inability to procure appropriate alternative land and infrastructure for the commissioning of a shipyard we, as Contractor, without any obligation to do so (and without prejudice to our rights) on our part have investigated with you ways in which the original project, as set out in the Agreement, could be varied by way of change order so as to contribute to the operational, training and maintenance needs of the growing fleet of vessels owned and to be owned by entities under the ownership of the Government of the Republic of Mozambique whilst looking to maintain your ability to exploit the “local” shipbuilding market.”
“As a result of such investigation we have … agreed to replace the shipyard and vessels previously envisaged with, inter alia, bases … of which will be capable of assembling a vessel and undertaking minor steel works) and with the creation of a Mozambique Naval Institute to train your employees/government employees. Such Naval Institute being a pre-requisite to the due operation of the naval assets of corporations owned by the Government of the Republic of Mozambique.”
“1. Detailed description of the business and the business plan // 2. Audited historical financials // 3. Model with projections and assumptions, covering at least the next 6 years // 4. Detailed debt breakdown // 5. CapEx & WC information // 6. Any (if available) valuation reports & commercial DD // 7. Information on management”
“… in December 2014, SISE requested additional financing of USD 278.0 million, with the aim of rescheduling the debt … and expanding protection to on-shore.”
“… It should be noted that this debt process has always been treated as highly confidential, given that any default would put the country’s credibility at risk, as well as leading to a situation where disbursements from partners could be suspended. Given the confidentiality of the matter, it should also be pointed out that the IMF was not informed, and therefore it can be considered that the government provided false information over time, resulting in the suspension of the program and negative consequences for the country’s entire economy (it should be noted that, in addition to the donors, all creditors and private investors use the IMF’s opinions to assess their relationship with the country).”
“… according to the feasibility study, income generation through the provision of services to companies carrying out off-shore activities, particularly gas concession holders. In this context, in 2014 the government approved and signed a concession contract with the company for it to provide security services to gas concession holders and others on an exclusive basis.”
“Two years on, the project is not generating any income, which is why it constitutes a major fiscal risk. It should be noted that, according to the company, no service contract has yet been signed, although advanced negotiations are taking place with ENI. …”
“Tuna fishing, using a fleet of 24 boats”
“The company is not generating any revenue because it only started fishing at the end of last year. At the moment it only has 5 fishing boats, compared to 9 that are already in the country. …”
“Construction of a shipyard for the construction and maintenance of boats”
“… Proindicus as a company only consisted of, I think, just five to ten people on the Mozambique side. They were very seldomly all present in the offices save for on special occasions. It was obviously not possible for Proindicus to have delivered this project without the direct involvement of the government, and particularly the Navy who we dealt with frequently.”
“… we demonstrated, based on real time data how to track at sea the illegal transfer of fish caught by an internationally registered fishing vessel to another unregistered vessel. This type of illegal fishing was and is a big problem in Mozambique and counts for billions of dollars of losses. This was a huge opportunity that we presented to Mozambique to deal with this problem but they did not take this up and we were not given the necessary proper access to the Ministry of Fisheries to be able to progress this further. I was surprised by this and did not know why the different government organisations in Mozambique did not try to cooperate to take advantage of these opportunities …”
“… taking appointments with the President/ MOF starting the first week of April to discuss the restructuring & consolidation of MAM/ Proindicus/ Ematum”
“… This was not an easy thing to do given the very significant sum involved, but it was considered necessary to avoid the risk of a default and the loss of the EMATUM process. … At the time, I did not think that this payment was being made by the Republic in fulfilment of a guarantee. …”
“Mr Howe KC: … We say, Mr Ubisse, the reality that is staring you in the face from these documents is that the Republic had to help because it was the guarantor under the guarantees of these obligations. That is correct, isn’t it? Mr Ubisse: Regarding EMATUM, that is correct. Mr Howe KC: Not just EMATUM but Proindicus as well, Mr Ubisse. There is no relevant distinction there, is there, and there wasn’t at the time? Mr Ubisse: For Proindicus I think the context is very important. The context in which the Government became aware and the context of the exchange and the issue raised by the banks of the [cross] default that would not allow that exchange to conclude, that’s the context in which the payments for Proindicus was made, and other payments, as I did mention.”
“also has Nyusi’s handwriting in it who (according to Rosário) just wants this shit deaded …”
“that Moz itself (MinFin included) has done everything wrong when it comes to this trade (eg fishing licenses, stupidity on restruc., etc”
“… they have all this … locally. So if that’s all the letter asks for then no help required and no need for us (Palomar) to get involved. Palomar offered to help. It got shot down. Rosário should make it an Isaltina [Ms Lucas]/Cristina problem.”
“Agreed. We do nothing.”
“As discussed, we understand from the Minister of Finance that the two Debt facilities signed by MAM and Proindicus have not been accounted for in the country’s total debt figure. If this is the case, a public bond transaction for the restructuring "Exchange Offer" of EMATUM’s debt will not be possible. A full and transparent disclosure of material information to the markets is a legal requirement and if not done it can turn into a criminal offence. No bank or law firm would ever sign on a transaction without full disclosure of the total amount. Full disclosure does not mean necessarily that Govt has to disclose the names of the projects, but only the amount. In Moz case, the amount of the two project is so material that you cannot hide it, as suggested, as a matter of National Security. To proceed with the transaction, lawyers and banks would need to have full immediate evidence of the disclosure. By disclosure I mean that we will need to know the full amount of the Govt debt figure item by item and have evidence where the two projects are. The total figure will then be disclosed to the investors, but in a legal way that MAM and Proindicus are not mentioned with their names. To be clearer, investors do not need to know that Proindicus and MAM exists, but they will want to know what is the total real debt of the country. In the prospectus to be given to investors, the latter will only see that the Gov has direct obligations for x amount split into broad categories. Timing is against us and if we want to issue the bond before next EMATUM’s payment (USD 100 on 11th Feb 16), we need to act now. Should the above not been done, Mozambique will alienate the international financial community and not be able to come to the markets for many years. All this confusion could have been avoided if the letters confirming the honouring of this debt had been signed by the new Minister of Finance when the new Cabinet was sworn in.”
“… it would appear to us that the Total Public Debt figures published by the IMF already include [the Proindicus and MAM] Guarantees”
“a) the total public and private sector external debt of the Republic of Mozambique amounted to 70.9% of GDP in 2012 (nominal GDP of USD 15.2 billion), 78.3% of GDP in 2013 (nominal GDP of USD 16.0 billion) and 84.5% of GDP in 2014 (nominal GDP of USD 17.0 billion) with the amount projected to increase to 106.3% of GDP in 2015 (projected nominal GDP of USD 15.2 billion); b) of the total external debt, public and publicly guaranteed external debt amounted to 34.5% of GDP in 2012, 42.4% of GDP in 2013 and 48.1% of GDP in 2014 with the amount projected to increase to 63.4% of GDP in 2015; and c) total nominal public and publicly guaranteed domestic debt amounted to 5.4% of GDP in 2012, 8.5% of GDP in 2013 and 8.5% of GDP in 2014 with the amount projected to increase to 10.0% of GDP in 2015. The above debt statistics reflect fully the debt position of the Republic of Mozambique as at October 2015 including, without limitation, all debt obligations guaranteed by the Republic of Mozambique, acting by and through its Ministry of Finance. This confirmation is being provided to you solely in connection with your ongoing due diligence and you may not disclose the contents of this letter to any other party. We further write to request that the information set out in the January 2016 IMF Country Report form the basis of the debt disclosures to be contained in the prospectus. We further confirm that as at the date of this letter no events have occurred that would materially change the historical debt figures set out in the January 2016 IMF Country Report.”
“So anyway gents here's where we are at end of play today:- we persuaded the minister to agree to issue a letter to CS and VTB confirming that the numbers set out in the IMF report are true and accurate in all respects - we have sent the draft unsigned version of this letter to CS and VTB and asked both banks to confirm by tomorrow am that this letter is acceptable as presented (VTB is already working on it, I am chasing CS) - so effort is now to push banks to finish prospectus and get to marketing- part of strategy is to weed out CS who we don't think can deliver anyway- I told minister that 1) he will have to find an internal solution for the 21 March Proindicus payment (he agreed but I need to confirm exact amount due in March as I think his number (55) was low) and 2) if we go through March unscathed that we will push to restructure MAM - minister seemed to invite us to prepare a comprehensive restructuring plan / roadmap and also provide thoughts on how each of the business can be made into the revenue generating businesses they were designed to be- [] was helpful during the meeting and helped put things in a language minister can understand - BNI absolutely useless … - I interpret above to mean that Palomar is informally engaged by both minister and BNI to try and sort this out”
“Mr Howe KC: … I asked you that the -- simply to confirm your agreement that the reason why the MAM and Proindicus guaranteed – state guaranteed debts were included in the prospectus figures for total public debt of the Republic is because the prospectus had to give an accurate, complete and true picture of the Republic's actual total debt obligations at the time of the prospectus and that is correct, isn't it? Mr Ubisse: That's correct. Mr Howe KC: Thank you. Your letter of9 March 2016 that we looked at before … we looked at that and we looked at in particular at the fact that you were signing this letter, the letter refers to the January 2016 IMF Country Report and by reference to that report … you confirmed that the debt statistics in it: "... reflect fully the debt position of the Republic of Mozambique as at October 2015 including, without limitation, all debt obligations guaranteed by the Republic of Mozambique, acting by and through its Ministry of Finance." That confirmation that you gave was untrue and you knew at the time that you gave it that it was untrue because Minister Maleiane had told you on2 February 2016 that the MAM and Proindicus state guarantees were not included in the IMF debt statistics in that country report? Mr Ubisse: It is not correct, sir, because I don't have the date of this letter and as stated the banks were providing us with a lot of documents to be signed in procurement of the requisites of the prospectus. … Mr Howe KC: Assume the date of this letter was9 March 2016 , Mr Ubisse. I am putting it to you so you have an opportunity to comment that the confirmation you gave in that letter was not true and at the time you gave it you knew that it was not true? Mr Ubisse: I didn't mention that, that's not correct. The letters were being processed by the bank. As the report says, the prospectus in accordance with the requisite process. So we were not very familiar with the issue. Thank you. Mr Howe KC: I have given you that opportunity. Now I am going to move on. …”
“We must give an end to these companies [an apparent reference to the state-owned enterprises of SPVs] because they prove technical and practically unsustainable. We’ll talk with Maleiane.”
“Tuna and Gunships: How$850 Million in Bonds Went Bad in Mozambique”
“So it is no exaggeration to say, is it, Mr Ubisse, that this was one of the most massive failures to report under an IMF supported programme in the history of the IMF with African countries?”
“It was a major issue for Mozambique in relation with – it was very damaging to them, the question of the plan, or course.”
“… the authorities acknowledged that an amount in excess of$1 billion of external debt guaranteed by the government had not previously been disclosed to the Fund”
“As you are aware of Mozambique is in a process of strengthening its fiscal transparency and Public Financial Management System. In this context, I have requested the Prime Minister to share with the IMF/ World Bank all the relevant information related to Mozambique’s external debt position, including the guarantees issued to the public entities related to maritime and coastal security, namely, Proindicus and MAM – two entities linked to the Mozambique’s Security Services.”
“Mr Howe KC: … there was going to be a threat of a call on the guarantee against the Republic? Mr Ubisse: I think the letter is very explicit, sir. Mr Howe KC: At that time, the Republic did not in any way disavow the guarantee obligation that it owed, did it? Mr Ubisse: At that time, the Republic did not challenge the guarantees. Mr Howe KC: No. Mr Ubisse: I think it is important to have the context of those two debts, [inaudible] the Republic, and the work that the Government was doing there to the IMF the Government was doing there to iron out, to correct and to better understand the position of the Republic and how those two events affected the discussions ongoing with VTB. Mr Howe KC: Yes, quite the contrary, far from disavowing the guarantee, in fact Minister Maleiane was in communication with VTBC at this time and notwithstanding the default to propose pursuing further discussions for a long-term solution, a restructuring with VTBC by a team including the Government as guarantor as well as representatives of the borrower; wasn't that right? Mr Ubisse: Discussions with the VTB happened during the 2016.”
“… to widely inform and clarify to the people of Mozambique and international community the matters arising from the debts contracted with Government guarantees during the period 2013-14.”
“3.2.7 Evidence of management failings The Independent Audit identified what appear to be considerable management failings in meeting contractual obligations and in establishing the local infrastructure required to enable the Contractor to deliver the intended assets and services, as well as a failure to undertake the required actions necessary to ensure the Mozambique Projects could operate as planned. The Mozambique Companies lack some of the basic infrastructure to enable operations to commence: Proindicus does not have an operational satellite package; EMATUM does not currently have permits for the fishing vessels; and MAM has only recently obtained access to a shipyard in Maputo that is undergoing an upgrade to enable the maintenance of vessels. The Contractor has provided Kroll with several hundred documents including emails and meeting minutes to demonstrate the challenges encountered in delivering the Mozambique Project. The documents show repeated efforts by the Contractor to obtain responses from Rosário for project management issues. The documents also provide an insight to the issues faced by the Contractor in delivering the contracted assets and services for the Mozambique Companies. For example, according to the documentation, for Proindicus the trainees provided by the company did not have the necessary pre-course skills and qualifications or appropriate technical knowledge to be able to undertake the HSI32 courses; trainees did not have the appropriate clothing for training; representatives for Proindicus were not present at the handover for the DV15 vessels and employees trained to operate the Control and Command System were subsequently called for military training. For EMATUM, the company has not secured the required land and buildings to equip a coordination centre. The failure of management to secure an appropriate shipyard base at Maputo in a timely manner (approximately eighteen months later than planned) means that the MAM Project remains a work in progress. It is not possible to establish the stage of completion of the project, nor the funds remaining to be spent from the total contract price of USD500 million. The apparent mismanagement by Rosário and other senior members of the Mozambique Companies appear to have contributed to significant delays in the delivery of the Mozambique Project. Kroll cannot ascertain the impact of these delays on the overall pricing of the project without further information from the Contractor.” “3.9.2 Key findings relating to project planning and management The documentation reviewed during the Independent Audit points towards a small group of SISE and government officials, led by Rosário, exercising control over the planning of the Mozambique Project. The infrastructure necessary to enable the successful implementation of the Mozambique Project was not established prior to the agreement of each supply contract. Specifically, it appears that: insufficient port facilities were available for the appropriate mooring, maintenance or repair of the vessels acquired by Proindicus and EMATUM; there were no plans to construct a dry land processing and storage facility for EMATUM, and land required for the construction of the shipyards as envisaged by the MAM supply contract had not been secured in a timely manner. Further, there appears to be several issues that have prevented the acquired assets being operationalised, for example: Training of crew: Kroll was informed by the Contractor that insufficient personnel were provided for training for vessels owned by both Proindicus and EMATUM. Permits for fishing vessels: Kroll was informed that the fishing vessels are currently unable to operate due to permits not being reissued; and, Expired satellite package: A satellite package, agreed for the first three years of the project, has expired, with no evidence that negotiations for a new package have commenced. As a result, the radar systems built into each asset cannot communicate with the central command centres, and therefore the assets cannot be operationalised.”
“(i) played a material role in making Mozambique one of the most heavily indebted countries in Sub-Saharan Africa at present and (ii) places considerable strain on the government’s finances and international reserves with its heavy debt service burden. As such, it undermined achievement of key goals under the PSIs.”
“The Republic of Mozambique reserves any rights it may have in connection with any of its debt obligations and nothing contained in this presentation shall be construed as waiver or amendment of such rights.”
“… On behalf of the Mozambican government, I deeply regret the failure to provide the Fund with accurate information as envisaged under the IMF Articles of Agreement, and stand ready to take remedial measures to prevent the recurrence of such events. In this context, I would like to assure you that the Mozambican Government is committed to rebuilding trust with the Fund. As a first step towards this objective, we have provided the IMF all the data and loan documentation, including government guarantees mentioned in your last letter. To prevent the recurrence of misreporting, the Government is contemplating a number of measures to strengthen debt management, in coordination with the IMF, including: … c) Clarifying debt management requirements to subject long-term borrowing to ex-ante approval by the Ministry of Economy and Finance, for all state-owned enterprises and autonomous government bodies; d) Publishing a quarterly report on the stock of all outstanding government debt and guarantees and their management policy and; e) Issuing annual fiscal risk statements with information on SOEs and government guarantees, including the assessment of their contingent liabilities. … I also take this opportunity to reaffirm our commitment to the IMF in terms of data provision and debt policy reform. I hope that we will continue our fruitful cooperation in the context of the IMF program.”
“Since disclosing the previously unreported debt obligations, the Mozambican authorities have taken several important steps to address the situation. In June, the Prime Minister, in an address to Parliament, explained to the Mozambican people and the international community the matters arising from the contracted debt. Remedial measures include the launch by the Public Prosecutor of a criminal investigation into the debts incurred by certain state-owned entities, which will include an independent audit of these entities by an experienced and reputable international auditing company. Further corrective actions will focus on introducing reforms to enhance Mozambique’s debt management, with the aim of reinforcing the process of issuing loan guarantees and improving transparency of public borrowing and guarantees.”
“Due to the non-observance of the continuous assessment criterion on the ceiling for the contracting or guaranteeing of new non-concessional external borrowing under the 2010-2013 and 2013-2016 PSIs, the Executive Board decided that it can no longer maintain a positive assessment of program performance under the two PSIs.” “With respect to Mozambique’s breach of obligation … the Executive Board welcomed the remedial measures already taken and additional corrective actions committed to by the authorities to implement measures to improve and strengthen the monitoring and reporting of data provided to the Fund. In view of these remedial measures and additional corrective measures, the Executive Board decided not to require any further remedial action, but called on the authorities to implement the announced measures in a comprehensive and timely manner.”
“The IMF is committed to remaining constructively engaged with Mozambique.”
“AR agreed fully with [Mr Boustani’s] presentation AR confirmed the Mozambican Government (notably the President, Prime Minister, and Minister of Finance) support for the development and activation of MAM, Ematum & Proindicus. A Plan of Action to be jointly prepared with Privinvest, Lawyers & shared with VTB Bank to be presented for Government’s approval. AR stated that various international groups submitted proposals to operate Proindicus & Ematum. Mainly PARAMOUNT & Lancaster 6 (affiliated to Blackwater). A presentation made by Lancaster 6 was handed to VTB & Privinvest. AR also mentioned that the Government (mainly the Minister of Finance) is waiting for the publication of the KROLL Audit Report. … AR mentioned that the Minister of Finance has been unsatisfied with LAZARD Bank performance. Proposing to set a meeting between VTB Bank & the Minister of Finance pursuant the publication of the KROLL Audit Report AR also mentioned that the Minister of Defense has personally assisted to a Navy Show at Pemba on the 15 & 16 of June 2017 displaying Proindicus & MAM assets & capabilities.”
“1. [Privinvest] has delivered all the scope of supply as per its Procurement Contract with MAM 2. Final Handing Over Letter from [Privinvest] to MAM has been shared with VTB 3. [Privinvest] has all the know how, expertise & willingness to support MAM in its development plan”
“Mozambique has strong Local Content Laws that must be used to enforce MAM’s position as the exclusive national contractor for the Oil & Gas industry The most probable outcome is a Decree/Concession from the Mozambican Government to grant MAM exclusivity & rights of first refusal Absolute willingness to work jointly with Lawyers, [Privinvest] & VTB to design & draft the proposed legislative texts to achieve the above mentioned objectives.”
“It does not mean that [the Court] can leap from that to say that the supplier has done anything wrong or that there’s anything wrong with what the supplier did.”
“[t]he Republic reserves any rights it may have in connection with any of its debt obligations and nothing contained in this Document shall be construed as a waiver or amendment of such rights.”
“Mozambique's Attorney-General has filed a lawsuit in the UK to nullify the criminally-obtained government guarantee to the loan contracted by Proindicus, a state-owned enterprise, with Credit Suisse. Renegotiation discussions with VTB on the government-guaranteed loan contracted by MAM, another state-owned enterprise, are almost finalized and will provide substantial debt relief while protecting the interests of Mozambique in case legal issues were to arise in connection with the government guarantee.”
“I reluctantly had accepted to provide a witness statement, as I unfortunately had to respond to the outrageous and completely incorrect statements made by Mr. Pearse. I felt it was necessary to personally address them, at the very least, to protect my reputation. Although it was discussed in the past that I might have to testify in court, I no longer wish to proceed with that as I strongly believe my witness statement covers all relevant points. This is a chapter of my professional life, both at VTB PLC and in relation to the Mozambique transaction, that I no longer wish to revisit. Therefore, I respectfully decline to participate in these proceedings any further.”
“… finally they have the capability to protect their seas from poaching and that she has now seen that it is possible to have a fast reaction force to intercept illegal fishing boats that she knows are preying on their fish stocks.”
“Mr Adkin KC: Okay. What I am going to suggest to you, Mr Safa, and I am going to put to you the MAM supply contract just at −− let me take it in turns. The MAM supply contract was totally uncommercial and disastrous for the Republic, wasn’t it? Mr Safa: I don’t agree with this. What was disastrous is the way they managed it. Mr Adkin KC: The Proindicus contract was totally uncommercial and disastrous for the Republic, wasn’t it? Mr Safa: I don’t agree. The way they managed it was disastrous, yes, but the potential was enormous whether for MAM or for Proindicus. Mr Adkin KC: And the EMATUM contract was uncommercial and disastrous for the Republic, wasn’t it? Mr Safa: It is the way they managed it. Mr Adkin KC: The projects failed, Mr Safa, not because they were mismanaged or sabotaged but because they were extortionately priced contracts procured by bribery which took no account of the needs of the Republic and could never have been profitable. That is the position, isn’t it, Mr Safa? Mr Safa: I don’t agree with this a second. Those contracts were done and drawn in view or taking into consideration what the Republic wanted, what the Republic was looking for and the operational needs of the Republic. And they were supplying to the satisfaction of everybody excellent products. Unfortunately, mismanagement starting since the supply. And then there was a complete failure in managing those projects as well as assets or projects. Complete failure. I want to add at the end what we viewed is that there was probably a will at a certain time not to have it work or not to make it work, but this is always on the side of the Republic who was the customer.”
“As far as we were concerned the Republic had a perfectly good project. It had a perfectly good provider of that project. What it needed to do was take the equipment, take the support of Privinvest, take the benefits of it, the training, the transfer of knowledge and develop the plan. That’s not what happened.”
“The tragedy is that the Projects fell victim to internal FRELIMO battles and, specifically, President Nyusi’s political machinations. The Republic thus denied itself the proper use of the assets and services delivered and the considerable revenue and independence that it would have derived from them had it used them as originally intended.”
“Mr Safa: Excuse me, if it is possible for me, can I −− at the end can I speak for two minutes? Mr Justice Robin Knowles: Just give me a moment. Mr Matthews, unless you have an objection I am minded to listen to Mr Safa if he wishes to speak but it is a matter for you. Mr Matthews KC: My Lord, I am not in a position to object or otherwise. It is a matter entirely for your Lordship. Mr Justice Robin Knowles: Yes. Mr Safa, just I would like to finish hearing what you want to tell me, but please, please be brief because normally the evidence comes through question and answer. Mr Safa: My Lord, thank you very much. Thank you for this. I believe that in my witness statements I tried as much as possible to explain exactly the issues around what I was asked by Credit Suisse, by Andrew Pearse and by the Republic. I have been giving an explanation on the payments that were effected from our side and the reason for those payments. The thing that, and I tried to do it yesterday, I feel I’m in a place where instead of people saying to me, like in the Credit Suisse case, you were the master of kickbacks, to show to me Mr Iskandar Safa, we have this, this and this against you and that is why you are the master of kickbacks, they are saying to me: you are master of kickbacks, please prove that you are not. The second thing, and this is not only for the kickbacks. Amando Guebuza. 33 or 30 million were paid to Armando Guebuza, please show me that you didn’t pay it, instead of showing me a transfer or a bank statement saying Armando Guebuza receives from many of our companies 30 million. So it is always I have to fight in default and not fight to something that shows exactly what I am being accused of. It applies to the master of kickback, it applies to Armando Guebuza, it applies to the pricing of the contract. My Lord, the pricing of the contract is an issue that, as I allowed myself to tell you yesterday, that will be found in any contract that will be. The thing is that it is not a boat of 30 metres. One has to give the characteristics of the boat. And one, to compare it with somebody who came with an offer with the same characteristics and saying, look, he came with an offer of$5 , you were at$55 and we went with you. Please explain. This I can explain. But I mean to do it backwards and say why the price is not the right price, it is impossible to do. So what I wanted to do, we did as much as we can in order to explain but to explain things in default is impossible or very, very difficult. That is what I wanted to say, my Lord. Mr Justice Robin Knowles: Thank you for saying it, Mr Safa, and I have listened closely to your evidence and to your making that observation at points during your evidence and I’ll be considering it alongside everything else in due course. But thank you for that. Mr Safa: One more thing if I might, my Lord. I have one more thing. I just want to add for the last 32/33 years when we started this business, unlike probably all companies that are in the defence business, we were never indicted, we were never convicted with the thing concerning bribes or buying a contract. Never.”
“… paid USD 7m in connection with the joint investments with Mr Chang including, for example, to put together a team and to create the local logistics and infrastructure for the proposed sovereign wealth fund, which we thought Palomar might also have a role in managing as a public-private partnership with Mozambique and also to explore and obtain a banking licence for the proposed banking business”
“The promises and payments made to Minister Chang were to induce, and did induce, his execution of the Proindicus Guarantee, the Proindicus [Guarantee Confirmations], the EMATUM Guarantee and the MAM Guarantee. That was the quid pro quo for the promises of payment and payments subsequently made to him.”
“And further, you may ask, if we have the backing of the Defence Minister [Minister Nyusi] why would we need to bribe Minister Chang? The Republic does not say Minister, or now … President Nyusi was bribed. There is an untainted channel of instruction for the guarantees to be signed running from the then Defence Minister Nyusi”
“… The Republic must make good, for each payment, the corporate entity it alleges the payment in question was made by (and how liability is said to arise in virtue of that). It has not sought to do that. If it did, it would expose that the Republic’s case – that all Corporate Defendants are liable for all payments – cannot be maintained.”
“… a payment by party A cannot render party B liable in bribery. The Republic has advanced no factual case to overcome the objection. On any view, therefore, the only party which could be held liable in bribery for any particular payment is the payor itself.”
“General rule 1. Unless otherwise provided for in this Regulation, the law applicable to a non-contractual obligation arising out of a tort/delict shall be the law of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur. 2. However, where the person claimed to be liable and the person sustaining damage both have their habitual residence in the same country at the time when the damage occurs, the law of that country shall apply. 3. Where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply. A manifestly closer connection with another country might be based in particular on a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question.”
“the Court sees a scheme to commit the Republic to English-law-governed Guarantees of English-law-governed financing obligations, in respect of lending advanced from London by English banks, selected because their London bankers could be (and were) corrupted”
“Whoever intentionally or negligently violates another person’s right or any statutory provision intended to protect the interest of others, is obliged to compensate the injured party for the damages resulting from the violation.”
“(i) a person; (ii) an offer, payment or promise of money or an advantage; (iii) not due to a public servant/employee; (iv) for the public servant/employee to perform acts or omissions, whether or not contrary to the duties of office.”
“Article 9 (Active corruption) 1. Whoever gives or promises to the entities provided for in Article 2 [see Appendix], by themselves or through an intermediary, money or other pecuniary or non-pecuniary advantage not due to them, for the purposes indicated in Article 8 [see Appendix], shall be punished with the penalties of that provision. …”
“Article 7 (Passive corruption for unlawful act): 1. The entities provided for in Article 2 who, by themselves or through an intermediary, with their consent or ratification, request or receive money or a promise of money or any pecuniary advantage, which are not due to them, to perform or not to perform an act that implies a breach of the duties of their office, shall be punished by a major prison penalty of between two and eight years and a fine of up to one year. …”
“(i) a public servant/employee; (ii) a request for or receipt of money or any advantage by the public servant/employee or through an intermediary that is not due to him/her; (iii) to carry out an act or omission that involves a breach of the duties of office.”
“1. This law applies to perpetrators of the crimes referred to in Article 1 who are managers, officials or employees of the State or local authorities, public companies, private companies in which the State has a shareholding or public service concession companies. 2. A public official or employee is regarded as anyone who, for the purposes of this law, exercises or participates in public functions or functions equivalent thereto, and to which they have been appointed or chosen by direct effect of law, or by election or by determination of the competent authority. 3. The provisions of this Law apply to those who, even if they are not part of any of the categories referred to in the previous number, induce or contribute to the committing of the crimes listed in Article 1 or take advantage of them.”
“… the consent of the injured party does not exclude the unlawfulness of the act when it is contrary to a legal prohibition …”
“The Republic’s case should also be dismissed because it is time-barred: the Republic provided no evidence of its own discovery of the underlying facts. That, ultimately, is fatal. This might seem a simple, if surprising, oversight. It is, however, more than that. Had the Republic sought to prove the date of its discovery of the facts, its case on the merits would have unwound. The evidence would have led inexorably back to the start of the story: neither the Projects nor Privinvest’s investments and campaign contributions were secret from the Republic.”
“86. Leggatt J in Anangel Atlas Cia Naviera SA v Ishikawajima-Harima Heavy Industries Co (No.1)[1990] 1 Lloyd’s Rep 167 , 171 succinctly described a bribe as: “a commission or other inducement, which is given by a third party to an agent as such, and which is secret from his principal.”
“106. The essential character of a bribe is, thus, that it is a secret payment or inducement that gives rise to a realistic prospect of a conflict between the agent's personal interest and that of his principal. The bribe may have been offered by the payer or sought by the agent. A bribe encompasses not just a payment of money but the conferring of any advantage or benefit, and may be an actual benefit or merely the promise of a benefit held out by the payer or an expectation of one. … 108. The recipient of the bribe (or the person at whose order the bribe is paid) must be someone with a role in the decision-making process in relation to the transaction in question e.g. as agent, or otherwise someone who is in a position to influence or affect the decision taken by the principal.”
“For the purposes of the civil law a bribe means the payment of a secret commission, which only means (i) that the person making the payment makes it to the agent of the other person with whom he is dealing; (ii) that he makes it to that person knowing that that person is acting as the agent of the other person with whom he is dealing; and (iii) that he fails to disclose to the other person with whom he is dealing that he has made that payment to the person whom he knows to be the other person's agent.”
“87. It is clear from this description of a claim for bribery that the Republic’s claim based on bribery does not require an examination of the validity of any of the supply contracts. Nor is it necessary to prove dishonesty or that any fraudulent representation was made to the principal. Further, a defence that the supply contracts were valid and were on commercial terms would not be relevant to the question of a defendant’s liability to account for the bribe. The law assumes that the price of the goods and services purchased by or on behalf of the principal was increased by at least the amount of the bribe: Daraydan Holdings Ltd v Solland International Ltd[2004] EWHC 622 (Ch) ;[2005] Ch 119 para 53 per Lawrence Collins J. In this case, although this matter need not be proved, it is not disputed that the cost of the payments said to be bribes was financed by Credit Suisse’s lending which the Republic purportedly guaranteed. A defence of the commerciality of a supply contract, ie that the Republic received value for the monetary obligation which it undertook in entering into a guarantee, would be relevant only in relation to the quantification of the Republic’s claim for damages and indemnity beyond the amount of the bribes.”
“The essence of bribery is that a payor has corrupted a principal’s agent in order to obtain some advantage for themselves. It is for that reason a precondition of the tort that the payor and principal are negotiating with one another: the payee must be “the agent of the other person with whom [the payor] is dealing”. … The Republic’s case is that it was not dealing with either the Corporate Defendants or Mr Safa. It has expressly abjured any suggestion that it was party to the Supply Contracts, insisting that its case concerns the Guarantees only. And Privinvest were not dealing with the Republic in respect of the Guarantees: those transactions were between the Republic and the lenders. … on the assumption that the Republic proposes the relevant transaction to be the Guarantees, the only Mozambican Official with any role in respect of the Guarantees was Minister Chang. …”
“There were two kinds of representation: (1) the Investment Representations. President Guebuza, President Nyusi, Mr Chang, Mr Leão and Mr do Rosário represented that the payments made as investments were lawful. Those representations were made expressly and/or impliedly. The Republic does not admit the fact of the representations, save that (without explanation) it denies any representations were made to Mr Safa. (2) the Campaign Contribution Representations. President Guebuza, President Nyusi and Mr Chang represented that the campaign contribution payments were lawful. Those representations are also not admitted by the Republic.”
“(1) The Republic knew the content of its own laws, including the limits on state guarantees set out in the State Budget Law 2013 and 2014, the SISTAFE law, and whether Minister Chang had Parliamentary authority. This is not in dispute. The same applies to the acts of its public institutions. The Republic would, therefore, know whether the Administrative Court had issued a “visto”
“[Mozambique] agreed to pay these sums on30 September 2023 in relation to the Proindicus Guarantee, not only in the knowledge that the Guarantee was void (and/or was liable to be set aside/unenforceable) by reason of the breaches set out above, but also in circumstances where it made and continues to make allegations to that effect in these proceedings. … Alternatively, if [Mozambique] was under any enforceable liabilities under the Proindicus Guarantee on the date of the Settlement Agreement, those liabilities were incurred as a consequence of the Republic’s voluntary conduct.”
“would be relevant only in relation to the quantification of the Republic’s claim for damages and indemnity beyond the amount of the bribes”
“It must further give credit for any funds received from others in connection with the three Transactions, including any assets obtained through forfeiture orders—such as the$421,000,000 the head of the Republic's Central Office for the Recovery of Assets, Dr Machava, publicly stated in August 2021 had been seized.”
“The SPVs, who were the direct beneficiaries of the performance under the Supply Contracts, were ultimately wholly-owned by the Republic.Any benefits to them would therefore inure to the Republic either through the increase in the value of those shares or through the payment of dividends or capital distributions.”
“The Central Office for the Recovery of Assets (“GCRA”) of the Republic’s Prosecutor-General’s Office (“PGR”) says that all the assets seized in the context of the undeclared debts represent just 15.6 percent of the 2.7 billion dollars, the global amount of the loans that sank the country into a profound financial crisis and a bitter dialogue with international financial institutions. These relate to 19 real estate properties, including a hotel located in the city of Tete; 81 vehicles, 14 motorcycles, four vessels and an amount [in cash] estimated as 614 million and 932 thousand meticals, which were in the possession of the various defendants in the proceedings. All these assets represent 15.6 percent of the 2.7 billion [US dollars], which, corresponds to 421 million and 200 thousand dollars. In meticais, this amounts to approximately 27 billion meticals at today’s exchange rate.”
“Further, the Republic must give credit for any funds it recovers from other persons in respect of the Three Transactions, which reduces its loss in connection therewith. In particular, the Republic must give credit for any sums recovered by way of compensation and/or seizure of assets from the defendants to the Maputo Trial and/or any other person whose property has been seized on the basis of a connection to the Three Transactions. According to an article dated1 August 2021 , featuring an interview with a Deputy Attorney General of the Republic, Amélia Machava, Ms Machava stated that the Republic’s Central Office for the Recovery of Assets has seized US$ 421,200,000 of assets in respect of the Three Transactions. The Republic’s alleged loss is accordingly reduced (at present) by (at least) US$ 421,200,000 .”
“393.4A. Save that it is admitted that the Republic will give credit for any sums for which it is obliged to do so as a matter of the relevant governing law and that Dr Machava made statements broadly as alleged, no admissions are made of paragraph 491.5 and it is denied that the Republic must presently give credit in the amount alleged.”