UBS seeks last-ditch settlement in Mozambique ‘tuna bonds’ case

UBS has inherited the Mozambique corruption case after buying Credit Suisse earlier this year. Keystone / Hotli Simanjuntak

UBS is seeking a last-minute deal with the government of Mozambique to avoid a bruising courtroom battle over Credit Suisse’s involvement in the $2 billion (CHF1.8 billion) “tuna bonds” scandal, according to people briefed on the discussions.

A 13-week trial at London’s High Court is due to start next week in the case brought by Mozambique against Credit Suisse, which UBS acquired in a rescue deal six months ago. Last week, the British Supreme Court allowed the trial to go ahead, with Mozambique pursuing about $1.5 billion in damages.

+ Where did it all go wrong for Credit Suisse?

UBS lawyers are keen to avoid the dispute going to trial and are pushing for a settlement, according to three people with knowledge of the matter, though the case may still go ahead.

Lawyers in London for the African nation remained ready for the trial to start on Monday, another person briefed on the process said.

The Swiss lender has been focused on clearing up legacy legal disputes since it agreed to take over its former rival in March.

On Wednesday, France’s top court said it would give its final verdict in November in UBS’s long-running tax evasion case where the bank is contesting a €1.8 billion penalty.

Big African fraud case

Last month, UBS agreed to pay $1.4 billion to resolve a US regulatory probe into the alleged mis-selling of residential mortgage bonds in the run-up to the 2008 financial crisis, wrapping up the last remaining case brought by the US government against Wall Street groups over the issue.

The bank has also agreed to pay $388 million to US and British regulators over Credit Suisse’s failings around the collapse of Archegos Capital, which caused a $5.5 billion trading loss for the collapsed lender and helped bring about its demise.

UBS also settled a lawsuit brought by Credit Suisse against a popular Zurich blog, Inside Paradeplatz, over what it claimed were unvetted and abusive reader comments under stories.

UBS has just under $10 billion of provisions and contingent liabilities for litigation and regulatory matters, according to estimates by JPMorgan.

The Mozambican case relates to one of Africa’s biggest ever corruption cases.

In 2013 Mozambican state companies issued debts under guarantee by one of the world’s poorest nations, ostensibly to fund tuna fishing and other projects, but the loans soon collapsed in default over the alleged looting of hundreds of millions of dollars.

Massive fines

Mozambique is looking to recoup losses from Privinvest, a Gulf-based shipbuilder that supplied boats and other kit under the deal, and Credit Suisse, which arranged much of the debt. They deny the claim.

Credit Suisse failed to get the lawsuit struck out in June having agreed to pay $475 million in fines and forgive $200 million of debt owed by Mozambique in a series of co-ordinated settlements with four regulators in three countries two years ago.

Mozambique has accused Privinvest of paying $136 million in bribes to state officials and Credit Suisse bankers working on the debt. Three former Credit Suisse bankers pleaded guilty for receiving kickbacks on the debt issue in US criminal cases over the scandal.

As well as damages for the alleged bribes, Mozambique’s claim included more than $1 billion over the withdrawal of international financial support, over $260 million for higher debt costs, and about $100 million in fees on the loans, the UK Supreme Court said in its judgment last week.

UBS agreed to a government-brokered takeover of Credit Suisse six months ago in the most significant bank merger since the financial crisis, which has already attracted a spate of lawsuits from investors who lost billions of dollars on the deal.

The latest filings at London’s High Court show that an amended claim about the tuna bonds scandal was lodged by Mozambique on September 26.

UBS declined to comment, while the Mozambican attorney-general, Privinvest and lawyers for Mozambique did not respond by time of publication.

Copyright The Financial Times Limited 2023