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The legal basis to void Mozambique hidden debt

Constitutional Council decided loans and sovereign guarantees are null

by furtherafrica.com
May 21, 2020
in Countries
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On May 8th, Mozambican Constitutional Council decided that the acts regarding loans to Mozambican state-owned companies (Proindicus, S.A. and MAM, S.A.) and sovereign guarantees given by Mozambican Government are null, and consequently those loans are void.

Having the Mozambican Constitutional Council considered the debts and the guarantees unconstitutional, it means that they never had juridical existence in Mozambique, fact that is reinforced by the circumstance of both National Assembly (through a Parliamentary Inquiry Commission) and Administrative Court had never accepted them as legal.

Constitutional Council based its decision in the following arguments:

  1. Mozambican Government could not concede sovereign guarantees of such amounts, since they were superior to the legally established maximum amounts;
  2. to grant them, according with Mozambican Constitution, the Government would need to request a legislative authorization to National Assembly, which did not happened;
  3. Mozambican Government also violated Mozambican law when agreed loans that were not concessional, since it was not allowed;
  4. as well, Mozambican Government infringed the law that prescribes a duty of declaring loans and sovereign guarantees’ amount in each year’s State Budget Law.

This decision may have impact in the procedure interposed by Credit Suisse and VTB in London High Court against Mozambican State, regarding these international loans. Traditionally, London High Court’s decision is not influenced by laws and judicial decisions of involved countries, but this practice was changed on 2018, in a procedure regarding Ukraine in which the Court established that under certain circumstances, national laws and Constitutions may affect the decision, if the debtor country proofs that the debt was unconstitutional and had never recognized it as valid.

The case began when after (supposedly) Mozambican Government secretly assured that some state-owned companies would comply their obligations, and if they could not comply, the State would pay their debts, on 2016 “The Wall Street Journal” brought to light the existence of loans to Mozambican companies (and sovereign guarantees to safeguard those loans), that had not complied with legal proceedings, arising as an example of high-level corruption in Africa.

So called “hidden debts case” involved loans evaluated in more than USD 1 Billion, between 2013 and 2014. The scandal caused the suspension of IMF and other entities’ direct support to Mozambican State Budget and the reduction of country’s rating by international financial rating agencies, to the lowest level (Financial Default), which severely damaged Mozambique’s economy and reputation.

Article by Duarte Marques da Cruz


Duarte Marques da Cruz
Duarte Marques da Cruz is partner of the Portuguese law firm MC&A, specialized in international business advisory, with a special focus in Lusophone markets. With extensive experience in the Energy sector (Renewables and Oil & Gas) and in International Taxation, he has supported international companies in major upstream, midstream transactions and projects, including in implementing, exploration and development programs. Duarte has also supported international clients in other areas of practice, namely, Mining, Transport & Logistics, Regulatory Compliance and Mergers & Acquisitions in Mozambique, Angola and Portugal.

Tags: Duarte Marques da CruzEmatumFurtherAfricaHidden debtMAMMC&A AdvogadosMozambiqueMozambique Parliamentary Inquiry CommissionProindicusThe legal basis to void Mozambique hidden debt

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furtherafrica.com

FurtherAfrica is an online platform centralising news and content on the development and growth story of Africa. Content Syndication is done in partnership with The Exchange. The platform focuses on Southern Africa with an interest in economic growth, investment opportunities, financials and everything else in between.

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