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Republic of Mozambique v Credit Suisse – bribery claims proceed by way of arbitration

The decision of the Court of Appeal reaffirms the arbitration-friendly approach taken by the English courts and the mandatory nature of stays of court proceedings under section 9 of the Arbitration Act 1996).

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Published 26 July 2021

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The decision of the Court of Appeal in Republic of Mozambique v Credit Suisse International and others [2021] EWCA Civ 329 reaffirms the arbitration-friendly approach taken by the English courts and the mandatory nature of stays of court proceedings under section 9 of the Arbitration Act 1996 (“AA 1996”).

Facts

The dispute concerns the Republic’s claims in bribery, unlawful means conspiracy and dishonest assistance against Credit Suisse, former Credit Suisse employees and five UAE and Lebanese companies (the “Privinvest defendants”) and others.

Three corporate vehicles wholly owned by the Republic (the “SPVs”) entered into three Supply Contracts with three of the Privinvest defendants (the “Supply Contracts”) by which the SPVs acquired valuable goods and services in connection with the Republic’s development of its Exclusive Economic Zone. The Supply Contracts were governed by Swiss law and contained arbitration agreements specifying arbitration under the rules of the International Chamber of Commerce or the rules of the Swiss Chambers’ Arbitration Institution. The SPVs borrowed the purchase funds from the First and Second Defendants, Credit Suisse International and Credit Suisse AG (together “Credit Suisse”), and a third bank, VTB Capital plc (“VTB”) (together the “Financing Banks”).

In turn, the Republic gave sovereign guarantees to the Financing Banks over that borrowing (the “Guarantees”). The Guarantees given by the Republic were set out in contracts governed by English law, and all contained an exclusive jurisdiction clause in favour of the courts of England and Wales.

The Financing Banks paid the Privinvest entities in full for the goods supplied and the work done. However, the loans were not repaid by the SPVs. The Republic’s liability under the guarantees amounted to around USD2.1 billion.

The Republic brought proceedings in the English courts alleging that the entry by the Republic into the Guarantees were null and void, having been obtained by the payment of “kickbacks” to various officials and other influential individuals in Mozambique by, among others, three of the Privinvest defendants.

The Privinvest defendants applied for a stay of the English court proceedings under section 9 of the AA 1996 on the basis that, as a matter of scope, the arbitration agreements in the Supply Contracts covered all the claims made by the Republic against the Privinvest defendants and so the matter should proceed by arbitration.

The High Court Decision

In the High Court, Waksman J dismissed the application of the Privinvest defendants for a stay pursuant to section 9 of AA 1996 . The Judge accepted the Republic’s argument that its claims concern the Guarantees, not the Supply Contracts, and that there was no ‘matter’ within the meaning of section.9 that was required to be determined with arbitration.

The Privinvest defendants appealed and argued that the claims made against them are inextricably linked with the Supply Contracts, such that they constitute matters that fall within the scope of the arbitration agreements.

Court of Appeal decision

The Court of Appeal held that the lower court judge had erred in his conclusions. Notably, it disagreed with the judge as to what constituted a “matter” for the purposes of section 9 of the AA 1996. Having set out the approach to determining what a ‘matter’ is for the purposes of the section, the Court considered the Republic’s claims and the realistically foreseeable defences to those claims, which it held included the validity and genuineness of the Supply Contracts. The Court of Appeal concluded that, as a matter of Swiss law (which was the relevant governing law), the claims constituted matters that were ‘sufficiently connected’ to the Supply Contracts to fall within scope of the arbitration agreements.

Conclusion

As the first appellate authority on what constitutes a “matter” for the purposes of section 9 of AA 1996. the decision reinforces the English courts’ common-sense approach to arbitration agreements and makes clear that parties before the English courts will struggle to avoid arbitration by seeking to split up a case artificially.

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Longer Reads

Republic of Mozambique v Credit Suisse – bribery claims proceed by way of arbitration

The decision of the Court of Appeal reaffirms the arbitration-friendly approach taken by the English courts and the mandatory nature of stays of court proceedings under section 9 of the Arbitration Act 1996).

Published 26 July 2021

Associated sectors / services

  • Arbitration
  • Banking & financial disputes
  • Financial services

Authors

The decision of the Court of Appeal in Republic of Mozambique v Credit Suisse International and others [2021] EWCA Civ 329 reaffirms the arbitration-friendly approach taken by the English courts and the mandatory nature of stays of court proceedings under section 9 of the Arbitration Act 1996 (“AA 1996”).

Facts

The dispute concerns the Republic’s claims in bribery, unlawful means conspiracy and dishonest assistance against Credit Suisse, former Credit Suisse employees and five UAE and Lebanese companies (the “Privinvest defendants”) and others.

Three corporate vehicles wholly owned by the Republic (the “SPVs”) entered into three Supply Contracts with three of the Privinvest defendants (the “Supply Contracts”) by which the SPVs acquired valuable goods and services in connection with the Republic’s development of its Exclusive Economic Zone. The Supply Contracts were governed by Swiss law and contained arbitration agreements specifying arbitration under the rules of the International Chamber of Commerce or the rules of the Swiss Chambers’ Arbitration Institution. The SPVs borrowed the purchase funds from the First and Second Defendants, Credit Suisse International and Credit Suisse AG (together “Credit Suisse”), and a third bank, VTB Capital plc (“VTB”) (together the “Financing Banks”).

In turn, the Republic gave sovereign guarantees to the Financing Banks over that borrowing (the “Guarantees”). The Guarantees given by the Republic were set out in contracts governed by English law, and all contained an exclusive jurisdiction clause in favour of the courts of England and Wales.

The Financing Banks paid the Privinvest entities in full for the goods supplied and the work done. However, the loans were not repaid by the SPVs. The Republic’s liability under the guarantees amounted to around USD2.1 billion.

The Republic brought proceedings in the English courts alleging that the entry by the Republic into the Guarantees were null and void, having been obtained by the payment of “kickbacks” to various officials and other influential individuals in Mozambique by, among others, three of the Privinvest defendants.

The Privinvest defendants applied for a stay of the English court proceedings under section 9 of the AA 1996 on the basis that, as a matter of scope, the arbitration agreements in the Supply Contracts covered all the claims made by the Republic against the Privinvest defendants and so the matter should proceed by arbitration.

The High Court Decision

In the High Court, Waksman J dismissed the application of the Privinvest defendants for a stay pursuant to section 9 of AA 1996 . The Judge accepted the Republic’s argument that its claims concern the Guarantees, not the Supply Contracts, and that there was no ‘matter’ within the meaning of section.9 that was required to be determined with arbitration.

The Privinvest defendants appealed and argued that the claims made against them are inextricably linked with the Supply Contracts, such that they constitute matters that fall within the scope of the arbitration agreements.

Court of Appeal decision

The Court of Appeal held that the lower court judge had erred in his conclusions. Notably, it disagreed with the judge as to what constituted a “matter” for the purposes of section 9 of the AA 1996. Having set out the approach to determining what a ‘matter’ is for the purposes of the section, the Court considered the Republic’s claims and the realistically foreseeable defences to those claims, which it held included the validity and genuineness of the Supply Contracts. The Court of Appeal concluded that, as a matter of Swiss law (which was the relevant governing law), the claims constituted matters that were ‘sufficiently connected’ to the Supply Contracts to fall within scope of the arbitration agreements.

Conclusion

As the first appellate authority on what constitutes a “matter” for the purposes of section 9 of AA 1996. the decision reinforces the English courts’ common-sense approach to arbitration agreements and makes clear that parties before the English courts will struggle to avoid arbitration by seeking to split up a case artificially.

Associated sectors / services

  • Arbitration
  • Banking & financial disputes
  • Financial services

Authors

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