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Civil Suits for Damages by Mozambicans Harmed by the Hidden Debt ScandalRichard MessickFebruary 2020The Mozambican government and its citizens have suffered enormous harm from the “hidden debt scandal.” The April 2016 disclosure that senior government officials accepted bribes in return for secretly guaranteeing $2.2 billion in loans prompted donors to immediately halt budget support forcing the government to sharply cut spending. While the government is suing for the damages the scandal caused it, no Mozambican citizen has yet to file suit for injuries the wrongdoers caused them. They have the undisputed right to do so. Article 35 of the United Nations Convention Against Corruption requires the 187 nations party to the convention to:“ensure that entities or persons who have suffered damage as a result of an act of corruption have the right to initiate legal proceedings against those responsible for that damage in order to obtain compensation.”The only questions are where such cases can be filed, how close the link between defendants’ wrongful actions and the injury must be for damages to be awarded, and whether the time-limit for bringing the case, the statute of limitations, has expired. UNCAC provides that the answers to these questions are to be determined by the law of the country where suit is brought. This note offers preliminary answers to where suit could be brought and what claimants would have to show to recover damages and identifies the additional research required before actions are filed. It also explains how suits by individuals might increase the chances the government will prevail in its suit.Countries where suit could be brought From the information now available, damage actions could likely be filed in seven countries. Mozambique certainly, for that is where the injuries occurred, and most probably France, Lebanon, Russia, Switzerland, the United Arab Emirates, and the United Kingdom. These six are where one or more of the alleged bribe-payers is located or does business, and general principles of law in both common and civil law jurisdictions give claimants a right to sue for damages in the national court of the country where the wrongdoer is found, a right that for corruption damages UNCAC article 35 reinforces.Link between bribes and harm sufferedAs with any civil action to recover damages, Mozambican claimants would have to show a link between the wrongful act, the payment of the bribes, and the harm they suffered. Although different nations’ laws express the linkage requirement differently, broadly speaking all jurisdictions require claimants show two things: that the wrongful act was in fact a cause of their loss and that the relationship between the defendant’s action and the damage is not “too remote,” that it was a “proximate” cause of the loss.Portuguese civil damage law, likely similar if not identical to the Mozambican law, illustrates these principles. Under Portuguese law, a claimant need not show that the wrongdoers’ actions were the sole cause of the harm suffered. Rather, as a recent review of the law explain, the cause-in-fact requirement is met if the action “contributed to the damaging result.” All that is necessary, its authors write, is “that the injuring event is one of the conditions of the damage (among others).” The bribe payments that when revealed triggered the hidden debt scandal would seem to easily meet this formulation of the cause-in-fact test. Once the scandal was disclosed, donors immediately suspended funding. That left government without monies to pay suppliers or to fully fund social services. Some firms went bankrupt when government failed to pay them. In addition, there are surely cases where the loss of health, education, and funds for other critical services injured identifiable individuals or an identifiable class of individuals. The second requirement for liability for a civil wrong -- that the link between the wrongful conduct and the harm not be “too remote,” that it be “proximate” -- is captured in Portuguese law by use of the word “probably” in the statute. “Probably,” the law review authors explain, requires the judge “to assess whether the injuring event is an adequate or appropriate condition.” On its face, the revelation of the bribe followed by the donor funding freeze and reduction in government funding would seem to qualify as an “adequate” or appropriate” event leading to the harm claimants suffered. The vagueness in the test for proximate cause is not unique to Portuguese law. The facts giving rise to a suit for damages are so varied and complex that no draftsperson can write a law specifying in advance every instance where the facts call for imposing liability and where they do not. As a result, judges everywhere enjoy a good deal of discretion when applying the proximate cause test to an individual case, allowing them “to reach outcomes that are in sync with societal views of what is . . . desirable behavior” in their country. The open textured nature of the law governing civil damage actions would be an advantage to a Mozambican claimant, at least in jurisdictions where judges’ discretion is not constrained by non-legal factors. It is hard to imagine a judge free to exercise his or her judgement ruling that the payment of large bribes to officials of a poor country is “in sync” with their nation’s view of “desirable behavior.” To the contrary. The judge would surely rule that it is anything but “desirable behavior” for large multinational enterprises and corrupt, wealthy executives and government officials to conspire to rob Mozambique of hundreds of millions of dollars and go on to find that the bribery scheme “probably” caused harm to any claimant able to show the slightest link between an injury and the scheme. Research requiredTo determine whether actions against those involved in the bribery scheme could be brought requires further legal research and a better understanding of the facts. The time period for bringing a case in the different jurisdictions first needs to be reviewed. On a strict reading, the time for filing suit began to run when a claimant suffered a loss from the cut in government spending, likely the fall of 2016. The three- and one-half-year time lapse might rule out suits in France, as its statute of limitation on civil damage actions is three years. Statutes in other nations may also preclude suit. On the other hand, the laws of many countries contain exceptions – as where the damage is continuing, or the wrongdoer has taken affirmative actions to hide the wrongdoing. Local counsel in each jurisdiction should be able to easily determine the general provision governing the time limit for bringing suit for civil wrongs, and if it has expired, whether there are exceptions that apply in the case of the commission of intentional wrongs such as the payment of bribes.The passage of time would likely not be at issue in Mozambique. Under the Mozambican criminal procedure code, those claiming injury as a result of a crime can become a party to the criminal case against the defendant and receive damages if the defendant is convicted. The public prosecutor filed a case in March 2019 against some 20 Mozambican citizens for their role in the scandal and later amended it to add additional defendants. The code appears to set no time limit on when an individual could join the case as a civil party -- although Mozambican counsel should to be consulted to ensure this reading is correct. Counsel should also be asked to advise on what evidence a civil party would need to present to receive compensation if one or more defendants are found guilty. Mozambique’s criminal procedure code also allows those injured by the scandal to file their own civil suit against any scandal participant whom the prosecutor has not charged. That would include Credit Suisse and its London subsidiary, the Russian-owned bank VTB, several Privinvest companies along with three company employees, CEO Iskandar Safa, and senior executives Najib Allan, and Jean Boustani. All are alleged to have been involved in bribing Mozambican officials. The penal code is not clear on whether there is time limit on the filing of an independent civil action, and a Mozambican lawyer would again need to be consulted, both on whether suit could be brought and what evidence on causation and damages would need to be collected. Besides legal research, facts need to be gathered on who was injured and how. The damages Mozambican citizens suffered from the sudden, steep reduction in government spending are likely many and varied. Some victims are known. One firm that sold to the government went bankrupt when the government was unable to pay the firm’s bills, its employees losing their jobs and the owner her livelihood. These claims are directly traceable to the reduction in government spending. Surely, there are other firms that incurred losses when government defaulted on monies owed them.Although the Mozambique government reportedly did its best to maintain spending on social services when donors froze funding, there was most likely a hiatus in funding as monies were shifted from one account to another, and there were likely some absolute cuts as well. Exactly where funding was reduced and for how long should be determined from government spending data.This information should then be paired with on-the ground research in the regions and sectors where reductions were made. Examples of the harm to look for would include those who i) suffered, and perhaps even died, from a delay or denial of medical treatment, ii) lost months if not years of schooling, or iii) were stricken with an infectious disease because of a breakdown in expenditures on water treatment and sanitation. Front-line service providers could be enlisted to interview possible claimants with help from lawyers who know what information would be needed to present a cognizable claim. In some countries, each person injured would have to file their own case. In others, a group of similarly affected individuals could file a collective or class plement to government suitThe government has brought suit in London against ten individuals and companies involved in the hidden debt scandal: the Swiss bank Credit Suisse, its U.K. affiliate, five members of the Privinvest Group of companies located in either the United Arab Emirates or Lebanon, and the three?former executives of Credit Suisse who pled guilty in the U.S. criminal case. In the complaint, it asks that the hidden debts be cancelled and that defendants compensate the government for the expenses incurred in taking out the loans, the costs involved in the reissue of one of the loans, and for damages arising from the reduction in economic growth following the scandals’ disclosure. As of mid-February, the only defendants that have answered the complaint are Credit Suisse and its London branch. Both claim they are innocent of any wrongdoing, that any wrongs that were done were done by employees, that they are not responsible for the actions of their employees, and that the Government of Mozambique’s claim that they should be liable for damages would “not be fair and just.”Lawsuits by individuals for the injuries they sustained would complement the government’s London action. Their suits would put a human face on the damage the bribe payers and bribe takers have wreaked. Likely many of who suffered the most live close to if not below the poverty line. The suits would attract media attention in the way the government’s, alleging real but abstract harms, does not. This attention would not be lost on the banks which are defendants, for their future business and indeed their licenses to do business in many jurisdictions depend upon a reputation for honesty and fair dealing. It could provide an additional reason why they might decide to settle cases rather than continuing with what could be lengthy, time-consuming, and expensive litigation. And litigation that could well be a public relations nightmare.Even Privinvest, a privately-owned company, could be affected. It brags on its web site that it has large contracts with defense ministries around the world. A reputation for corrupt conduct might lead some ministries to reconsider doing business with the company, particularly in the face of publicity showing how its corrupt behavior affected the poor in Mozambique. And even if defense ministry officials were not swayed by stories of its wrongdoing, parliamentarians, civil society activists, and anticorruption agencies maybe. ................
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