Republic of Mozambique v Privinvest Shipbuilding SAL (Holding) & Ors [2023] UKSC 32

Mozambique sued Privinvest and others alleging bribery and conspiracy relating to three supply contracts financed by sovereign guarantees. Privinvest sought a mandatory stay under section 9 of the Arbitration Act 1996, arguing disputes fell within arbitration clauses. The Supreme Court allowed the Republic's appeal, holding that the corruption claims were not matters within the scope of the arbitration agreements.

Facts

The Republic of Mozambique brought proceedings against Privinvest companies, Credit Suisse entities, and individuals, alleging a corrupt scheme involving three supply contracts entered into between 2013-2014 by special purpose vehicles (SPVs) wholly owned by the Republic. The SPVs borrowed approximately US$2 billion from London banks to fund purchases from Privinvest, secured by sovereign guarantees signed by Mozambique’s Finance Minister. The Republic alleged over US$136 million in bribes were paid to Mozambican officials and Credit Suisse employees. Each supply contract contained Swiss law arbitration agreements.

Procedural History

Privinvest applied for a mandatory stay under section 9 of the Arbitration Act 1996. Waksman J dismissed the application, finding the claims insufficiently connected to the supply contracts. The Court of Appeal allowed Privinvest’s appeal, holding all claims fell within the arbitration agreements’ scope.

Issues

The central issue was whether the Republic’s claims for bribery, unlawful means conspiracy, and dishonest assistance were ‘matters’ in respect of which the legal proceedings were brought that fell within the scope of the arbitration agreements in the supply contracts.

Judgment

The Supreme Court unanimously allowed the Republic’s appeal. Lord Hodge delivered the judgment, establishing that section 9 involves a two-stage process: first, identifying the matters in respect of which legal proceedings are brought; second, determining whether those matters fall within the arbitration agreement’s scope.

In my view there is now a general international consensus among the leading jurisdictions involved in international arbitration in the common law world which are signatories of the New York Convention on the determination of matters which must be referred to arbitration.

Lord Hodge emphasised that a ‘matter’ must be substantial and legally relevant:

a matter is a substantial issue that is legally relevant to a claim or a defence, or foreseeable defence, in the legal proceedings, and is susceptible to be determined by an arbitrator as a discrete dispute. If the matter is not an essential element of the claim or of a relevant defence to that claim, it is not a matter in respect of which the legal proceedings are brought.

Application to the Facts

The Court held that the validity and commerciality of the supply contracts were not essential elements of the Republic’s bribery, conspiracy, and dishonest assistance claims, nor relevant defences to those claims. The substance of the controversy was whether transactions were obtained through bribery and whether defendants knew of the guarantees’ alleged illegality. A defence asserting the supply contracts gave value for money would not answer those allegations.

The assertion that the matters in respect of which the legal proceedings are brought are allegations of corruption in relation to the conclusion of the supply contracts states the matter too broadly.

Implications

This judgment provides authoritative guidance on interpreting ‘matter’ under section 9 of the Arbitration Act 1996, aligning English law with international jurisprudence from Singapore, Australia, and Hong Kong. It confirms that courts should undertake a ‘practical and common-sense enquiry’ focusing on substantial issues that are not merely peripheral. The decision preserves claimants’ autonomy to choose which claims to pursue and prevents defendants from artificially expanding arbitration agreements’ scope through peripheral defences. It also confirms that futility in seeking a stay may be relevant where matters will be determined in court proceedings regardless.

Verdict: The Supreme Court allowed the Republic of Mozambique’s appeal, holding that none of the Republic’s claims against Privinvest (other than the conceded IFA and UMIFA claims which the Republic had withdrawn) fell within the scope of the arbitration agreements. The mandatory stay under section 9 of the Arbitration Act 1996 was refused.

Source: Republic of Mozambique v Privinvest Shipbuilding SAL (Holding) & Ors [2023] UKSC 32