Background

A central plank of the Bank’s strategy on Law for Development  is the establishment of an African Legal Support Facility (“ALSF” or “the Facility”) aimed at providing technical assistance to the Bank’s Regional Member Countries (“RMCs”).  Critical challenges demanding assistance are the problems with the most intransigent of creditors, vulture funds that act against Highly Indebted Poor Countries (“HIPCs”), fragile states and post-conflict countries; and the inadequate capacity of RMCs to engage effectively through fiscal and legal regimes that optimize socio-economic benefits in complex business transactions, especially those involving extractive resources.

The imperative for the Facility has been consistently expressed and supported by various parties including African Finance Ministers, who, during a meeting at the United Nations Economic Commission for Africa (“ECA”) in early June 2003, when discussing the topic of the International Monetary Fund (“IMF”) and Africa, called for the rapid establishment of a legal technical assistance facility to help HIPCs deal with creditor litigation.

The Commission for Africa (“the Commission”) in March 2005 similarly called for action to relieve what it termed “dangerous debt.” The Commission emphasized the importance of addressing the precarious component of HIPCs’ debt owed to non-OECD (Organization for Economic Cooperation and Development) bilateral and commercial creditors who are not participating in the HIPC initiative. The Commission noted that the debt has increasingly become a target for lawsuits by the original creditors and disreputable speculators. The Commission supported the position of the African Finance Ministers and called for the establishment of a rapid response legal technical assistance facility, independent of the Bretton Woods Institutions, to help African countries pre-empt and avoid lawsuits, and change national debt relief laws.

Additionally, the African Big Table (“the Big Table”) held in February 2007, co-sponsored by the Bank and the ECA, recognized the skills gap of Regional Member Countries in negotiating contracts for extractive natural resources and called for appropriate intervention. The Big Table called specifically for the establishment of a facility to help RMCs develop expertise and capacity to negotiate extractive resource contracts. The Big Table observed that the natural resources sector is witnessing a commodity price boom, fuelled by global resource scarcity and the entrance into the commodity market of new global players. Given Africa’s unique resource development, the Big Table concluded that this offers a window of opportunity for RMCs to extract better terms from natural resources exploitation and to promote growth and poverty alleviation across the continent.  The Big Table noted the need to create an enabling environment, modern legal and regulatory frameworks, and competitive fiscal regimes.  The Big Table also recognized the importance of reviewing the current generation of natural resource laws and regulations to better accommodate the interests of RMCs. 

It is therefore widely recognised that many RMCs lack the specialist legal expertise or experience in vulture fund negotiations and litigation as well as in matters of complex commercial transactions. The purpose of the Facility is to assist RMCs primarily in acquiring effective legal assistance in dealing with vulture fund negotiations and litigation, and accessorily acquiring the requisite legal capacity on a reimbursable fee-basis to negotiate complex commercial transaction.

Accordingly, the objectives of the Facility focus on harnessing the gains from debt relief granted HIPCs, minimizing the diversion of debt relief gains for purposes other than those agreed under the debt relief framework, strengthening relevant assistance granted fragile states and post-conflict countries, thereby enabling affected RMCs to address the challenges posed by vulture funds, and accessorily enhancing the capacity of all RMCs in complex commercial  transactions, especially those in the natural resource sector.