Despite the enormous importance of legal arrangements, the legal dimension is often recognized too late and at substantial costs. In matters involving vulture fund claims and litigation, RMCs are disadvantaged by the quality of legal representation. This disadvantage stems from the specialized, sometimes esoteric, nature of laws in subject matter and jurisdictions in which RMCs’ counsels have inadequate technical knowledge. In negotiating some claims and in defending themselves in litigation, RMCs have unknowingly waived rights that otherwise would have created strong, valid legal defences. Consequently, hundreds of millions of US dollars (potentially billions of such dollars) saved by RMCs through debt relief, which have been earmarked to help meet the Millennium Development Goals (“MDGs”), are being diverted to avaricious, intransigent creditors. This diversion of resources frustrates the purposes of debt relief.
Failures of RMCs to negotiate effectively are supposed to have also led to opportunity costs estimated in billions of US dollars arising from various badly drafted contracts and other financial agreements. A number of reasons have been identified in studies for the failure of RMCs to adequately address these challenges. Key reasons are poor legal capacity, high costs of litigation, inexperienced government officials, corruption and lack of transparency. This is often compounded by the fact that RMCs do not have the necessary information to identify competent law firms for representation. Poorly qualified lawyers add to the cost and length of litigation. The cost of legal defence in a typical vulture fund litigation is about US$1.5 million and the cost of expert legal advice in the negotiations of complex commercial transactions is roughly equivalent.
Precedents exist for international legal assistance aimed at removing legal imbalances in litigation and negotiations. Similar international legal aid mechanisms have been established by other international organizations to help ensure access to justice and to remove inequalities that impact negatively on the fulfilment of their respective mandates. For example, the International Court of Justice in The Hague has a Fund established to overcome impediments to the judicial settlement of disputes between nation-states, which works for the benefit of less developed countries that appear before the Court. Some member countries of the World Trade Organization are founding members of the Geneva-based Advisory Centre on WTO Law (“ACWL”), which provides technical legal assistance in dispute settlement and negotiations pertaining to WTO law. The Commonwealth Secretariat and the Commonwealth HIPC Clinic in London, England, provides limited advisory services to member countries of the Commonwealth.
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ALSF - Summary of Key Features (56 KB)