ALSF Takes Measures to Fight Vulture Funds in Africa
Tunis, 9 November 2010 – The African Legal Support Facility (ALSF) will provide a USD 500,000 grant to fund services of a reputable international law firm in connection with the dispute between the government of the Democratic Republic of Congo (DRC) and a renowned vulture fund, FG Hemisphere. The ALSF Acting Director, Mamoudou Deme, revealed his institution’s support to DRC, on Tuesday, 9 November 2010 in Tunis, following the grant’s approval by the ALSF Board on 8 November 2010.
The legal assistance to the DRC is the first of its kind by the ALSF since its creation by the African Development Bank (AfDB) Group in 2008. The support to DRC falls within the ALSF’s mission to provide technical legal advice to its members in creditor litigation. This includes technical legal assistance to strengthen their legal expertise and negotiating capacity in matters pertaining to debt management, natural resources and extractive industries management and contracting; investment agreements and related commercial and business transactions.
In a report considered during the ALSF Board meeting, the DRC, like many African countries, has, for the past decade, been facing several lawsuits by FG Hemisphere. FG Hemisphere in 2004, purchased debt on the secondary market from Energoinvest DD, related to power projects developed in the DRC in 1980 and 1986, and has sued the government for over USD 100 million in multiple jurisdictions in an attempt to enforce the arbitration awards. The report also pinpoints that FG Hemisphere then purchased this debt on the secondary market in an attempt to reap large profits.
For many African governments, including the DRC, currently receiving large amounts of debt relief through the HIPC initiative, strong action towards wiping out vulture funds are critically required for effective and sustained peace and security, economic growth and human development. “With the current global economic recovery and Africa rebounding, the African Legal Support Facility (ALSF) is strongly committed to helping AfDB’s member countries to completely wreck vulture funds activities in the continent,” Mr. Deme said. He also stressed that “Lawsuits by vulture funds threaten the core objectives of the HIPC initiative by effectively reducing the impact of the debt relief and causing inequitable burden sharing among creditors.”
Apart from FG Hemisphere, two other vulture funds – Themis Capital and Des Moines Investment Ltd – filed suits against the country and the Central Bank of the DRC to recover approximately USD 74 million in principal and interest allegedly owed to them pursuant to a refinancing and credit agreement dated 31 March 1980. “All these amounts claimed reduce resources available to the country and undermine its economic development and all actions for regional integration,” he said, adding that “The successful defense of these matters would represent an important message to vulture funds activities on the continent.”
The ALSF support is in line with the successful debt cancellation by both Paris Club members and multilateral development banks, including the AfDB. “By supporting the DRC in this project, the ALSF will be supporting that goal by balancing the playing field with respect to these particular debt issues,” Mr. Deme said.