The Facility would have two main activities:
- obtaining specialist legal assistance for the negotiation and/or litigation of vulture fund claims, and
- building legal capacity on the continent to deal with such claims and litigation. The legal advisory service will be implemented at the headquarters of the Facility, whereas the capacity building programmes will be implemented at headquarters, regional and country level.
Approval by the Bank’s Board of Directors of the draft instrument for the establishment of the Facility.
Establishment of an Endowment Fund for the Facility through a grant by the Bank and other donors of initial resources. Bank members will be asked to contribute to the Endowment Fund. The levels and modes of contributions will have to be agreed and decisions made about whether the endowment contributions can be paid over a period of time.
In order to minimize costs, the Facility will be housed within the Bank. The Bank will take the appropriate steps to negotiate a Host Country Agreement with the Government of its Temporary Relocation Agency, and subsequently with that of the Bank’s host country prior to returning to its headquarters, in the form attached to this paper for the Facility.
The main risk posed is the possibility that vulture funds might seek to institute retaliatory lawsuits against those providing assistance for the defence of RMCs in claims raised by the vulture funds. This risk is mitigated by the design of the Facility as a separate legal entity that would benefit from immunities and privileges insulating the Facility and its members from such lawsuits.
Another risk is the inability of the Facility to raise funds to sustain its activities. This risk has been addressed through the proposal to establish an endowment fund and to empower the Facility to charge fees, as appropriate.
The work of the Facility to assist RMCs address the problems posed by vulture funds is consistent with the goal of the international community and the Bank to grant debt relief to the least developed countries to enable strides towards meeting the MDGs. It is in harmony with global efforts on debt relief and is a legitimate and essential element of the package for dealing with the problems of sovereign debt.
The ancillary work of the Facility to aid RMCs in negotiating complex commercial transactions is consistent with the Bank Group’s policy to improve financial management of assets and resources in RMCs.
The work of the Facility is congruous with the mandate of the Bank to promote the social progress and economic development of African countries. This will be done by ensuring that financial resources made available by the Bank and other creditors through grants of debt relief are used for the purposes intended and not diverted. This will also be done by enhancing the capacity of RMCs to optimize the returns generated from commercial transactions, investments and national assets, especially natural resources.
Work of the Facility in selected respects including strengthening the legal, regulatory and fiscal framework of RMCs to maximize investments will complement the work of Bank technical experts.