Vulture fund demands millions from DR Congo in illegal debt
Vulture fund FG Hemisphere is suing for the debt in a court in Jersey, because the claim would not be allowed in UK courts. Vulture funds are companies that buy up the debts of countries cheaply and then demand repayment for an inflated amount through the courts.
FG Hemisphere is claiming a debt payment of US$100 million from DR Congo, the second poorest country in the world. But documents obtained by BBC Newsnight and the Guardian suggest that the debt was bought illegally from Bosnian state-owned company EnergoInvest for just US$3.3 million. They link it to allegations of corruption against former Bosnian Prime Minister Nedžad Branković.
Tim Jones, Policy Officer at Jubilee Debt Campaign, said:
"The debt being claimed by FG Hemisphere is unjust in multiple ways. It comes from loans to the odious dictator general Mobutu, it should have been cancelled as part of internationally agreed debt relief, and now we learn it was sold illegally.
"Offshore centres such as Jersey are the outriders for dangerous deregulated dealing. This would not be allowed under UK law, but unscrupulous companies can get round this by going to court in the Channel Islands. The Jersey government needs to act fast to close the loophole, and limit FG Hemisphere's unjust claim before it is too late.”
A campaign led by Jubilee Debt Campaign led the UK parliament to pass an act restricting vulture fund activity in 2010, but the law does not apply in the Channel Islands.
After winning two previous cases, FG Hemisphere hope to win the final stage of this case in 2012. The government of Jersey is consulting on legislation which would restrict vulture funds and prevent FG Hemisphere making its claim.
1. Jubilee Debt Campaign is the UK coalition campaigning for cancellation of unjust and unpayable poor country debt.
2. The debt originally dates from loans to the regime of General Mobutu to build power transmission lines in his home region of Gbadolite in the 1980s.
3. Following civil war, in 2003 the Democratic Republic of Congo entered the international debt relief scheme, the Heavily Indebted Poor Countries Initiative. In 2010 the country completed this initiative, and was supposed to have 82 per cent of its debts cancelled. However, the scheme is voluntary, and vulture fund FG Hemisphere has refused to take part in the debt write-down.
4. In 2010, the UK Parliament passed an Act which says the maximum debt repayments vulture funds can sue the poorest countries in UK courts for is what they would have received under the international scheme. The Act was made permanent in 2011, but does not apply to Crown Dependencies and Overseas Territories such as Jersey, Guernsey, the British Virgin Islands and Cayman Islands. The UK Treasury estimates the Act will save the poorest countries £145 million over the next six years.
5. In September following demands from Jubilee Debt Campaign supporters as well as local MPs, the Jersey government launched a consultation into introducing similar legislation. The Consultation closes on 8 December.
6. Tim Jones, Senior Policy Officer of the Jubilee Debt Campaign, will visit Jersey on 21-22 November to meet with government officials.