Vulture fund loses case against Congo
18 July 2012Campaigners tell Jersey to pass vulture funds law as big questions remain about funds in Jersey.
In a surprise decision, the UK’s Privy Council has ruled against vulture fund  FG Hemisphere in a case brought against Democratic Republic of Congo’s state mining company for $100 million. The judgement marks the final appeal in a case brought in Jersey for payment on a debt bought by FG Hemisphere for just $3 million. The debt originated in the 1980s when the Yugoslavian government lent money to Dictator General Mobutu to win contracts for their businesses.
Such a case would not have been brought in the UK since a law was passed in 2010 limiting the amount vulture funds could claim from some impoverished countries, including DRC. However, the law was not made to apply in British crown dependencies such as Jersey.
FG Hemisphere was seeking assets held in Jersey which are owed to DRC’s state mining company, Gecamines. The vulture fund claimed Gecamines was an 'organ of the state' and so responsible for debts owed by Democratic Republic of Congo. However, the Privy Council found that whilst Gecamines is a state-owned company, it is not responsible for the Congolese government's debts.
Campaigners welcomed the court’s decision, but said that the case was not the end of the story for either Jersey or DRC.
Nick Dearden, Director of Jubilee Debt Campaign , said:
“We welcome the fact that these funds will not flow into the coffers of a secretive vulture fund which tries to unfairly profit from the past debt distress of impoverished countries. Jersey now needs to do what it should already have done - pass a law to make such cases unprofitable for the vultures.
"But greater questions remain about this case. Why is DRC's mining wealth being fought over in faraway Jersey? The emergence of offshore havens such as Jersey has had a serious impact on the ability of governments to realise revenue from companies exploiting their resources, and the ability of people in those countries to hold their governments to account. We urgently need to end the secrecy that is preventing accountability, country by country reporting would be a good first step."
For more information or an interview contact Jubilee Debt Campaign on 020 7324 4722 or 07932 335 464
1. Vulture funds specialise in buying up the debts of countries in financial difficulty. Once other creditors have written-off debts and a country has become ‘solvent’, they sue for the full amount, claiming extortionate profits.
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. The Debt Relief (Developing Countries) Act 2010 limits the amount a vulture fund can claim from the 40 poorest and most indebted countries in UK courts, on debts contracted before 2004. The forty countries are known as the Heavily Indebted Poor Countries and include countries such as Liberia, Zambia, Tanzania and Nicaragua, as well as the Democratic Republic of Congo. The international community has agreed to cancel significant amounts of these countries debts, currently totalling $125 billion for 33 countries. Jubilee Debt Campaign campaigned for this law, and since that time have received pledges from Jersey and Guernsey to pass a similar law.
4. FG Hemisphere was claiming assets held by the mining company GTL which are owed to the Congolese state mining company Gecamines. GTL is registered in Jersey. It is 55 per cent owned by US company OM Group, 25 per cent owned by Forrest Group and 20 per cent by Gecamines. According to the UN Human Development Report (2011), the Democratic Republic of Congo is the poorest country in the world.
5. Jubilee Debt Campaign is part of a global movement demanding freedom from the slavery of unjust debts and a new financial system which puts people first. For more information see http://www.jubileedebtcampaign.org.uk