Vulture Fund dodges UK debt relief law in Jersey court

Vulture Fund dodges UK debt relief law in Jersey court

By staff writers
4 Nov 2010

Campaigners have today condemned a $100 million judgement in favour of US vulture fund FG Hemisphere made in a Jersey court.

The judgement orders Jersey-based mining company GTL to send “all future payments” on a mining contract with the Democratic Republic of Congo’s state-owned Gecamines to the US vulture fund FG Hemisphere Associates LLC.

The original debt, which FG Hemisphere bought in 2003, was for $37 million. It has now risen to more than $100 million in principal, interest and fees, and is growing by around $27,500 a day, according to Jersey Court of Appeal documents seen by Bloomberg.

The debt was incurred during the rule of dictator Mobutu Sese Seko in the 1980s.

The judgment comes six months after the UK passed the landmark Debt Relief (Developing Countries) Act, the world’s first law to restrict the ability of so-called 'vulture funds' to sue developing countries for historical debts and make massive profits.

In July, the DRC completed the IMF and World Bank’s HIPC debt cancellation scheme, meaning $8 billion of debt will be written off.

Nick Dearden, Director of Jubilee Debt Campaign, said: "The UK’s landmark vulture law – which will expire next June unless George Osborne makes it permanent – has kept the vultures out of the London courts. But it is sickening that they have been able to take their toxic cases to Jersey and swoop in once more.

“It is only a few months since Congo finally got debt cancellation from the World Bank after seven years of promises. Now those debt relief funds are being hijacked by a US vulture fund when they are desperately needed to tackle the enormous poverty the country faces. Not only does the UK’s Vulture Law need to be made permanent, it urgently needs to be extended to all Crown Dependencies and British Overseas Territories as well.”

Since buying up the debt in 2003, FG Hemisphere has sought DR Congo assets in a number of jurisdictions, including Hong Kong, the US and South Africa. In March last year, DRC was handed a $5,000 per week penalty in a US court for failing to comply with a directive to list its worldwide assets.

Gecamines Director General, Calixte Mukasa, told Bloomberg the decision was “incredible and revolting” and said the company will appeal.

At least 54 companies are known to have taken legal action against 12 of the world's poorest countries in recent years, for claims amounting to over $1.8bn.

[Ekk/2]

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