Rich countries meeting in the Paris Club group of creditors have confirmed that they would be cancelling $7.4 billion of debt owed by the Democratic Republic of Congo, but expressed concern at the continuing activities of so-called 'vulture funds'.
The Democratic Republic of Congo’s debt originated under the dictator General Mobutu, when western governments supported the Zaire regime with loans in return for the General’s support during the Cold War. It was known at the time that the money was not benefiting the Congolese people and much of it was being stolen by Mobutu and his allies.
Jubilee Debt Campaign Director Nick Dearden said: “The Congolese people should never have paid a penny on Cold War loans supporting the Mobutu regime. We welcome the fact the Democratic Republic of Congo has finally had $7.4 billion of debt cancelled. But the debt should have been declared illegitimate and cancelled many years ago.”
In making their announcement, the Paris Club noted that vulture funds are not taking part in debt relief schemes, but suing the Democratic Republic of Congo in courts across the world. For example, vulture fund FG Hemisphere is pursuing a court case in Jersey, trying to reclaim a claimed debt of $100 million. FG Hemisphere bought the debt in 2003, when it stood at $37 million.
Nick Dearden added: “Governments need to make vulture funds cooperate with debt cancellation, not stand by whilst inflated claims are being pursued in courts across the world. 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.”
The Paris Club said: “The case of the DRC raised the issue of non cooperative behaviour from some litigating creditors. The Government of the DRC committed to seek from all its remaining external creditors a treatment comparable to HIPC (heavily indebted poor countries) debt relief.”
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 more than $1.8bn.