One of the world's most controversial 'vulture funds' will be in London on Monday (28 May) to attempt to claim $100m from the Democratic Republic of the Congo (DRC).
They are taking their case to the Privy Council under Jersey law, because their claim would not be lawful in UK courts. Although Jersey is not in the UK, the Judicial Committee of the Privy Council remains the highest court for Jersey.
Anti-poverty campaigners have criticised the failure of Jersey's government to introduce an anti-vulture law in time to stop this happening. Jersey's Chief Minister promised such a law at the end of last year.
Vulture fund FG Hemisphere are seeking to claim $100m from the DRC on a debt they bought for just $3m. The debt originated in the1980s when the Yugoslavian government lent money to Dictator General Mobutu to win contracts for their businesses.
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.
In 2010, the British parliament passed a law 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 have taken advantage of the anomaly to sue under Jersey law, citing assets held by a mining company in Jersey which are owed to the Congolese government.
"The debt being claimed by FG Hemisphere is unjust,” insisted Nick Dearden, Director of the Jubilee Debt Campaign, today (25 May). “The vulture fund is claiming extortionate amounts on a debt based on an odious loan to the dictator General Mobutu”.
At the start of February 2012, the Jersey government announced it would pass legislation similar to the UK to prevent exorbitant vulture fund claims against some of the most impoverished countries. However, no law has yet been introduced to the Jersey parliament.
Nick Dearden described the Jersey government's behaviour as “outrageous”.
He said, “The Jersey government has had two years to bring in UK-style legislation to clip the wings of vulture funds. By failing to do so, it is allowing an unscrupulous vulture fund to take money away from the poorest country in the world.
Dearden said that it is not clear why money owed to the Congolese government, from mining revenues in the Congo, is in Jersey to start with.
He added, “The Jersey government needs to make the activities of its companies far more transparent, to help prevent the island being used for tax avoidance and capital flight out of impoverished countries”.