The government of the war-torn Democratic Republic of Congo is racking up fines of $20 000 a week in a case brought by a New York-based vulture fund over a debt incurred from Tito’s Yugoslavia in the 1980s.
Vulture funds are so called because they prey on the world’s poorest countries, buying up their sovereign debt cheaply on capital markets and then going to courts, often in Britain or the United States, to enforce payment of the full value of the debt.
A Washington Court handed down a penalty against the DRC in March, starting at $5 000 a week and eventually rising to $80 000, for failing to comply with a demand to provide detailed information about all its assets throughout the world.
The fine is the latest twist in the long-running effort by investment fund FG Hemisphere to collect a debt first incurred 20 years ago, when the notorious dictator Mobutu Sese Seko was in power in the DRC. The debt now amounts to $100-million, including interest and penalties.
Lawyers for the African country have lodged an objection to the penalty, on the grounds that the district court has no jurisdiction over a sovereign state; but Stephen Cundra, of law firm Roetzel and Andress, who is representing the DRC, said no ruling has so far been handed down on whether the fine must stand.
“Eight million people have died in the Congo for lack of healthcare… and the last thing they can do is find $100-million for a vulture fund,” Cundra said.
As well as a series of moves to take control of the DRC’s assets in Washington, the fund has also taken action in Hong Kong and South Africa.
FG Hemisphere, which was unavailable for comment, describes itself as “a New York-based investment company specialising in uncovering, investigating and managing alternative investment opportunities and special situations within the emerging markets.”
Nick Dearden, director of the Jubilee Debt Campaign, said: “The World Bank has made clear that DRC cannot afford to repay its debts. Today as DRC struggles to emerge from a past characterised by slavery, imperialism, looting and war, they are attacked again by financial vultures.”
Tamara Gaw, in-house counsel at campaign group TransAfrica Forum, said the case underlined the urgent need for legislation to prevent vulture funds pursuing developing countries’ debts on American soil.
The Stop Vultures Act is on its way through the House of Representatives. Britain announced last month that it would also consult on bringing in a law to cap the amounts an institution could claim against a poor country.
But the government was spurred into more concrete measures by a group of 12 cross-party MPs who had called in Parliament for a Developing Country Debt (Restriction of Recovery) Bill that would seek to ban hedge funds and other creditors from taking legal action against the world’s poorest countries.
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 $1,8-billion. – guardian.co.uk