Vulture fund FG Hemisphere is seeking to claim $100 million from the DR Congo at the UK Privy Council on Monday 28th May, on a debt it bought for just $3 million.
The case is being heard under Jersey law, the highest appeal court for which is the Judicial Committee of the UK’s Privy Council. The debt originated in the 1980s when the Yugoslavian government lent money to Dictator General Mobutu to win contracts for their businesses.[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.
In 2010 the British parliament passed a law limiting the amount vulture funds could claim from some impoverished countries, including DRC.[2] However, the law was not made to apply in British crown dependencies such as Jersey. FG Hemisphere is suing under Jersey law, claiming assets held by a mining company in Jersey which are owed to the Congolese government.
Nick Dearden, Director of Jubilee Debt Campaign, said:
“The debt being claimed by FG Hemisphere is unjust. The vulture fund is claiming extortionate amounts on a debt based on an odious loan to the dictator General Mobutu. It is outrageous that the Jersey government has allowed this appalling case to be brought.”
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 added:
“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.
“It is not clear why money owed to the Congolese government, from mining revenues in the Congo, is in Jersey to start with. 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.”
FG Hemisphere is 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, the Democratic Republic of Congo is the poorest country in the world.[3]
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For more information or an interview contact Jubilee Debt Campaign on +44 (0)20 7324 4722 or +44 (0)7932 335 464
1. 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.
2. 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 $120 billion for 32 countries.
3. UN Human Development Report, 2011
4. 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.