Thursday, December 17, 2009

London High Court Orders Liberia to Repay $20 Million to the "Vulture Funds"

From a press release just issued by the United Nations . . . .

A United Nations human rights expert voiced concern today over the decision of a court to order Liberia to pay debts of about $20 million to two so-called “vulture funds” – private investment firms that buy the debts of struggling countries or companies at below face value and then aggressively pursue repayment of the entire sum.

Cephas Lumina, the UN Independent Expert on the effects of foreign debt and other related international financial obligations of States, said in a statement issued in Geneva that asking Liberia to pay back the debts – which date to 1978 – was “a morally unacceptable trade-off.”

London’s High Court ruled late last month that Liberia must pay the $20 million owed to Hannah Investments and Wall Capital Limited.

Dr. Lumina said the amount sought was equivalent to a “significant portion” of the West African country’s annual budget for health and education.

“Payment of this debt by Liberia would have a direct negative effect on its Government’s ability to fulfil its human rights obligations, resulting in further impoverishment and privation of basic human rights, especially economic, social and cultural rights, such as the rights to water and sanitation, health, housing and education,” he said. “In return, two private speculative investors will unfairly increase their profit margins.”

Liberia is currently undergoing the Heavily Indebted Poor Countries Initiative (HIPC) process, an internationally agreed measure for debt relief that is designed to free up funds so that poor countries can invest in health, education and poverty reduction.

This follows its emergence from a protracted and brutal civil war in the 1990s and early this decade that devastated the country’s infrastructure and economy.

Dr. Lumina noted that Liberia was one of several HIPC countries that had been targeted by vulture funds for the repayment of debts owed.

“I strongly urge the international community, the Paris Club and, in particular, the United Kingdom, the United States and France – which are preferred jurisdictions for many vulture funds – to urgently consider enacting legislation to prevent vulture fund activity within their jurisdictions as a clear indication of their commitment to find a durable solution to the debt problem.

“It is illogical to cancel poor country debt and at the same time allow unconscionable vulture fund claims.”

Dr. Lumina added that poor countries should for their part “ensure transparency, participation and accountability in the negotiation, contraction, restructuring and settlement of public loans, including through legislation providing for oversight by parliaments and civic organizations. It is time to move beyond the rhetoric to more robust action outlawing this retrogressive practice.”

http://lawprofessors.typepad.com/international_law/2009/12/vulture-funds.html

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