Not Letting the Vultures ‘Carri-on’: New African Legal Support
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On Monday, the African Development Bank (AfDB) launched the Africa Legal Support Facility. The initiative is intended to provide funding and advice to African governments navigating complex commercial transactions or facing litigation by vulture funds. As the name implies, these funds ‘prey’ on distressed investments purchased at heavy discount (the ‘carrion’ of the financial world, for those who like my pun), including the cheap debt of struggling companies and countries. The funds then seek repayment of face value plus high interest rates.
The need for this facility was first expressed by African finance ministers in 2003, in response to increasing problems from vulture funds.
In a prominent case just two years ago, the fund Donegal International was awarded $15.5 million by the High Court in London for Zambian government debt it purchased for less than $4 million.
The international community has observed that savings from debt relief programs – intended to support health, education and other development efforts – are being eroded as resources are diverted to settle vulture fund claims. This issue is even more important in light of the current global financial crisis, as many countries will be forced to take on new loans to cope with its impacts, and will fall further into debt.
Beyond legal and technical assistance, the new facility is also intended to prevent African countries from being disadvantaged when negotiating resource-centered deals with powerful countries and companies.
-Rena Pacheco-Theard
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July 2, 2009 at 3:28 pm
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Thank You. Chris
July 9, 2009 at 11:09 am
Hello Rena,
You’ve written a wonderful post that updates an important issue. According to Jubilee USA,an “increasing number” of lawsuits are brought by Vulture Funds in the courts of the debtor countries themselves, where “weaker legal systems are easily overwhelmed by the level of technical detail involved in adjudication of these cases.”
Hopefully the AfDB’s new initiative will help African countries combat the Vulture Funds, which siphon huge sums of money away from the citizens of impoverished nations that desperately need the funding for social services like health care, education, public transportation etc.
I invite to take a look at a recent post on our blog, “Just Africa,” concerning Vulture Funds, as well as the reintroduction of the “Stop VULTURE Funds” Act (H.R. 2932) in the House of Representatives at: http://tiny.cc/uJaOI
And, for additional information on where Vulture Funds are prowling, you can check out an interactive map showing which countries are being affected: http://tinyurl.com/lyz7w7