Privy council blocks 'vulture fund' from collecting $100m DRC debt
FG Hemisphere had tried to exploit a legal loophole to demand impoverished African nation pay back money
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Processing DRC copper: the state mining company need not pay the debt.
The privy council has blocked a multimillionaire speculator from taking up to $100m (£64m) from the Democratic Republic of the Congo (DRC) for a decades old debt that started out at $3.3m.
Peter Grossman, who runs so-called "vulture fund" FG Hemisphere, had tried to exploit a legal loophole to demand the impoverished African nation pay back the debt. But the privy council overturned a previous court ruling allowing FG Hemisphere to demand the multimillion-pound payout from DRC's state-owned mining company.
In an attempt to skirt British law, which bans "vulture funds" from buying poor nations' debts on the cheap before suing them for 10-100 times the amount paid, Grossman took the case to Jersey, a crown dependency not covered by the UK law.
The Jersey court had ruled the DRC's state-owned mining company Gécamines should pay back the debt, which was originally a loan from the former Yugoslavia to Zaire, as DRC was then known, to build power lines 30 years ago.
Bosnian police files, shown to the Guardian and Newsnight, reveal FG Hemisphere paid $3.3m for the Yugoslav power claim. Michael Sheehan, another so-called vulture who set up the deal and who chooses to refer to himself as Goldfinger after the James Bond villain, is said to have collected more than half a million dollars from setting up the deal.
The privy council, which is the final court of appeal for Crown dependencies (including Jersey), ruled that Gécamines is not responsible for the Congolese government's debts.
The ruling means FG Hemisphere can no longer collect the debt via Jersey and the case may set a precedent making it harder for vulture funds and other sovereign debt creditors to collect funds from state-owned companies.
Before turning to the Jersey loophole, Grossman's company had unsuccessfully tried to seize the DRC's embassy in Washington as a downpayment on the debt.
A spokesman for Grossman said: "We are obviously disappointed at the judgment delivered by the council. FG Hemisphere has sought repayment of a debt for electrical infrastructure built at the request of the DRC government by a private company that was never paid for this work. We remain committed to finding a legal and fair resolution of this claim." Last year Grossman released a lengthy statement on the case, which can be read here: http://www.fghem.com/.
Justin Harvey-Hills, a partner at Mourant Ozannes, which represented Gécamines in the case, said: "The case will go far beyond Jersey and the UK. It sets an important precedent in common law. In order to enforce claims for sovereign debt against state-owned companies, creditors will need to show that the company is so much part of the state it has no meaningful independent existence."
The International Monetary Fund and the World Bank said many countries had been pursued by vulture funds, including Cameroon, Ethiopia, Sudan, Uganda, and the DRC. The IMF has said vulture funds are engaged in claims seeking a total of $1.47bn from the world's poorest countries
http://www.guardian.co.uk/business/2012/jul/18/privy-council-vulture-fund-drc
Peter Grossman, who runs so-called "vulture fund" FG Hemisphere, had tried to exploit a legal loophole to demand the impoverished African nation pay back the debt. But the privy council overturned a previous court ruling allowing FG Hemisphere to demand the multimillion-pound payout from DRC's state-owned mining company.
In an attempt to skirt British law, which bans "vulture funds" from buying poor nations' debts on the cheap before suing them for 10-100 times the amount paid, Grossman took the case to Jersey, a crown dependency not covered by the UK law.
The Jersey court had ruled the DRC's state-owned mining company Gécamines should pay back the debt, which was originally a loan from the former Yugoslavia to Zaire, as DRC was then known, to build power lines 30 years ago.
Bosnian police files, shown to the Guardian and Newsnight, reveal FG Hemisphere paid $3.3m for the Yugoslav power claim. Michael Sheehan, another so-called vulture who set up the deal and who chooses to refer to himself as Goldfinger after the James Bond villain, is said to have collected more than half a million dollars from setting up the deal.
The privy council, which is the final court of appeal for Crown dependencies (including Jersey), ruled that Gécamines is not responsible for the Congolese government's debts.
The ruling means FG Hemisphere can no longer collect the debt via Jersey and the case may set a precedent making it harder for vulture funds and other sovereign debt creditors to collect funds from state-owned companies.
Before turning to the Jersey loophole, Grossman's company had unsuccessfully tried to seize the DRC's embassy in Washington as a downpayment on the debt.
A spokesman for Grossman said: "We are obviously disappointed at the judgment delivered by the council. FG Hemisphere has sought repayment of a debt for electrical infrastructure built at the request of the DRC government by a private company that was never paid for this work. We remain committed to finding a legal and fair resolution of this claim." Last year Grossman released a lengthy statement on the case, which can be read here: http://www.fghem.com/.
Justin Harvey-Hills, a partner at Mourant Ozannes, which represented Gécamines in the case, said: "The case will go far beyond Jersey and the UK. It sets an important precedent in common law. In order to enforce claims for sovereign debt against state-owned companies, creditors will need to show that the company is so much part of the state it has no meaningful independent existence."
The International Monetary Fund and the World Bank said many countries had been pursued by vulture funds, including Cameroon, Ethiopia, Sudan, Uganda, and the DRC. The IMF has said vulture funds are engaged in claims seeking a total of $1.47bn from the world's poorest countries
http://www.guardian.co.uk/business/2012/jul/18/privy-council-vulture-fund-drc
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