A/HRC/14/21 Of those, 33 had not been settled as of September 2008. In the majority of cases a court judgement had been granted, for an estimated total of $1.2 billion (excluding awards extinguished through Debt Reduction Facility buy-backs). The potential impact of court awards varied from less than 0.5 per cent of the debtor country’s gross domestic product (GDP) to 49 per cent in the case of Liberia.6 10. The 2009 report on the status of implementation of the HIPC Initiative and Multilateral Debt Relief Initiative indicates that litigation by commercial creditors appeared to be “less of a problem” in 2009 as compared to the previous year and that the number of cases still pending declined from 33 in 2008 to 14 in 2009.7 However, the same report warns that “the threat of new litigation remains” and states that new lawsuits were initiated in 2008 against the Democratic Republic of the Congo, Sierra Leone, the Sudan and Zambia.8 11. Commercial creditor litigation is not confined to HIPCs. According to a study by the Trade Association for the Emerging Markets (EMTA), at least nine non-HIPC countries have been the subject of such litigation.9 In a number of these cases, the litigating creditor was awarded what EMTA has described as “a substantial amount” relative to what was paid for the debt obligation in the secondary market, or to what other creditors who voluntarily exchanged their debt in the restructuring received.10 12. Vulture fund lawsuits tend to be instituted in the courts of the developed countries. This may be where the vulture fund is registered or it may be the jurisdiction specified in the loan agreement. Most lawsuits are filed in courts in the United States of America, the United Kingdom of Great Britain and Northern Ireland and France, which are perceived as “creditor-friendly” jurisdictions. A small number of lawsuits have been filed in the courts of HIPCs. 13. It is notable that vulture funds are often secretive, both in terms of their ownership and operations, and many of them are incorporated in offshore financial centres and banking secrecy jurisdictions, commonly referred to as tax havens.11 Some are owned by large financial institutions such as hedge funds (often based in the United States) and in other cases their ownership is obscure. Often, companies are established to pursue a single debt. For example, Donegal International Limited, which sued Zambia in 2006 (see below), was incorporated in the British Virgin Islands on 18 December 1997 by Debt Advisory International LLC, a company based in the United States and owned by Michael Sheehan, 6 7 8 9 10 11 6 It should be noted, however, that IMF only tracks private creditor lawsuits for HIPC Initiative eligible countries that have reached the decision or completion point. Ibid., para. 38. IDA and IMF, “Heavily Indebted Poor Countries (HIPC) Initiative and Multilateral Debt Relief Initiative (MDRI) – status of implementation” (2009), para. 24. According to IDA and IMF, the drop in the number of active cases is attributable to Debt Reduction Facility operations in Nicaragua and Liberia, out-of-court settlements by Cameroon, the Republic of the Congo, Sierra Leone and Zambia, and the discontinuation, by five creditors, of lawsuits against Nicaragua (para. 24). Ibid., para. 25. These are Argentina, Brazil, Bulgaria, Costa Rica, Ecuador, Panama, Paraguay, Peru and Poland. However, EMTA states that it is “unable to confirm that this is a complete list of cases brought against non-HIPC sovereigns in the restructuring context”. (EMTA, “Creditor litigation in the nonHIPC sovereign debt restructuring context: EMTA case summaries”, discussion draft (2009), p. 1). EMTA, “Preliminary analysis of creditor litigation in the non-HIPC sovereign debt restructuring context”, discussion draft (2009), p. 3. Many tax havens are located in Europe, or are dependencies or overseas territories of European countries. See European Network on Debt and Development (Eurodad) and others, “Addressing development’s black hole: regulating capital flight” (May 2008), p. 9. GE.10-13156