A/HRC/33/54 III. Case studies 9. Vulture funds have a long history of predatory practices against developing countries, particularly heavily indebted poor countries (HIPCs). The most commonly targeted are countries, most of them in Africa and Latin America, with already unsustainable debt burdens and lacking the capacity and resources needed to face complex and protracted judicial processes. In recent years, vulture funds have aimed their profit expectations at middle-income countries, particularly Argentina. With more than 40 lawsuits filed by commercial investors after the default of 2001, the country accounts for a third of the total number of lawsuits brought by vulture funds.14 The Rapporteur examines in detail in this section some examples of the impact of vulture fund strategies and activities on human rights. A. Donegal International v. Zambia 10. By 1984, the Government of Zambia was unable to service a $30 million debt owed to Romania for the acquisition of agricultural equipment. In early 1997, the firm Debt Advisory International (which later incorporated Donegal International) began to put forward proposals for acquiring the debt. In 1999, just as Zambia was about to reach the decision point for comprehensive debt relief under the HIPC Initiative, Romania sold the debt to Donegal International for about $3 million, 11 per cent of the face value. 11. In 2003, in controversial circumstances involving allegations of corruption and bribing of public officials, Zambia signed a settlement agreement with Donegal International to waive sovereign immunity from litigation and paid approximately $15 million of the then $44 million face value of the debt. The agreement also included penal rates of interest in the event of default and the application of United Kingdom law to any future dispute arising from it. After paying off a total of $3.4 million, the Government of Zambia stopped fulfilling the terms of the agreement, arguing that it was tainted with corruption (see A/HRC/14/21, para. 24). 12. In 2006, only months before Zambia was due to receive debt cancellation under the HIPC Initiative, the company sued the country in the United Kingdom courts for a total amount of $55 million. Donegal obtained a favourable ruling, obtaining a 370 per cent return, nearly 17 times the value of the original debt. 13. The Government of Zambia reportedly recognized the judgment and allocated about 65 per cent of the amount received, already earmarked for health programmes, to service the debt (ibid., para. 25).15 As a result of this litigation, vulture funds took away from the country almost 15 per cent of its total social welfare expenditure, funds that could have been channelled instead towards education, health care and poverty alleviation. 16 14 15 16 6 Schumacher, “Sovereign defaults in court”, p. 36. See also Kupelian , “Vulture funds”, p. 9 and T. Laryea, “Donegal v. Zambia and the persistent debt problems of low-income countries”, Law and Contemporary Problems, vol. 73, No. 4 (Fall 2010). Li Yuefen, presentation to the Advisory Committee; L. Polgreen, “Unlikely ally against Congo Republic graft”, New York Times, 10 December 2007.