A/HRC/33/54 B. FG Hemisphere v. Democratic Republic of the Congo 14. In 1980, the Democratic Republic of the Congo entered into a credit agreement with Energoinvest, a company based in Sarajevo, for the construction of a high-voltage electric power transmission facility. The country soon defaulted on its repayment obligations. 15. In 2003, the International Chamber of Commerce made two arbitral awards in favour of the company and in 2004 a District Court in the United States of America confirmed the amounts to be paid: $18,430,000 and $11,725,000, plus 9 per cent interest and the costs of arbitration. At that point, the company decided to transfer the right to recover the claim to FG Hemisphere, a company based in the State of Delaware, a tax haven in the United States.17 The debt was reportedly purchased for $37 million.18 16. FG Hemisphere then pursued its claim on the debt by attempting to seize the country’s assets in different parts of the world. In 2005, a court ordered the Government to provide detailed information about the location of those assets worth more than $10,000.19 Following the failure to provide that information, a District Court in the United States imposed a fine of $5,000 per week, to increase periodically to a maximum of $80,000 per week, for failing to comply with the order (ibid., para. 19). 17. To enforce the 2003 rulings, FG Capital Management has managed to freeze hundreds of millions of dollars owed to the Democratic Republic of the Congo and obtained enforcement judgments from several courts all around the world. In November 2008, a South African court effectively halted sales of electricity from the country by ruling that FG Hemisphere could seize any payments for services sold by the Democratic Republic to South Africa. In February 2010, the Court of Appeal in Hong Kong froze about $100 million of a signing bonus for a $6 billion minerals-for-infrastructure agreement between the Democratic Republic and China until the International Chamber of Commerce awards were resolved.20 The agreement included the payment of $221 million in mining entry fees to the Government, which FG Hemisphere sought to receive towards payment of the arbitral award. The Government of the Democratic Republic claimed State immunity, but the Court of Appeal ruled that the Democratic Republic had no immunity in commercial proceedings.21 18. This is an unfortunate event for a country that needs money for development. The Democratic Republic of the Congo is rich in natural resources, but is recovering from more than four decades of dictatorship and war that have destroyed its infrastructure. In fact, it is difficult to see how a country with one of the lowest Human Development Index rankings (176) can service its external debt obligations without at the same time harming its poverty reduction and economic development prospects (ibid., para. 20). The negative impact of vulture funds on the State’s capacity to create the conditions necessary to fulfil its human rights obligations is therefore evident. 17 18 19 20 21 The sale was approved by the former Prime Minister of Bosnia and Herzegovina, who was investigated on corruption charges relating to his tenure at Energoinvest. “Vulture funds–the key players”, Guardian, 15 March 2011. M. Kavanagh, “Congo, U.S.-controlled venture lose $100 million vulture claim”, 3 November 2010. Available from Bloomberg.com. Sookum, Stop Vulture Fund Lawsuit, p. 45. Kavanagh, “Congo, U.S.-controlled venture lose $100 million vulture claim”. K. Crossley, “Case analysis: Democratic Republic of the Congo and Ors v. Hemisphere Associates LLC”, Asian Legal Business, 17 June 2011. 7