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
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