A/HRC/33/54 court decision, they make sure that “creditor-friendly” jurisdictions are involved in the resolution of the dispute.6 The courts of debtor countries are increasingly becoming an available option as weaker legal systems are easily overwhelmed by the level of technical detail involved in this kind of litigation.7 Cases brought by vulture funds are particularly protracted: the average estimated time for recovery is six years, which would suggest annualized returns averaging from 50 to 333 per cent.8 Such long judicial proceedings are always burdensome and can complicate debtor States’ financial and reserve management; (e) “Chase” the country to enforce the judgment. Once vulture funds have obtained a favourable judgment, they seek its enforcement before different courts (i.e., through “forum shopping” practices) until they secure the enforcement action they desire. Figures show that attachment of the country’s assets abroad has become a particularly common enforcement strategy in past years.9 Despite many unsuccessful attempts, such actions have often helped vulture funds to achieve a favourable out-of-court settlement. However, vulture funds continue to deploy a legal strategy before courts that seek to enforce favourable rulings by challenging the doctrine of sovereign immunity, which has traditionally protected certain State properties and assets from seizure;10 (f) Obtain exorbitant profits. Vulture funds have achieved, on average, recovery rates of some 3 to 20 times their investment, equivalent to returns of 300 to 2,000 per cent. The International Monetary Fund (IMF) estimates that in some cases the claims by vulture funds constitute as much as 12 to 13 per cent of a country’s gross domestic product (GDP);11 (g) Operate in jurisdictions where bank secrecy rules apply.12 Most vulture funds are incorporated in tax havens, where there is no obligation to disclose information on benefits or ownership and it is feasible to hide gains to avoid or evade taxation. 13 Such jurisdictions facilitate the secretive manner in which vulture funds operate as well as the flight of much-needed capital, particularly from developing countries (see A/HRC/14/21, paras. 13-14). 6 7 8 9 10 11 12 13 London and New York are the primary locations for external sovereign borrowing and related legal disputes. Studies provide evidence that over 70 per cent of international bonds were issued under New York State law, while most of the reminder were issued under English law. J. Schumacher, C. Trebesch and H. Enderlein, “Sovereign defaults in court: the rise of creditor litigation”, 6 May 2014, p. 1. “Vulture funds and poor country debt: recent developments and policy responses”, Jubilee USA Network, Briefing Note No. 4, April 2008, p. 3. African Development Bank Group, “Vulture funds in the sovereign debt context”. Li Yuefen, Special Adviser, South Centre, presentation to the Advisory Committee on 25 February 2015. A ruling of the High Court of the United Kingdom of Great Britain and Northern Ireland in 2005, for example, allowed the firm Kensington International Ltd. to intercept the proceeds of oil sales of the Congo to recoup a $39 million debt. The profits realized by the Congo from the sale of oil can be seized until a claim of $90 million is repaid. Schumacher, “Sovereign defaults in court”, pp. 7-8 and 12. African Development Bank Group, “Vulture funds in the sovereign debt context”. For example, Donegal International Ltd. is based in the British Virgin Islands, Kensington International Ltd. in the Cayman Islands and FG Hemisphere in Delaware, United States of America. Some of the features of these jurisdictions are: opacity (bank secrecy or other mechanism such as trusts); low taxation or exemption from taxation for non-residents; regulations favourable to the establishment of front companies without real activity on the territory; lack of cooperation with other countries’ inland revenue, customs and/or judicial authorities; and weak or non-existent financial regulation. See R. Vivien, “FG Hemisphere vulture fund’s latest victory against the Democratic Republic of Congo. What is Belgium doing?”, Committee for the Abolition of Illegitimate Debt, 2 January 2011. Available from www.cadtm.org. 5