Maravi

VJ condemns ‘vulture funds’

VJ condemns ‘vulture funds’
By Noel Sichalwe
Saturday February 17, 2007 [02:00]

CHIEF government spoke-sperson Vernon Mwaanga has said the concept of 'vulture fund' is unacceptable as it is used to exploit poor countries. Mwaanga was commenting on the London High Court case that determined the disputed Zambia's debt settlement agreement with Donegal International involving US$55 million. He said the situation called for the international community to outlaw the practice in the interest of financial equity and justice.

Mwaanga said this was the first 'vulture fund' case before the English courts in which a sovereign debtor has successfully challenged the ‘vulture funds’ claim prior to judgment. "Furthermore, the judge's findings of facts have vindicated the then Attorney General George Kunda's decision to suspend payments under the settlement agreement following concerns that had been expressed by the Task Force on Corruption," Mwaanga said. He thanked cooperating partners that have financed the corruption fight and witnesses that gave evidence in the matter. "The judge has significantly reduced the liability of the Zambian government by finding the clauses in the agreement were 'penal', that is, that they were unfair and unjustly penalising Zambia," he said. "The exact extent of liability has not yet been determined. A hearing is still to take place on March 9, 2007 at which time the liability will be established and the issue of legal costs will also be addressed. The indication that has been given by the court is that the sum will be closer to US$14 million, the original settlement, than the US$55 million being claimed by Donegal, which would represent a substantial service of just over US$40 million."

Donegal was seeking to enforce a claim against Zambia for US$55 million despite having bought it from Romania eight years ago for US$3.2 million. Donegal is alleged to have bought the debt behind the back of government representatives. Among the people that were mentioned in the judgment was then director of external resources mobilisation at the Ministry of Finance, Stella Chibanda, who rejected government recommendation to implement the debt buy back.

Judge Andrew Smith also described Donegal's action in obtaining confidential information about the debt from the Zambian government officials as unlawful and immoral. He said Donegal International witnesses that included their local representative Fisho Mwale were dishonest and unreliable having been evasive and misleading. On April 17, 1979 Romania and Zambia signed a loan agreement in respect of acquisitions of agricultural machinery. By an assignment dated January 19, 1999, Donegal acquired the rights of Romania to the debt pursuant to an assignment agreement between Romania and the Zambian government. The Zambian government then acknowledged the assignment to Donegal and the registration of Donegal as current holder of the debt on February 12, 1999. Donegal International Limited was claiming an initial amount of about US$42 million debt that later accumulated to over US$55 million from the Republic of Zambia with interest. This claim was made on April 1, 2003 and was signed by Michael Sheehan on behalf of Donegal while then finance minister Emmanuel Kasonde signed on behalf of the Zambian government. The court proceedings arose strong emotions since Zambia, being a poor country, saw itself as being vulnerable to vulture funds.

Judge Smith said the claim of more than US$55 million was an improper attempt by Donegal to exploit Zambia's vulnerability. Donegal has since responded that their purpose was to make profit and that it was legitimate to pursue the claim of more than US$55 million through the court proceedings against the Zambian government. However, the Zambian government and Donegal sought to reach an amicable settlement in relation to the debt on the terms set out in accordance with the agreement.

Labels: VERNON MWAANGA, VULTURE FUND

posted by MrK @ 3:09 PM