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AFRICAN LEGAL SUPPORT FACILITY. Godfred Penn Chief Counsel Office of the General Counsel. World Bank, Washington DC, 9 July 2009. OUTLINE. 1. What is the African Legal Support Facility (ALSF)? 2. Why was it created? 3. Where will it be domiciled? 4. How will it work?

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African legal support facility

AFRICAN LEGAL SUPPORT FACILITY

Godfred Penn

Chief Counsel

Office of the General Counsel

World Bank, Washington DC, 9 July 2009


Outline

OUTLINE

1. What is the African Legal Support Facility (ALSF)?

2. Why was it created?

3. Where will it be domiciled?

4. How will it work?

5. What are its expected benefits?

6. What will ALSF not do?

7. ALSF Functional Structure

8. Next steps


1 what is the alsf

An International Organization created with sponsorship of AfDB

Purpose: Enhance access

of African countries to sound technical

legal advice in dealing with

lawsuits by Vulture Funds

& other claims that arise

or may arise from contracts

entered into with third parties

to finance development in extractive industries.

1. WHAT IS THE ALSF


1bis alsf current status

1bis. ALSF CURRENT STATUS

  • As of July 5 2009 35 countries have signed the treaty establishing the ALSF

  • 2 International Organizations (the AfDB, OHADA) have also signed

  • 11 countries have accepted, approved or ratified the treaty

  • The ALSF treaty entered into force on December 15 2008 in accordance with its Article XXIX


2 creation of alsf 1 4

2. CREATION OF ALSF #1/4

  • 60’s-70’s-80’s - African Gov’ts contracted Loans with Commercial Banks for diverse development purposes (e.g. mining, trade and infrastructure)

  • The bulk of these projects turned out to be white elephants because of the lack of legal expertise

  • Commercial banks sold their unpaid loans to individuals, companies and vulture funds

  • The reaction? Outrage from African Ministers of Finance 2003, the G8 members at Gleneagles (2005), African Round Table (Addis-Ababa 2008), and by ADB and Other Multilateral Donors.


2 creation of alsf 2 4

2. CREATION OF ALSF#2/4

1.1.vulture funds = outrageous

One example to illustrate:

Donegal vs. Zambia:

  • Donegal International bought Zambian debt owed to Romania in 1999:

  • Original Debt = 15 million USD

  • Amount of purchase by Donegal = 3.4 million USD

  • Donegal’s Claim = 55 million USD (17 times)

  • Court Judgment obtained = 15.4 million USD

  • Settlement = 15 million USD.


2 creation of alsf 3 4

2. CREATION OF ALSF#3/4

Vulture funds = merciless

Vulture funds:

  • Buy debt at large discount

  • Sue for the total amount & penalties on debt

  • Refuse to Participate in HIPC relief of Debtor Countries debt

  • After obtaining judgment or arbitral award, they attach the debtor’s assets in foreign countries (e.g. France, UK,USA)

  • Since 1999, at least 19 countries have been sued by vulture funds


2 creation of alsf 4 4

2. CREATION OF ALSF #4/4

Weak capacity in negotiation and drafting of contracts:

  • Views of African Ministers of Finance;

  • Cancellations: Liberia, DRC, Guinea

  • Renegotiations, DRC, Liberia etc;


3 alsf domicile and structure

Governing Council

(12 members)

Management Board

(5 members)

Director

3. ALSF DOMICILE AND STRUCTURE

  • ALSF will have 3 bodies

  • AfDB

  • House ALSF

  • Provision of initial allocation

  • of 10million UA

  • Other Donors

  • Other contributions


4 how will alsf operate

4. HOW WILL ALSF OPERATE?

  • Commercial Transactions (e.g. mining concessions)

    • Provide legal support in negotiation of contracts

    • Hire of highly qualified lawyers

    • Use precedents created to build knowledge and expertise for Government negotiators

  • Defense against Vulture Fund Litigation

  • Minimize the diversion of debt relief gains

  • Strengthen assistance to HIPCs and Fragile States

  • Provide funding assistance for hiring qualified law firms in the defense of debtor interests

  • Assistance on terms suitable for each indebted member nation


5 alsf expected benefits

5. ALSF EXPECTED BENEFITS

Legal expertise

to countries

involved in

Vulture Fund litigation

Enhancement of the

fiscal viability of

projects

especially in EIs

Legal advise to countries

wishing to negotiate

complex development

contracts

with 3rd parties

Training for a

core group

of negotiators

in debtor countries

Payment of

services

from Funds

endowed by ADB,

other donors and MNCs

Creation of a

knowledge database


5bis alsf expected benefits

5bis. ALSF EXPECTED BENEFITS

Grants to LICs for Vulture Fund litigation not to exceed 1 million EUR per beneficiary

50%-50% cost sharing for eligible countries with better than LIC economic performance

Reimbursable advances for MICs for Vulture Fund litigation and negotiation

Reimbursable advances not exceeding 5 million EUR per beneficiary for negotiating complex commercial contracts


6 alsf what alsf will not do

6. ALSF: What ALSF will not do

Not encourage non compliance with covenants in loan agreements

Not assist in the non-enforcement of legitimate claims

Not itself participate directly in negotiations or to resolve claims

Not deal directly with law firms on its own account


7 alsf a functional structure

7. ALSF: a functional structure

  • The organs have been set up since June 29 when ALSF held its Constitutive Assembly.

  • There is now a Governing Council of 12 members (9 currently appointed);

  • The Management Board of five is in place;

  • The Executive Director will be appointed by the Management Board shortly... ALSF is now functional.


8 next steps

8. NEXT STEPS

Operationalization of the administrative machine

Encouragement of countries… that have not yet signed the agreement to do so.

Lobbying for more funds from member countries and orgs.

Taking of

Office by

Executive

Director

  • Examination of Requests from Member Countries (pending requests from Djibouti, Guinea, DRC & Liberia)

  • Provision of demand-driven services to member countries


African legal support facility1

AFRICAN LEGAL SUPPORT FACILITY

Godfred Penn

Chief Counsel, GECL

African Development Bank

Thank you for your attention


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