JERSEY VULTURES

Who do we really remember on Remembrance Day each year – and why?

It’s all very well recognising those people who have fallen in past wars but they must have died for some purpose. We surely have a duty to remember them through our own actions - all the year round - not just for a few days in November?

This year, alongside the poppy “celebrations” it was announced that the Jersey Royal Court had found in favour of a USA based “distressed debt fund” (a so called, “vulture fund”) against the Democratic Republic of Congo (or DRC, formerly Zaire), for a mammoth $100 millions claim.

The picture attached to this posting is of a Congolese child who could well use even the smallest part of that money. It is an image we associate with so much of Africa - of the desperately poor people who live there and of their corrupt governments.

We have a responsibility for so much that happens in far away places but the practical basis of our International Finance sector is usually hidden from view or scrutiny. This extraordinary decision in favour of the US debt fund has briefly lifted the security curtain, once again, on the more dubious side of our economy. We should ask if we wear poppies and celebrate our gallant fallen in ignorance of such scandals or whether we just don’t care?

Did our “heroes” really die in order that we might exploit others and their misfortunes – all over the world?

In recent years, over 50 similar judgements have been made in various courts around the world, so Jersey’s involvement is by no means unique. The UK Government has passed temporary rules so that such debts cannot be pursued in courts there (UK Debt Relief – Developing Countries- Act) and it is becoming ever more difficult for the vulture fund managers to find any sympathetic jurisdictions prepared to hear them.

That Jersey still allows such a use of the

Royal Court

has attracted a great deal of international attention and criticism already and more is likely to follow. But it is just business so far as Jersey’s Finance leaders are concerned, and they seem to have no critical conscience in such matters. Shall any Jersey Ministers be offering a comment?
Why should this activity take place under a “Royal” banner?

Of course, it is impossible to extract the good guys from the bad ones where such huge sums of money are concerned. This case falls within the category of “dispute resolution” or “mediation” and is seen as a potentially lucrative branch of the international lawyers’ portfolio of services. It is the sort of business that Jersey seeks in the name of “diversification.”

Gillian Robertson is quoted on a  web-site of Jersey law firm “Applebys” referring to previous Jersey proceedings in this case in 2005, when the DRC government was resisting enforcement, following a Brussels court judgment. Her comments then referred to “Jersey’s legal system as a global best for a small jurisdiction.”

In Jersey, the law firm of Ogiers has acted for the New York based vulture fund “FG Hemisphere Associates LLC” for some years and has presumably submitted a substantial fee-note or two, for its efforts.

The case has been trawling around the world for decades in various forms – so others must have taken substantial sums in fees and charges too.

Originally, this debt arose in 1980 when Yugoslav company “Energoinvest” contracted to build a huge hydro-electric dam and electricity distribution system, but the Congolese government defaulted on re-payments.

In 2004 the matter went to arbitration in Switzerland and the debt of $24millions plus interest was assigned (sold) to the New York fund as a speculative venture.

In 2008, the fund tried to achieve settlement through the South African courts but failed, even though the court had halted the sale of electricity from Congo to South Africa in an attempt to secure payment to the US vulture.

By the time the case reached Hong Kong, the debt had grown to over $100 millions and the “signing bonus” from a deal between the DRC’s $66 billions minerals industry with China was the attraction. The China Railway Group – a Chinese State owned business – had agreed to invest in the DRC but the Hong Kong court was reluctant to rule and its law was unclear. The DRC government claimed “sovereign immunity” but the fund received a favourable judgment against the Chinese company which could not be enforced - so the case next appeared in Jersey.

The aim of the vulture fund is to make a claim on assets or funds arising from businesses with DRC government connections. In Jersey it was a deal connected with the largest unexploited gold-field in Africa that was identified as the potential source of a financial settlement. But the

Royal Court

initially declined to interfere in case it ruined that deal.

Then in June this year, the

Jersey Court

ordered that assets of $57 millions should be frozen whilst the vulture pursued the case in the USA, because a subsidiary of OM Group Inc. – the largest producer of cobalt in the world and one of the parties involved - is based in Ohio.

At this point in the proceedings, the case had appeared on the public list of cases being heard in the Jersey court system but enquiries over many weeks at the Judicial Greffe revealed nothing. Nobody would offer any assistance or information regarding this case. Now that the matter has reached a judgement, the Greffe has helpfully released a 46 page photo-copy, which is both very interesting, and complex.

The English Judge for the 27 October hearing was (Commissioner) Howard Page Q.C. assisted by Jurats Tibbo (a former Bank manager and member of the Jersey Financial Services Commission and Bob Kerley (the former Jersey Registrar of births etc).

Page is an experienced UK commercial lawyer and judge who sits in the Jersey court quite regularly but does not live in the Island. However, he is a great fan of the Jersey system of law and its administration. He recently wrote in glowing terms supporting the contentious Jersey Crown Officers, as part of the inquiry set up to examine their roles

(chaired by another UK Judge – Lord Carswell).

The recent judgment found for the New York vulture fund and allows the  $100 millions plus debt to be collected through “Gecamines,” a Jersey registered entity that is “an organ of the State of the DRC” which must “send all its future payments” to the New York based fund. It is this decision that has shocked the decent-minded world.

Now, an appeal has been lodged and all payments, up to the value of the debt, are to be deposited with the Jersey court, pending the outcome of the appeal, but details are sparse.

In fact, this $100 millions dispute is only a tiny part of Congolese debt problems. The DRC agreed a deal to “wipe out” $8 billions of international debts in July which have been accumulated since it achieved independent, self governing status from Belgium, fifty years ago. The true extent of the debts and the related corruption can only be guessed at but it has been suggested that former President Mobuto alone stole between $4 and $10 billions before he was deposed in 1997 and fled to Morocco.

Are his billions salted away in Jersey? Does anybody give a damn if they are?

The Belgian colonial government left a legacy of debt when it departed from the Congo. The USA and many other countries, under the cover of the World Bank, IMF and suchlike, have pumped in further huge sums over the years. Not only is the country awash with potential minerals, gold, diamond, timber and oil resources but “western” governments devoted billions in propping-up Mobuto and other  friendly despots in an attempt to keep the territory non-communist or “on-side.”

Inevitably, there have been several wars too, both within the territory and with bordering ones so that the 58 million population has endured a legacy of poverty, cruelty and exploitation. The Congolese will hardly notice the latest indignity dreamed up in Jersey – but we should protest, on their behalf.

In February this year, Floribert Chebaya, the leading Human Rights campaigner in the DRC and prominent member of the “Voice for the Voiceless” group was murdered in Kinshasa. The involvement of the government or very senior officials and police is not disputed and eight policemen have been charged with his murder. Five have now been put on trial and three are still at large, but the outcome will hardly change anything for the better.

Sadly, the Democratic Republic of the Congo is not at all unusual in a corrupt commercial world. The neighbouring Republic of Congo has similar problems with debt fraud and huge sums of money vanishing into the usual complex of obscure companies or “special purpose vehicles” in the Channel Islands, the Caymans, BVI, and Anguilla, Bahamas etc.

Campaigning groups such as “Global Witness” research and publish information on the INTERNET regarding the similar debt problems of countries  including Ethiopia, Guyana, Nicaragua, Sierra Leone, Uganda, Zambia, Cameroons, Angola, Burkina Faso, Equatorial Guinea, Gabon etc

The Global Witness evidence to the UK Treasury Select Committee on Offshore Financial Centres (2008 – reported in Feb 2009 on the UK Gov website) is especially worth studying.

Bloomberg.com has posted some interested internet articles on this Jersey case, in spite of difficulties in obtaining information from Jersey’s secretive administration.

The Channel Islands governments rubber-stamped the “Democratic Republic of Congo (UN) Sanctions (CI) Order 2005” which makes it an offence to release certain funds or financial assets - but whether it is, or is supposed to apply in such a case as this, is not obvious.

The New York “vulture fund” FG Hemisphere, was represented at this October hearing by Jersey lawyer Kerry Lawrence of Ogiers – the Jersey-based, international law firm with “locations” in Bahrain, the BVI, the Caymans, Hong Kong, Ireland, London and Tokyo besides Guernsey and Jersey.

Kerry Lawrence is described in glowing PR terms as “a superb litigator who focuses on trusts and commercial litigation” and is “incredibly bright”…giving….”very clear explanations of complex legal issues.” She is head of commercial litigation in the Jersey office and specialises in insolvency and tracing assets according to the Legal 500 and other web-sites’ blurb which also boasts of Ogiers’ role in pursuing this $100 millions debt from the DRC.

The Congolese government was not represented at the October Jersey hearing but Jersey Lawyer Justin Harvey-Hills of Mourant-Ozannes appeared for “La Generale des Carrieres et des Mines” (“Gecamines”), the second Respondent, and Jersey lawyer Anthony Robinson of Bedell and Cristin for “the Party Cited” – namely “Groupement pour le Traitment du Terril de Lubumbashi Ltd. (otherwise “GTL”).”

These law firms too have extensive international networks and their lawyers are described in glowing terms on several web-sites.

All this legal activity is just good business for the law firms involved. Places like Jersey are no longer just simple tax havens. Today, finance centres span the entire world through complex networks and the little domestic law firms that used to advise on purely local, island matters, a few decades ago, are now multi-millions, international businesses.

Of course, nobody seems to represent the best interests of the desperately poor child depicted on the image for this blog. Questions on the role of finance centres like Jersey are being asked ever more around the world and governments are looking at ways to curtail their activities. But who in the Jersey finance “industry” will defend the ethical standards that apply in such cases as this or will argue how such activities benefit the world?