AFRICAN LEGAL SUPPORT FACILITY

1. AFRICAN LEGAL SUPPORT FACILITY Godfred Penn Chief Counsel Office of the General Counsel World Bank, Washington DC, 9 July 2009

2. 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

3. 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

4. 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

5. 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.

6. 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.

7. 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

8. 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;

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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.

15. 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

16. AFRICAN LEGAL SUPPORT FACILITY Godfred Penn Chief Counsel, GECL African Development Bank Thank you for your attention