Liberia Sued in London Court for US$20M Debt

UNITED KINGDOM – Two Caribbean-registered funds have launched a legal case in London, the UK, against Liberia over a debt that dates back to 1978.

Hamsah Investment and Wall Capital Limited sued Liberia at a British High Court Wednesday for a summary judgment to enforce a 2002 New York judgment for over US$20 million against Liberia.

The US$20 million represents about 5% of Liberia’s total fiscal budget for the year. The Liberian Government, led by President Ellen Johnson Sirleaf, is grappling with the challenges of post-war reconstruction and development amidst difficulties inherited from the civil war, and the effects of the recent global financial and economic crisis.

The New York Court rendered a default judgment against Liberia in 2002, at a time when the West African nation was embroiled in civil crisis.

The Liberian Government has swiftly reacted to the lawsuit by requesting a full trial and describing the plaintiffs as “vultures” that are after money from poor countries such as Liberia.

The troubling legal battle could pose serious setback to the country’s debt relief program under the Highly Indebted Poor Countries Initiative (HIPC), which was agreed upon during the Paris Club arrangement. Liberia’s total debt overhang last year was in the tune of US$5 billion.

Under the Paris Club arrangement with its creditors, Liberia is not allowed to pay above US$0.33 per dollar – an arrangement, the Liberian Government says, Hamsah Investment and Wall Capital Limited have refused to honor. The companies are instead demanding the post-conflict African nation pay as high as dollar for dollar.

The Liberian Government is afraid that satisfying the claimants’ judgment would violate the terms of the Paris Club Agreement, which calls for comparable and equitable treatment of all creditors.

Addressing a news conference in Monrovia Thursday afternoon, Finance Minister, Augustine Kpehe Ngafuan disclosed that the Government of Liberia is represented in London on pro-bono legal basis by Byrne & Partners. He said the government does not know who is behind the companies bringing the claim.

Ngafuan expressed gratitude to Byrne & Partners for representing the country’s legal interest at the British High Court in London.

The Finance Minister reiterated his call for a full and fair trial, adding, “The British High Court is an internationally respected court, and we are very sure that Liberia will be given the full benefit of the legal process that it was denied in 2002.”

The loan was contracted in 1978 between the Republic of Liberia and Chemical Bank of New York.

According to the government, the loan was for an amount “not to exceed” US$15 million and was intended to finance the “acquisition and improvement of the assets of refinery in Monrovia by the Government or by the Liberia Petroleum Refining Company (LPRC).”

But the claimants, the government said, were awarded US$18.38 million – including principal, interest and legal costs after the New York ruling.

Repayment of the debt was due to commence in August of 1980 and was expected to be completed in August of 1985.

Ngafuan told reporters in Monrovia that “No records were available at the Ministry of Finance” to indicate whether any payment was made by Liberia to service the debt.

“This debt was not serviced until 2002 when a fund called Sifida and FH International purchased it in and obtained a court judgment in New York to enforce the terms of the loan,” he noted.

Further information released by the government indicates that Liberia’s debt was later sold to Red Barn and FH International in 2006.

The Minster explained that the Liberian Government met with all of its commercial creditors, including Red Barn and FH International, in 2007 and offered a debt buy-back deal to settle the country’s outstanding debt.

Ngafuan stated that the debt was again resold to current claimants Hamsah Investment and Wall Capital Limited.

Meanwhile, the Government of Liberia has vowed to fight against these firms, described by critics as “vulture funds.”

He pointed out that Liberia has no money to pay the debt back, accusing the firms of profiting from poverty.

Liberia is recovering from a 14-year civil war which ended in 2003.

In an interview with the BBC yesterday, Ngafuan stated, “We are asking everybody, we are asking even the court not to grant them summary judgment. Let them go through the normal procedure. Our lawyers are going to work tooth and nail to battle this.”

Liberia hoped that the international community would take action to make sure that “these people that survive on poverty do not thrive.”

UK activists are lobbying their country’s government to change the law so that such cases will cease to be heard in UK courts.

Nick Dearden of Jubilee Debt Campaign told the BBC, “This case is absolute proof that you can’t tackle vultures by voluntary means.

“Currently these companies don’t have to tell us anything about themselves because they’re registered in tax havens. They can just turn up in London and sue one of the poorest countries in the world.”

Very little is known about the funds, Hamsah Investments and Wall Capital.

Hamsah was a few years ago awarded more than US$11 million in a similar action against another developing country, Nicaragua.