Page last updated at 19:36 GMT, Thursday, 26 November 2009

Liberia ordered to pay 'vulture funds' over 1978 debt

Liberian woman cooking
Liberians are recovering from years of civil war

A British court has ordered Liberia to pay two Caribbean-registered investment funds more than $20m (£12m) for a debt that dates back to 1978.

The sum awarded to the firms - described as "vulture funds" by critics - is equivalent to about 5% of the Liberian government's budget this year.

Liberia says it has no money to pay the debt back and has accused the firms of profiting from poverty.

The country is recovering from a 14-year civil war that ended in 2003.

The details of the case are still unclear, but it is thought Liberia borrowed $6.5m from the US-based Chemical Bank in 1978 and that debt may have been resold a number of times.

The two funds requested London's High Court to grant a summary judgement in the case - making Liberia liable for the debt without the need for a full hearing.

'Tooth and nail'

In 2002 a New York court ruled that Liberia owed $18m - the current case is an attempt to collect that sum plus interest.

At the time of the New York case Liberia was wracked by civil war and did not offer a defence.

Liberia map

Liberia's legal advisers think that if the funds do succeed in collecting the money, they will make a very large profit.

Ahead of Thursday's ruling, Liberian Finance Minister Augustine Kpehe Ngafuan told the BBC's Network Africa programme the country could not afford to repay the debt.

"Our lawyers are going to work tooth and nail to battle this," he said.

He added that he 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 the government to change the law so such cases cannot be heard in UK courts.

Nick Dearden, of Jubilee Debt Campaign, said: "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."

He called the High Court's ruling "disappointing but not surprising".

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

Hamsah was awarded more than $11m in a similar action against Nicaragua.

BBC economics correspondent Andrew Walker says vulture funds are controversial - especially when they target nations already receiving debt relief on what they owe to rich countries.

Sometimes that debt relief frees the resources to pay creditors who take legal action, our correspondent says.

The solicitor representing Hamsah has not yet responded to requests for comments on the case.

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