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Funds sue Liberia over 1978 debt Funds sue Liberia over 1978 debt
(40 minutes later)
Two investment funds registered in the Caribbean have launched a legal case against Liberia over a debt that dates back to the 1970s. Two Caribbean-registered investment funds have launched a legal case in London against Liberia over a debt that dates back to the 1970s.
The funds are suing Liberia at the High Court in London for more than $20m (£12m) - some 5% of the Liberian government's total budget this year. The firms, described as "vulture funds" by critics, are suing for more than $20m (£12m), some 5% of the Liberian government's total budget this year.
The case relates to a lending deal between Liberia and Chemical Bank of the United States in 1978.The case relates to a lending deal between Liberia and Chemical Bank of the United States in 1978.
One of the funds involved won a similar case against Nicaragua. Liberia is recovering from a 14-year civil war which ended in 2003.
The details of the Liberian case are still unclear, but it is thought that the country actually borrowed $6.5m under this facility. The details of the case, to be heard in the High Court in London, are still unclear, but it is thought that the country actually borrowed $6.5m under this facility.
It appears that at some stage Chemical Bank sold the debt and it may have been resold a number of times.It appears that at some stage Chemical Bank sold the debt and it may have been resold a number of times.
There was a judgement in a New York Court against Liberia in 2002 for $18m.There was a judgement in a New York Court against Liberia in 2002 for $18m.
The current case is an attempt to collect that sum plus interest.The current case is an attempt to collect that sum plus interest.
Vulture funds Controversial practice
At the time of that New York case, Liberia was wracked by civil war and did not offer a defence.At the time of that New York case, Liberia was wracked by civil war and did not offer a defence.
Very little is known about the funds - although one, Hamsah Investments, was involved in similar action against another low-income country, Nicaragua.Very little is known about the funds - although one, Hamsah Investments, was involved in similar action against another low-income country, Nicaragua.
Firms which buy up problem debts are often known as vulture funds, and when the debtor is the government of a poor country, it is a very controversial practice.Firms which buy up problem debts are often known as vulture funds, and when the debtor is the government of a poor country, it is a very controversial practice.
That is especially true when the country concerned has received debt relief on what it owed to rich countries and to international agencies such as the World Bank.That is especially true when the country concerned has received debt relief on what it owed to rich countries and to international agencies such as the World Bank.
Sometimes that debt relief is what frees the resources to pay creditors who take legal action.Sometimes that debt relief is what frees the resources to pay creditors who take legal action.
The solicitor representing Hamsah has not so far responded to requests for comments on the case.The solicitor representing Hamsah has not so far responded to requests for comments on the case.