17 February 2007
Ndola — GOVERNMENT has said the exact extent of the liability in the US$42 million vulture case has not yet been determined as another hearing of the case is scheduled for March 9, 2007.
Chief Government spokesperson, Vernon Mwaanga, said in a statement in Lusaka yesterday that the March hearing would determine the liability as well as legal costs to be addressed.
The indication by the British court was that the sum would be closer to $14 million and not the $55 million Donegal claimed, representing a substantial service of just over $40 million.
The Government in 2003 entered into a settlement agreement with Donegal and it subsequently came to light that the assignment was tainted by corruption. The legal issue to be determined by the English courts is whether the settlement was duly signed on behalf of Zambia and Zambia's liability under it.
The case was heard in the England courts because the purported settlement agreement stated that in the event of a dispute, the parties should submit to the English jurisdiction.
Mr Mwaanga, who is also Information and Broadcasting Services minister, said Donegal were seeking to enforce a claim for $55 million despite having bought the debt from Romania eight years ago for only $3.2 million.
"It emerged from the judgment that Donegal bought the debt from behind the back of Government.
"It must be noted that Stella Chibanda, the then director of external resources mobilisation at the ministry of Finance, had rejected a recommendation to implement a debt-buy-back," Mr Mwaanga said.
In the view of the judge, the minister said, Ms Chibanda's action was not justified.
Mr Mwaanga said the judge went further and described Donegal's action in obtaining confidential information about the debt from Zambian Government officials as unlawful and immoral.
The minister said the judge found Donegal International witnesses, who included Fisho Mwale, to be dishonest and unreliable, having been evasive and misleading and having deliberately given false evidence.
The judge, however, found out that the witnesses called by Government were seeking honestly to give truthful evidence and to assist the court.
"The exact extent of the liability has not yet been determined. A hearing is still to take place on March 9, 2007, at which time the liability will be established and issue of legal costs will be addressed," Mr Mwaanga said.
The case in question was the first one before the English courts in which a sovereign debtor had successfully challenged the vulture fund's claim prior to judgment.
"Furthermore, the judge's findings of fact have vindicated the then Attorney-General, George Kunda's decision to suspend payments under the settlement agreement, following concerns that had been expressed by the Task Force on Corruption," he said.
Government thanked donors for their financial support to the Task Force on Corruption, which has been responsible for contracting the United Kingdom (lawyers who have acted commendably on the difficult matter.
Government strongly felt that the concept of vulture fund was totally unacceptable and had been used for some time now to exploit poor countries.
The claim against the Zambian government arose from a debt incurred from the Romanian Government in 1979, for supply of tractors, agricultural machines, vehicles, spare parts and training of personnel.
In Parliament, Finance Minister, Ng'andu Magande, stated that Zambia had not lost the vulture fund case as there were other administrative issues to be considered.
He was responding to a supplementary question by Livingstone MP Sakwiba Sikota (ULP), who wondered if the matter would not affect the strength of the Kwacha.
The MP also wanted to know what measures Government would undertake to ensure that the vulture fund did not distort the Zambian economy.
He explained that the vulture funds business was all over the world and because of the debt forgiveness by the international community, such ventures were flourishing.
"The case in question happened way back in the 90s and I can assure this House that the matter will not affect the economy.
"It is a pity that Government cannot state exactly what it owes to people because of pending cases such as the one in question," the minister said.
The English court ruling has angered anti-debt campaigners, who say it would undermine Zambia's plans for poverty reduction.
The judge ruled against Zambia's application to dismiss Donegal's claim, but at the same time proposed to end a freeze of Zambian assets secured by the fund.
Donegal, however, will have a chance to argue the case for a continued freeze of Zambian assets.
According to BBC economics reporter, Andrew Walker, people familiar with the case believe that the judge will order Zambia to pay Donegal between $10 million and $20 million, less than half what Donegal sought.
Lawyers for Zambia, however, said the judgement was a victory for Zambia.
Janet Legrand, of DLA Piper, called the ruling "fantastic news for both the government of Zambia and its people."
Oxfam consultant, Martin Kalunga-Banda, said $42 million was equal to all the debt relief Zambia received last year.
He told the BBC that this would take a serious toll on education in Zambia.
"It also means the treatment, the Medicare, the medicines that would have been available to more than 100,000 people in the country will not be available," he added.
While the repayment might be legal, it arose from debts accrued when the country was under "an undemocratic system."
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