A False Dawn or a New Era? A Critical Analysis of the Possible Importance and Effectiveness of the African Development Bank (AfDB) African Legal Support Facility (ALSF)

Abstract

On June 2009, the African Development Bank (AfDB) launched a new facility called the African Legal Support Facility (ALSF). The introduction of this facility was a sharp response to vulture funds, which had become nightmares to many African governments. This came to the fore when in 2007 Donegal sued Zambia to pay it US $55 million for a debt Zambia owed Romania, which Donegal had bought for US $3.4 million. The amount claimed by Donegal was 17 times the amount it had purchased the debt from Romania and it obtained judgment in the tune of US $15.5 million. The debt was finally settled for US $15 million. It should be noted that since 1999, about 19 claims have been brought by vulture funds against developing countries. The objectives of this article are four folds. First, it will discuss the nature of vulture funds either when they operate as private equities or as hedge funds. This will provide background knowledge on what they are. Second, the paper will examine the Facility i.e. its creation, composition and raison d’etre. Third, and most importantly, the paper will critically examine four inter-linked issues to determine the suitability and utility of this Facility, especially in the present circumstance in which the African Development Bank operates. In discussing these problems, references to the strengths and weaknesses of the implementation of past programs or facilities of AfDB will be made. This will be to determine whether this Facility is either just one of those projects whose advent elicited so much hype, but failed to stand the test of time especially during implementation or whether, it will hold muster against all the potential odds and provide a much wanted relief to African governments taken hostage by vulture funds.