African Legal Support Facility (Legal Capacities) Order 2014

Lord Collins of Highbury Excerpts

Tuesday 17th June 2014 Grand Committee

[Baroness Northover (LD)]

My Lords, this draft order covers the ratification of the international treaty agreement establishing the African Legal Support Facility. The order was laid before the House on 6 May.

Since its inauguration in 2009, the ALSF has grown its membership to 57 members, consisting of 46 African countries, five non-African countries and six international organisations. Its primary objective is to support African countries to make the most from their natural resources. It helps countries to combat vulture funds and strengthens legal expertise within Africa.

First, on extractives, Africa as a continent has been unable to capitalise fully on the development and growth opportunities offered by its significant natural resources. In many cases the exploitation of oil, gas and mining resources has helped to enrich the powerful and well connected, but failed to bring about widely shared poverty reduction. Many countries do not have the laws and rules required to create modern extractive industries that share the benefits from resource extraction through fair taxation and job opportunities for local people. Even where sound legislation exists, the capacity to implement it is often woefully inadequate. To make matters worse, poor people and communities often bear the brunt of the negative impacts of resource extraction such as environmental degradation, displacement and, in some cases, conflict.

Bad contracts are often the reason why extractive industries do not work for the poor. Governments in developing countries do not have the legal capacity to match the expertise that investors are able to mobilise through international law firms. This expertise is very expensive and therefore beyond the reach of Governments who do not even have the funds to pay their civil servants or deliver the most basic social services to their people. As a result, they lose out through bad deals.

Over 60% of ALSF’s active and completed projects are therefore assisting countries to negotiate complex commercial contracts, especially in the natural resource and extractive industries, that strike a better balance between host Governments and investors. It is important to emphasise that responsible investors are strongly supportive of the assistance that the ALSF provides because more balanced contracts are less likely to be renegotiated by future Governments.

A secondary objective of the ALSF is to support African countries facing legal proceedings by vulture funds. African Ministers have called on the international community to assist countries facing this challenge, particularly those that have benefited from relief under the Heavily Indebted Poor Countries Initiative. Vulture funds have been and remain a major problem for developing countries. They buy up commercial debt at a discount and then sue for the full amount plus interest. When vulture funds pursue settlement of these debts, they often use aggressive tactics such as seeking court orders to seize physical or financial assets belonging to the sovereign debtor. Vulture funds siphon resources that UK taxpayers and other international donors have pledged through debt relief and aid to African Governments for poverty reduction, and often base themselves in countries that require limited transparency, so it is difficult to restrict their practices. Although they are an important objective for the ALSF, there has been less demand for this service than on extractives. Combating vulture funds represents 22% of the ALSF’s completed and active projects.

Thirdly, the ALSF also provides technical assistance to regional members, to help strengthen their own legal expertise on extractives and vulture funds. Providing training for African lawyers means that they can take the lead for future debt and contractual negotiations.

Ratifying membership of the ALSF helps meet the UK’s commitment made as part of last year’s G8 presidency to support African leaders on making the most of their natural resources for inclusive growth. Membership of the ALSF is also part of DfID’s growing efforts to harness oil, gas and mineral wealth for economic development and poverty reduction. The Secretary of State for International Development has asked the department to scale up work on extractives with a focus on: raising global standards of extractives’ transparency and accountability, for instance through the Extractive Industries Transparency Initiative, which the UK helped to launch in 2005; increasing capacity of resource-rich countries to manage their resources better, especially through the department’s bilateral programmes in Africa and Asia; and building partnerships with the private sector to promote transparency, build skills and maximise the impact of their investments on poverty.

I therefore commend the order to the Committee.

[Lord Collins of Highbury (Lab)]

My Lords, I very much welcome the comments of the Minister in introducing this instrument. However, it is a bit unfortunate that it has taken nearly five years from 2009, when the UK signed the agreement for the establishment of the ALSF, to our taking this step today towards fulfilling our obligations under Article 3 of the agreement to grant the facility full juridical personality in the UK. Can the Minister explain that significant delay? I would also appreciate it if she could update the Committee on the status of the other signatories to the agreement fulfilling their obligations under Article 3, particularly the four other non-regional signatories—France, the Netherlands, Belgium and Brazil. I also wonder whether she could highlight whether the delay in obtaining the juridical personality has hampered the operation of the facility since its establishment.

As the Minister highlighted, one of the key tasks of the facility has been and remains to empower African nations in tackling vulture funds. Has she assessed how effective it has been in that role? She mentioned 22% of work in that respect. Given that the UK has introduced legislation domestically to rein in such funds, what steps have been taken to ensure that our experience and expertise gained is shared through the facility and other means? Has the department considered providing financial or material support to the facility to fulfil that role?

My final point is very much to welcome the decision to award £7 million to the facility over the next three years to provide legal support for the negotiations that the Minister highlighted about extractives contracts. Given the number of such contracts being negotiated in Africa over the coming years, does she believe that the planned split of the funding, with just 15% going towards the building up of domestic legal capacity, is adequate to build self-sufficiency in the sector?

[Baroness Northover]

My Lords, I thank the noble Lord, Lord Collins, for his interest in this facility and also for providing me with his questions prior to this debate, which was extremely helpful.

This organisation clearly has significant potential impact. We are well aware that the rich mineral resources across Africa offer the potential for accelerated progress in poverty reduction. On the other hand, as the noble Lord indicated, there is a risk associated with that as well, and we have to make sure that the advantages of that richness in mineral resources benefit the people in these countries right across their societies. That is why we are taking forward our support for this organisation, which was initially begun under the previous Government and I pay tribute to them for that.

The noble Lord asked why it has taken five years to get this far, given that the United Kingdom signed the agreement in 2009. I reassure him that the slow ratification process has no direct impact on the operations of the African Legal Support Facility and the United Kingdom’s engagement with it. Ratification of an international treaty can take a very long time, as many official entities in the United Kingdom and elsewhere need to be involved, and a number of processes took longer than expected. In order to ensure inclusion and transparency, this necessarily included, for example, lengthy consultation with the overseas territories and Crown dependencies through the Ministry of Justice regarding their inclusion in the ratification of the agreement. Nine overseas territories and three Crown dependencies will, I am pleased to say, be included.

The noble Lord asked for an update on the status of other signatories in fulfilling their obligations under Article 3. I am very happy to provide those details for the noble Lord in writing.

He also asked about reviewing the effectiveness of operations and how that is looking at the moment. The ALSF governing council regularly reviews the effectiveness of its operations. While there were concerns about its value in initial years, new leadership has transformed its effectiveness. UK government officials maintain good links with the ALSF to exchange lessons, and DfID support forms part of a package of assistance from a wide range of donors. The ALSF agrees priorities for the use of these funds on an annual basis.

The United Kingdom is represented on the ALSF’s governing council, which obviously helps us to be well aware of exactly how it is moving forward and how we can best make sure that it benefits the communities that we are talking about here. Other organisations are also involved, including the World Bank, the Natural Resource Governance Institute and international senior lawyers. They have all helped in providing capacity building, and no doubt that is also helping the organisation to move forward.

Having paid tribute to the previous Government for initiating this process, I hope that the noble Lord and other noble Lords are reassured on those points.