Draft African Legal Support Facility (Legal Capacities) Order 2014
The Committee consisted of the following Members:
Bain, Mr William (Glasgow North East) (Lab)
† Bebb, Guto (Aberconwy) (Con)
† Burt, Alistair (North East Bedfordshire) (Con)
Campbell, Mr Gregory (East Londonderry) (DUP)
† Featherstone, Lynne (Parliamentary Under-Secretary of State for International Development)
† Field, Mark (Cities of London and Westminster) (Con)
† Glindon, Mrs Mary (North Tyneside) (Lab)
† Hilling, Julie (Bolton West) (Lab)
† Horwood, Martin (Cheltenham) (LD)
† Kane, Mike (Wythenshawe and Sale East) (Lab)
† Kelly, Chris (Dudley South) (Con)
† McGovern, Alison (Wirral South) (Lab)
† Paice, Sir James (South East Cambridgeshire) (Con)
† Rudd, Amber (Hastings and Rye) (Con)
† Smith, Julian (Skipton and Ripon) (Con)
† Spencer, Mr Mark (Sherwood) (Con)
Vaz, Valerie (Walsall South) (Lab)
† Williamson, Chris (Derby North) (Lab)
Georgina Holmes-Skelton, Committee Clerk
† attended the Committee
Sixth Delegated Legislation Committee
Tuesday 1 July 2014
[Nadine Dorries in the Chair]
Draft African Legal Support Facility (Legal Capacities) Order 2014
2.30 pm
The Chair: Hon. Members may remove their jackets if they wish.
The Parliamentary Under-Secretary of State for International Development (Lynne Featherstone): I beg to move,
That the Committee has considered the draft African Legal Support Facility (Legal Capacities) Order 2014.
Thank you, Ms Dorries, for chairing the Committee. The African Legal Support Facility is an international organisation established by international treaty. The treaty was laid before the House under the Constitutional Reform and Governance Act 2010. The treaty obliges the United Kingdom to confer legal personality on the facility under UK law, the primary consequence of which is to give the facility the capacity in UK law to enter into contracts, acquire and dispose of property and be party to judicial and other legal or administrative proceedings. The treaty can be ratified by the UK once the order has been made. The order was laid before the House on 6 May.
Membership of the organisation is open to all states and international institutions. Since its inauguration in 2009, the ALSF has grown in membership to 57, consisting of 46 African countries, five non-African countries and six international organisations. The UK’s nine overseas territories and three Crown dependencies were consulted on their inclusion in the ratification of the ALSF agreement. However, only one, the Isle of Man, has requested inclusion. The ALSF’s primary objective is to support African countries to make the most from their natural resources. It also supports countries to combat vulture funds and strengthens legal expertise within Africa.
On extractives, Africa has been unable fully to capitalise 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 it has 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 of resource extraction through fair tax 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 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 can mobilise through international law firms. Such expertise is expensive and therefore
beyond the reach of Governments who do not even have the funds to pay all their civil servants or to deliver the most basic social services to their people. As a result, they lose out through bad deals. Over 60% of the ALSF’s active and completed products therefore assist countries to negotiate complex commercial contracts, particularly in the natural resource and extractive industries, to strike a better balance between host Governments and investors. It is important to emphasise that responsible investors strongly support 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 from vulture funds. African Ministers have called on the international community to assist countries facing such challenges, 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 the settlement of such 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. They often base themselves in countries that require limited transparency, so it is difficult to restrict their practices. Although an important objective for the ALSF, there has been less demand for this service than that on extractives. Combating vulture funds represents about 20% of the ALSF’s completed and active projects.
As a third objective, the ALSF also provides technical assistance to ALSF regional members to help to strengthen their own legal expertise on extractives and vulture funds. By providing training for African lawyers, they can take the lead for future debt and contractual negotiations.
Ratifying membership of the ALSF meets the UK’s commitment made as part of last year’s G8 presidency to support African leaders in making the most of their natural resources for inclusive growth. Membership of the ALSF is also part of the Department for International Development’s growing efforts to harness oil, gas and mineral wealth for economic development and poverty reduction.
The Secretary of State for International Development has tasked the Department to scale up work on extractives with a focus on three areas: first, raising global standards of extractives transparency and accountability—for instance, through the extractive industry’s transparency initiative that the UK helped to launch in 2005; secondly, increasing the capacity of resource-rich countries to manage their resources better, especially through the Department’s bilateral programmes in Africa and Asia; and thirdly, 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.
2.36 pm
Alison McGovern (Wirral South) (Lab): It is a pleasure to serve under your chairmanship, Ms Dorries. As my colleague in the other place has already made clear, the
Opposition strongly support the order. In fact, it would be particularly grumpy of me not to, as its purpose is to fulfil the international obligations entered into by the previous Labour Government when we signed the agreement to establish the African Legal Support Facility in December 2009. As the Minister mentioned vulture funds specifically, the Committee will also recall the role of the previous Government in tackling such funds.The support facility is an extremely worthwhile venture. It is a real-life example of seeking a more level playing field for African states faced with the high-powered legal teams of extractive industries or vulture funds. The one-sided nature of many extractive contracts on the African continent remains one of the most significant blocks to sustainable and sustained development and poverty reduction. I hear that almost daily, as I am sure the Minister does, from African politicians and non-governmental and international organisations.
Far too often, such contracts do not provide the fiscal boost they should. They also fail to provide local job opportunities and vital environmental safeguards. The majority of the ALSF’s work is providing legal support to make better commercial contracts—an area where it has begun to make a real impact in the past five years. On extractives, vulture funds and building up legal expertise in Africa to enable self-sufficiency, the ALSF deserves our support and co-operation.
We welcome the order, but I should like to ask the Minster why it has taken so long to introduce it. The order brings into effect the UK’s obligations under article III of the establishing agreement to provide the ALSF with juridical personality in the UK, so allowing it to enter into contracts and be party to judicial or legal proceedings. Until that juridical personality is agreed, the establishing agreement cannot come into force in the UK.
We all know that if there is one thing that turns slower than parliamentary wheels, it is legal wheels. Even allowing for that, four and a half years to fulfil a fairly straightforward obligation appears at first glance excessive. Will the Minister explain the delay and assure the Committee that this valuable work has not been unduly affected? Further, will the Minister tell us whether the UK is alone in having taken so long to fulfil its article III obligations? In particular, have other non-African signatories—France, the Netherlands, Belgium and Brazil—granted juridical personality?
The Committee will note that paragraph 7 of the explanatory memorandum states that the UK intends to enter reservations in relation to articles XVI to XXV of the ALSF agreement. Will the Minister provide the Committee with a little more information on the Government’s reservations on those articles and about what discussions she has had with other signatories to the agreement in this regard?
Opposition Committee members strongly welcome DFID’s recent decision to award £7 million to the ALSF over the next three years for the negotiation of a number of extractive contracts. However, I am interested in the Minister’s view on how that award is split, given that just 15% of the award is intended to go towards building a domestic legal capacity in Africa, with the remaining 85% going to importing expertise. Does the Minister believe that sufficient UK funding is going towards a long-term goal of ensuring that mineral-rich African nations can be self-sufficient in legal expertise?
I note that the most recent award relates solely to extractive contracts. Although that is clearly valuable work and represents the plurality of ALSF’s case load, given the UK’s expertise in legislating against vulture funds, as I mentioned earlier, what steps is the Minister taking to ensure that our own expertise and capacity is shared appropriately through the ALSF?
I hope that the Minister can provide elucidation on these points. I reiterate my party’s support for the order, as it fulfils the Labour Government’s obligations to a valuable organisation.
2.41 pm
Lynne Featherstone: I very much welcome the Committee’s interest—and that of the hon. Member for Wirral South (Alison McGovern), my opposite number—in the African Legal Support Facility, especially on extractives and more broadly. Although it is a small organisation, it has the potential to have a significant impact. The rich mineral resources recently discovered across Africa offer the potential for accelerated progress in poverty reduction and for the continent to be a rising contributor to global growth. However, there is a risk that those resources, if used badly, might undermine Governments and fuel conflict and therefore exacerbate poverty. The ALSF can play an important role in bringing about the positive, rather than the negative, vision of the continent’s future.
I should like to respond specifically to a number of the hon. Lady’s questions. She asked why there is delay in ratification. I assure her that the slow ratification process has had no direct implications for the operation of the ALSF and UK engagement with it. Ratification of an international treaty can take a long time, as many official entities need to be involved, both in the UK and elsewhere. A number of processes took more time than expected. Ensuring inclusion and transparency necessitated lengthy consultation with the nine overseas territories and three Crown dependencies, through the Ministry of Justice, regarding their inclusion in the ratification of the ALSF agreement.
On the other signatories, I can confirm that 21 member states have completed domestic procedures to validate the agreement within their legal system. Of the five non-regional states that the hon. Lady mentioned, the Netherlands has deposited an instrument of ratification, France is in the process of completing ratification and Belgium and Brazil have not yet deposited a bill of ratification.
As the hon. Lady said, paragraph 7 of the explanatory memorandum mentions nine articles in respect of which the UK intends to express a reservation on ratification of the ALSF agreement. Those reservations relate to immunities and privileges for ALSF offices, assets and officials. The ALSF’s offices and assets are currently located outside the UK. UK policy is to grant immunities and privileges to international organisations on the basis of functional need. The ALSF has acknowledged those reservations, attaching them to the UK’s signed agreement, and they will be formally entered by the UK on ratification of the ALSF agreement.
The balance of funding between vulture funds and extractives is as follows: advisory services for extractives and infrastructure, 63%; debt-related projects, including vulture funds, 22%; and capacity building, 15%. The project pipeline is very fluid because not all demand
expressed by African Governments translates into real projects. It is therefore difficult to be specific about the distribution between themes, but the ALSF team expects extractives and infrastructure negotiations to continue to make up the bulk of the portfolio.The hon. Lady asked whether the split was appropriate in terms of capacity building. The allocation of 15% relates to specific capacity-building projects. However, skills transfer funding is also built into all the projects. Law firms that win bids to support the countries are required to work with national lawyers on all projects, to pass on their experience. That is an extremely valuable part of the ALSF’s capacity building in Africa, so that one day the countries can manage their own contracts. But from my experience locally with public-private partnerships, when the big companies come in they out fox even our local authorities. It is not just African Governments that have trouble with them, to be honest.
Striking the right balance between capacity building and negotiation support is something that the governing council, on which the UK sits, will keep under regular review. We very much agree that enabling African lawyers to lead on contract negotiations is essential in the long
term. However, extractive contracts are being negotiated all the time and access to world-class expertise can make a massive difference, as has been shown in several cases already. As a result of ALSF support for the negotiation of the uranium contract, the Government of Niger are expected to receive additional revenue of between €200 million and €300 million.Lastly, in terms of sharing the UK’s vulture fund experience, the ALSF is in discussion with all OECD members to highlight the importance of passing legislation similar to that which we have passed in the United Kingdom. The ALSF is also in the process of producing a handbook on how to stop vulture funds. UK lawyers are sharing their experiences to be included in the handbook. I therefore commend the order to the Committee.
The Chair: I think it worth mentioning, so that it can go on the record, that this Committee may be a first inasmuch as we have female Whips, Opposition lead, Minister, most of the officials, Chair, Clerk and Doorkeeper.