MANHATTAN (CN) – A federal judge in New York claimed jurisdiction to decide whether the Congo still owes $10 million to two financial firms that its predecessor nation contracted with during political upheaval.
But U.S. District Judge Paul Engelmayer refused to force the Congo to pay before giving the nation a chance to contest the validity of a chain of financial agreements signed with Themis Capital, LLC and Des Moines Investments Ltd. during periods of authoritarian rule and bloody war.
On March 31, 1980, Citibank signed an agreement with the Republic of Zaire, the Congo’s predecessor, which made Themis and Des Moines assignees of all debts owed to the creditors.
The companies owed roughly $10 million as a result of that agreement.
“In the years following the execution of the 1980 Credit Agreement, Zaire was plagued with political and social instability,” Engelmayer summarized in the order. “In May 1997, following 32 years of rule by authoritarian leader Joseph-Désiré Mobutu, Mobutu was overthrown in a coup led by Laurent-Désiré Kabila, who subsequently named himself president and changed the name of the country from Zaire to the Democratic Republic of the Congo (‘DRC’). The Court assumes for the purpose of this motion, and defendants do not dispute, that defendants DRC and Central Bank of the DRC (‘Central Bank’) are successors in interest to the Republic of Zaire and the Bank of Zaire.”
In 2003, a document referring to the older agreement allegedly circulated between Citibank and Congolese officials, affirming that the debt was collectible.
The financial firms say that Leonard Luongwe Kabule, who was then the Congo’s interim Minister of Finance and Budget, and Jean-Claude Masangu Mulungo, the Central Bank’s Governor, signed the 2003 document.
But the original creditors did not, the court noted.
The Congo argued that it had sovereign immunity against U.S. lawsuits, and that the statute of limitations required for their debts to be forgiven.
Judge Engelmayer claimed jurisdiction anyway on Thursday, but ordered discovery to determine whether the 2003 signatures were valid.
If not, the claims will be considered time-barred, the judge said.
“Finally, the Court takes judicial notice of the fact that, as of 2003, the severe political turmoil plaguing the DRC and lack of a functioning government were widely known. As defendants describe the political and social instability of the time:
“‘The DRC gained its independence in 1960. In 1965, Colonel Joseph Mobutu seized power in a coup and declared himself president… In 1997, Mobutu was ousted by a coup lead by Laurent Desire Kabila… [who] was assassinated in January 2001 and his son, Joseph Kabila, was named head of state. A transitional government was set up in 2003, after a peace agreement was reached with rebel groups, the political opposition and the civil society.’
“This turmoil, too, arguably enhanced any duty plaintiffs had to inquire, for the political chaos may have created an outsized risk of officials (whether recently ousted from power, or otherwise), acting outside the scope of their authority of individuals claiming to act on behalf of the government,” the order states.
“For all these reasons, discovery into additional facts and circumstances relating to the 2003 Letter is necessary to enable the Court to determine, reliably, whether plaintiffs had a duty to inquire into Mr. Luongwe and Mr. Masangu’s authority.”
Engelmeyer indicated that he would place the burden on the Congo to prove the signatures invalid.
“To be clear, if the discovery process yields no additional information giving rise to inferences of authenticity or inauthenticity, the existing record would appear to support entry of summary judgment for plaintiffs on this point, i.e., that the signatures are what they are purported to be –authentic signatures of Mr. Luongwe and Mr. Masangu,” the order states. “However, in an abundance of caution, and in order to enable defendants to adduce evidence (if it exists) that the two signatures were fabricated, the Court will permit very limited discovery on the issue of the authenticity of the signatures in the 2003 letter.”
The parties must schedule a plan for discovery by Aug. 3.