16th January 2023
Cuba’s Central Bank (BCC) has confirmed that legal proceedings will shortly begin in London before the commercial division of the High Court in a case relating to a debt recovery claim for €72mn (US$78mn) made against the Banco Nacional de Cuba (BNC) and the Republic of Cuba.
In a statement issued on 13 January, the BCC described the claimant, CRF I Limited, as a “vulture fund” seeking to benefit from unpaid government debt that it had accumulated. CRF I Limited, the BCC said, is incorporated as a Cayman offshore company,
The BCC observed that typically “vulture funds” buy in the secondary market, at auction prices, “debts issued by countries, to demand immediate payment of 100% under threat of legal action.” It went on to note that the judicial procedure will determine whether CRF I is a creditor of the BNC and Cuba, or as Cuba argues, the “CRF is not a creditor of the BNC or of Cuba and has never been.”
The BCC observed in its note that the object of the procedure relates to public debt because “it was contracted by the BNC before 1997 when it had functions as the Central Bank.” Since then, the BCC noted, “the BNC has had no authority to act on behalf of the Cuban government, neither to approve the assignment of public debt without the prior authorisation of the Ministry of Finance and Prices and the Council of Ministers, since the BNC cannot for any case authorise the assignment of guarantees granted by the State” in the form of sovereign guarantees.
The BCC further stated that “the BNC and Cuba have never ignored their debts, had always maintained their interest in negotiating with their legitimate creditors”, and “that both the BNC and Cuba are involved in the legal proceedings and will defend their rights.” It also indicated in its statement that the superintendence of the BCC “as a body of a technical nature, with autonomy for the exercise of its functions assigned by Law, related to the inspection, surveillance and control over the institutions that carry out financial and banking activities in the country” will provide more information in a timely manner as to the results of this process.
Reuters reported that CRF I Ltd, which it described as an investor in defaulted Cuban sovereign debt since 2009, filed the case in Britain’s High Court after Havana refused a debt relief offer made by CRF I and other bond holders in 2018.
The outcome of the case, which is being heard before Judge Justice Andrew Henshaw KC, has wider implications for both Cuba itself, CRF I and other similar funds that hold also large sums in Cuban debt. (Additional Background Cuba Briefing 12 September 2022).
In recent years Argentina and other Latin American nations have been engaged in similar lengthy legal battles with funds which have specialised in accumulating distressed securities.
Photo by JF Martin
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