A United Nations human rights expert today welcomed the United Kingdom’s decision to limit lawsuits from so-called vulture funds that prey on the debts of the world’s poorest nations, and asked that the initiative be extended to cover the country’s overseas territories and dependencies.
The United Kingdom on Monday adopted legislation to make permanent a temporary Debt Relief Act that limits lawsuits by funds which acquire defaulted sovereign debt at discounted prices and then seek repayment of the debt’s full value through litigation, seizure of assets or political pressure.
Cephas Lumina, the Independent Expert on foreign debt and human rights, welcomed the initiative that he said would “further limit the ability of unscrupulous creditors… to use UK courts to recover extortionate amounts from poor countries engaged in international debt relief efforts.”
“However, the Act has not yet been extended to cover all UK overseas territories and dependencies, and vulture funds are still allowed to operate in UK territories like Jersey, where such unscrupulous funds are currently suing the Democratic Republic of Congo for $100 million.”
Vulture fund activity, he said, “erodes the gains from international debt relief efforts at the expense of both the citizens of distressed debtor countries and the taxpayers of countries that have supported international debt relief efforts.”
Dr. Lumina called upon the international community to “follow the example of the UK and enact legislation to prevent vulture fund activity within their jurisdiction as a clear indication of their commitment to find a durable solution to the debt problem.”
He added: “The enactment of similar legislation in other countries will ensure that the billions of dollars committed to debt relief for the world’s poorest countries will not be diverted to satisfy the greed of unscrupulous companies.”
In a previous analysis, Dr. Lumina said that “debt relief provides heavily indebted poor countries fiscal space to increase spending on basic social services such as health and education, thus promoting the enjoyment of economic, social and cultural rights and the achievement of the Millennium Development Goals (MDGs).”
The funds often target governments that have received international debt relief. The World Bank reported in 2008 that 54 lawsuits had been instituted by commercial creditors against 12 so-called heavily indebted poor countries over the previous decade.
Secretary-General Ban Ki-moon has called for greater investment reform and international cooperation to ensure that vulnerable countries are not burdened by “onerous conditions or burdensome external debt.”
Dr. Lumina, who serves in an unpaid and independent capacity, reports to the UN Human Rights Council in Geneva.