Bill to curb 'Vulture Funds'

Wednesday, 6 May 2009 12:00 AM

By Alice Cannet

A labour MP will lead today a group of 12 cross-party MPs in parliament seeking to curb the activities of 'Vulture Funds' who make millions out of the debts of some of the world's poorest countries.

Sally Keeble will put forward the developing country debt bill which seeks to "to clip the wings" of 'vulture funds' who buy sovereign debts from developing countries' at cut-rate prices and then take legal action to obtain full repayment.

Ms Keeble, MP for Northampton North, said "The bill seeks to cap the returns on trading in defaulted sovereign debt of developing countries. It follows similar legislative moves in the US and proposals in Europe for greater regulation of hedge funds."

Anti-poverty group, Jubilee Debt Campaign, which backs the bill and leads the campaign against the funds estimates that at least 54 companies have taken part in this type of practice in recent years.

These companies are known to have gone to court against 12 developing countries with claims totaling £1.5 billion. Donegal International, based in the British Virgin Islands, is the most high profile case so far.

Donegal was awarded $15.5 million (£10.27m) in repayment after paying $3.3 million (£2.19m) for Zambian debt on a £15 million Romanian loan to help Zambia buy farming machinery.

Mrs Keeble said that, had the bill been implemented, Donegal would only have been entitled to the original $3.3 million (£2.19m). According to the World Bank reports, legal actions have been reported against Nicaragua, the Democratic Republic of the Congo, Cameroon and Ethiopia in recent years.

The bill Ms Keeble proposes today would require court consent for any recovering proceedings and introduce reporting procedures to the UK government.

It would seek to limit profits of sale of developing country defaulted debt to an interest only formula and force disclosure of participants in the transactions, and the beneficiaries.

"These vulture funds have been engaged in completely unregulated profiteering in third world debt. This bill puts forward some basic measures to clip their wings," Ms Keeble added.

Nick Dearden, director of Jubilee Debt Campaign, said: "This bill would represent a major step forward in tackling these odious funds. It cannot be right that companies are allowed, in British courts, to make enormous profits out of the suffering of millions of the world's poorest people."

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