The actions of so-called vulture funds – or speculative investors in the debt of distressed companies or sovereign states – have grabbed international media headlines over the past 18 months. Some of the dramatic media headlines have read: “ Vultures leave the developing world hungry,” “ How top London law firms help vulture funds devour their prey,” and “Vulture funds against poor countries.” [i] The issue became a particularly hot topic in 2007 when it was revealed that a company by the name of Donegal International was suing the Government of Zambia in the London courts for US$ 55 million on a debt it had paid just US$ 3.2 million to acquire. The company was eventually awarded US$ 15.4 million. The concern voiced by NGOs and governments alike is that the small gains in debt cancellation which countries such as Zambia have recently benefited from could be instantly wiped-out by aggressive vulture fund litigation.
Since then, there has been a flurry of announcements by individual creditor governments – such as Belgium, the UK and USA – on steps they are taking to combat such practices. International bodies such as the European Commission, Paris Club and World Bank have also announced their own measures to combat so-called vulture funds. This is due in large measure to advocacy and awareness-raising by Eurodad member organisations and other allies in these countries.
This Eurodad report explains and critically assesses some of the recent official policy announcements and asks how robust they are. Will they achieve their stated aims, and what are some of the views and proposals of heavily indebted poor country governments themselves? The paper also highlights the worrying increase in recent cases of vulture fund action, in particular against some of the world’s poorest countries. It ends with a demand for immediate action on a series of proposals which Eurodad believes could be more effective to tackle the problem in the long-term.
In particular, the key recommendations of this report are that:
[i] See: Guardian, How top London law firms help vulture funds devour their prey, October 17 2007: http://www.guardian.co.uk/business/2007/oct/17/debt.law, Guardian, Vultures leave the developing world hungry, October 20 2007: http://www.guardian.co.uk/society/2007/oct/20/internationalaidanddevelopment.debt and Le Monde, Fonds vautours contre pays pauvres, par Danny Leipziger, 25 juin 2007 : http://www.lemonde.fr
[ii] Eurodad Responsible Financing Charter, February 2008: http://www.eurodad.org/whatsnew/reports.aspx?id=2060