From the TUC

Vulture funds: UK Government does the right thing for poor nations

22 Jul 2009, by in International

One of the most sickening features of globalisation is the hyper-exploitation of the poorest countries on the planet by the ghouls of the financial world. What these so-called “vulture funds” do is buy up a poor country’s defaulted debt from a financial institution at an enormous discount, then find a court willing to let them sue the Government of that heavily-indebted, poverty-stricken country for recovery of the whole of the debt. As long as the court awards them more than the discounted rate they bought the debt for, they make a handsome profit – often millions of pounds for virtually no work at all.

Jubilee Debt Campaign vulture funds imageThey walk away with the money, and the people of the poor country concerned lose schools, hospitals, jobs, and Governments like Britain’s, who are currently forgiving other debts so that public services can be expanded see their efforts go to waste. In a fair and just world, these people should be staked out in the desert so that the vultures after which they are named could peck out their soft organs, but their practices should at least be illegal.

Now, the British Government seems willing to take the steps to make that happen (changing the law, I mean – the real vultures will have to go hungry for a while….)

The Treasury today announced a consultation to restrict the ability of certain financial creditors to ignore debt relief measures agreed by the international community – comments need to be submitted by 9 October. The consultation follows a Private Members’ Bill introduced by Sally Keeble MP, which cross-party support. And, of course, a long and brilliant campaign by the Jubilee Debt Campaign, of which the TUC is proud to be a part.

Some things that Governments do are not just technically effective or broadly positive, they are actually morally right.

2 Responses to Vulture funds: UK Government does the right thing for poor nations

  1. Axel
    Jul 27th 2009, 10:08 pm

    Seems unrealistic. If it was that easy to get the money, then why didn’t the financial institution which lent the money sue them in the first place? If the indebted couldn’t pay the first-hand lender, then how could they pay the ‘vultures’?

  2. Nick
    Jul 28th 2009, 10:34 am

    1. It isn’t easy but the final massive payout makes it worth the usually many years of litigation necessary. Vultures don’t do anything else but try to recover this money. Also, they usually get set up only to pursue one specific case. If their costs outweigh their profits, they declare bankruptcy and their debts don’t impact on other investments – something countries can’t do and most other commercial creditors wouldn’t want to do.
    2. Countries of course can find the money – but at the expense of health services, education, and other basics. Most creditors at least want to be seen to accept countries have a minimum level of responsibility and available money is over and above that level. This level of responsiblity is written into law in bankruptcy proceedings in the US. Again, countries don’t have bankruptcy laws.
    3. Despite the above, first-hand lenders do sometimes sue. The government’s proposal would deal with them in the same way – by forcing a steep discount in what they can expect. That’s why we’re really pleased with the government proposal – though we’d also like it extended to more countries.