The United Nations independent expert on foreign debt and human rights issued a statement today, welcoming the British parliament’s passage of a new law earlier this month which will have the effect of banning ‘vulture funds’ created to profit off the foreign debt of developing countries by essentially buying the debt for a highly reduced price (often when the debt is about to be forgiven) and then suing to require full payment, plus interest, from the debtor country. The effects of such vulture funds’ attempts to collect from the debtor country can be crippling.
The British law, the Debt Relief (Developing Countries) Act, will limit recovery by creditors on the foreign debt of countries designated as having “unsustainable” debt, namely the 40 countries in the IMF/World Bank Heavily Indebted Poor Countries (HIPC) initiative. Recovery will be, essentially, limited to the amount of debt that would remain if the debtor country had benefited from the amount of debt relief envisioned in the HIPC initiative. Additionally, the Act limits enforcement of court judgments and arbitration awards to recovery of the reduced amount.