29/05/2009 Standing Committee
In a recommendation adopted today by the Standing Committee of the Council of Europe Parliamentary Assembly (PACE) in , the Assembly seeks to draw governments’ attention to the risks posed to the poorest countries by certain finance companies engaged in debt restructuring transactions, which are regarded as “vulture funds”.
In his report on the subject, Paul Wille (Belgium, ALDE) explains that these finance companies make huge profits by buying up the debt of poor nations cheaply when it is about to be written off, and then sueing for the full value of the debt plus interest. At least 40 actions have been brought to date against third world countries by commercial creditors.
As an example, the rapporteur describes how in 1999, a private speculative investment fund bought 15 million dollars worth of Zambian debts from the Romanian Government for 3.3 million dollars. Bringing the case before a British court, the fund claimed 55 million dollars and in 2007 the court granted them 15.7 million, ie a profit of 370%.
In an effort to curb “unethical speculation” by vulture funds, which pose a threat to the development of indebted poor countries, the PACE has called on member states not to enforce judgments which favour “vulture funds” and to outlaw the sale of such debts.