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Stop Debt Vultures

Stop Debt Vultures

Stop the Vultures

Vulture funds are private investment firms that prey on the world’s poorest countries. These commercial bankers circle developing countries on the lookout for debts that the country is struggling to repay. Then they swoop down, purchase the debt on the secondary market for a cheap price, and sue the poor country to recover the full value of the debt, plus interest, penalties and legal fees.

In November last year, for the first time the Australian legal system was exploited by a Vulture Fund. New York investment firm FG Hemisphere, came to the NSW Supreme Court to pursue a debt claim against the Democratic Republic of Congo (DRC).

Congo is a heavily indebted poor country (HIPC). It had finally completed the long and tough process required to receive debt relief. Congo’s debt was due to be cut by over $7,000 million. The IMF, World Bank and African Development Bank had agreed to cancel 100 per cent of pre-2004 debts. Other creditors like the UK having committed to do the same.

But a Vulture Fund had been circling the DRC. Just as it reached HIPC completion point, FG Hemisphere swooped. Having bought one of the African nation’s debts cheaply on the secondary market, it refused to participate in the debt relief scheme, and instead began pursuing repayment of $100 million for this debt - $80 million more than the country would have been expected to pay for the debt under the HIPC process.

FG Hemisphere scoured the world in search of foreign assets belonging to the DRC. When it found that the government owned shares in an Australian mining company operating in Congo, the Vulture Fund filed a case in the NSW Supreme Court, and in November 2010 was successful in forcing the DRC government to sell the shares and transfer the $30 million (plus $2 million in legal costs and court-imposed fines) to itself.

This reprehensible vulture fund is not a one-off. Between 1998 and 2008, 54 court cases were instituted by vulture funds against 12 heavily indebted poor countries. National income that is earmarked for poverty reduction and basic social service provision is diverted to settling the legal claims of vulture funds. The law suits are grinding down poor countries in cycles of litigation for up to 10 years and costing the equivalent to 18% of spending on health care and education.

The good news is that this practice of vulture funds can be stopped by introducing legislation to ban such entities from profiteering in Australian courts. In April last year the UK government passed a landmark Debt Relief (Developing Countries) Act which does just that.

Following his mission to Australia in February 2011, United Nations Independent Expert on Foreign Debt and Human Rights said:

“The Independent Expert calls upon the Government of Australia to bolster its commitment to debt relief by urgently enacting legislation to limit the ability of vulture funds to use Australian courts at the expense of both Australian tax-payers and the citizens of the poor countries for whose benefit it contributes to multilateral debt relief."

Jubilee Australia is leading a campaign to STOP DEBT VULTURES, which calls on the Australian government to enact legislation to outlaw the practice of Vulture Funds collecting debt in Australia that has been purchased cheaply from highly indebted poor countries (HIPC).

take action:
1. Write to your local MP to Stop Debt Vultures from using Australian courts to profiteer off the poor.

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