Print
See related documents
Recommendation 1870 (2009)
Protecting financial aid granted by Council of Europe member states to poor countries against financial funds known as “vulture funds”
1. At a time
when the world economic and financial crisis is affecting the whole
population and giving rise to colossal losses in the banking system
and certain private investment funds, the Parliamentary Assembly draws
the attention of governments to the risks for states and citizens,
particularly in the poorest countries, of certain finance companies
engaged in debt restructuring transactions, which are regarded as
“vulture funds”.
2. “Vulture funds” are investment funds which purchase at a cheap
price the borrowings of poor countries, often heavily indebted,
then bring court proceedings to wear them down and compel them to
pay the nominal value (the initial amount owing) of these debts
at the time when the loans were issued, together with the interest on
arrears and legal costs.
3. The Assembly strongly condemns the action of these funds which
have no compunction in taking advantage of opportunities arising
from debt waivers granted by creditor countries, particularly European,
or blocking worldwide the assets of the countries concerned and
threatening them with bankruptcy.
4. These funds make use of a huge legal arsenal, often bringing
debtors to their knees. While international fund providers grant
debt remissions for persistent debts (Heavily Indebted Poor Countries
Initiative − HIPCI) and western governments for their part work
to secure debt reduction and remission (the Paris Club, for example),
these funds take over the benefits of the programmes, thus jeopardising
the United Nations Millennium Development Goals (MDGs). Some “vulture
funds” do not hesitate to interfere with the debt rescheduling programmes
set up for the poorest developing countries – the HIPCs or Heavily
Indebted Poor Countries.
5. In the context of an unprecedented global crisis, some states,
companies or banks could attempt to negotiate assignments of bad
or doubtful debts as discreetly as possible on the over-the-counter
loan market. The Assembly deplores the opacity of and lack of control
over this type of market.
6. According to Oxfam International, commercial creditors have
to date brought at least 40 actions against the Third World countries
that are the deepest in debt. The International Monetary Fund (IMF)
has voiced concern about the practices of “vulture funds”, but attempts
to work out a solution at international level have failed.
7. Nonetheless, the Assembly welcomes the few initiatives taken
at national and international level. It subscribes fully to the
May 2007 statement by Paris Club creditors who confirmed that they
were “committed to the full implementation of the HIPC Initiative”
and urged “all official and commercial creditors and HIPC countries
to take the necessary steps to implement this initiative”. It also
supports the initiatives taken by certain countries such as France
and Belgium; in March 2008 the latter’s parliament passed a law
to make co-operation aid secure against any attachment or transfer
by the “vulture funds” method.
8. Lastly, the Assembly would like to prevent financial aid or
the benefits of substantial debt remissions that may in future be
granted to poor or developing countries by Council of Europe member
states from being put to innappropriate uses on account of certain
creditors.
9. Accordingly, the Assembly calls on the governments of the
Council of Europe member states, at national level, to:
9.1. reinforce their legal arsenal
in order to curb the action of “vulture funds”, for example by refusing to
give effect to foreign judgments or to conduct judgment enforcement
procedures in favour of “vulture funds” in cases where the debt
arises from unethical speculation;
9.2. insert into the bilateral aid contracts they conclude
with developing countries a clause providing that the contract will
be void under such circumstances. In this way, if the money is not
used for development (in other words, if it is seized), it must
return to the original donor country;
9.3. establish rules of good conduct to prevent debts being
resold to “vulture funds” engaging in improper and aggressive practices;
9.4. offer technical and legal assistance in the area of debt
policy and management to the partner countries with which they pursue
development co-operation, so as to avoid, among other things, legal proceedings
with creditors.
10. Furthermore, the Assembly calls on the governments of the
Council of Europe member states, at international level, to:
10.1. take action with the International
Monetary Fund and the World Bank so as to ensure that lobbying by
“vulture funds” does not prevent a country’s access to a debt reduction
programme under the Heavily Indebted Poor Countries Initiative;
10.2. call on the governing bodies of the Bretton Woods institutions
to insist that countries granted debt relief employ greater transparency
in managing their revenue (from oil, minerals, etc.) and draw up
a plan to combat the corruption that could seriously undermine their
society, and to establish rules of transparency regarding information
and transactions applicable to over-the-counter traded loans markets.