The Government has taken action to prevent creditors from exploiting the poorest countries in the world through the UK courts.
Legislation to make permanent The Debt Relief (Developing Countries) Act 2010 was passed in the House of Commons today. The legislation will stop creditors, including so-called “Vulture Funds”, from using the UK courts to extract harsh and inequitable payments from poor countries for debts that the companies may in some cases have bought for a fraction of the cost.[ad#Google Adsense]
The Act could save poor countries an estimated £145m over six years.
The original Debt Relief (Developing Countries) Act 2010 was passed in April 2010, temporarily restricting the actions of “Vulture Funds” in the UK. This act had a sunset clause meaning that it was due to expire on 7 June. To prevent Vulture Funds returning to the UK, the Government has passed legislation to make the law permanent.
Speaking after the legislation was passed, Danny Alexander, the Chief Secretary to the Treasury said:
“Today the Government has acted to stop the unjust actions of a few unscrupulous companies having a huge impact upon the futures of some of the poorest countries in the world.
“This act will make sure that Vulture Funds will never again be able to exploit the poorest countries in the world within the UK’s courts.”
International Development Secretary, Andrew Mitchell said:
“Giving debt relief to poor countries allows them to spend more on schools, hospitals and other vital services necessary to boost growth and reduce poverty.
“It is important that other nations now follow our lead and look at what they can do to address this issue.”
Speaking today, Mark Hoban MP, the Financial Secretary to the Treasury said:
“It is a privilege to be involved in passing this legislation and making this Act permanent. The Government is committed to ensuring that the poorest countries are protected from the exploitative practices of Vulture Funds and this Act will ensure that they have no place in the British legal system.”
In April 2010, the UK Parliament passed the Debt Relief (Developing Countries) Act 2010, designed to ensure that all creditors provide their share of debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative. This tackles the problem of a small minority of creditors, often referred to as “Vulture Funds”, taking HIPCs to court to try to get back the full value of their debts, including interest and penalties for arrears. The Act had a sunset clause, primarily introduced to review the evidence of the impact of the legislation.
The Government has consulted with representatives of the financial services sector, lawyers, civil society, the international financial institutions (IMF, WB) and HIPC country Governments. The evidence suggested that the Act had some benefit on HIPCs and no evidence has been found of unintended or adverse effects.