Legislation has been proposed in Jersey to stop vulture funds, hedge funds that buy up defaulted debt cheaply to then sue the country for at least the full value of the debt, from pursuing payments on illegitimate debts in Jersey courts. The Draft Debt Relief (Developing Countries) (Jersey) Law 201 was lodged on October 1, 2012, and illustrates Jersey’s commitment to international debt relief measures.[i] To date, the UK is the only country to enact such legislation. Enactment of this law in Jersey would be a huge step in the right direction; as you may recall, Jersey courts have been used in the past by vulture funds. Like in an unexpected decision this summer, Jersey courts ruled in favor of the Democratic Republic of the Congo when vulture fund FG Hemisphere attempted to sue a DRC-owned mining company for $100 million on an originally $3 million debt.[ii]
Without such laws in place internationally, though, vulture funds continue to prey on their victims. Just this month, for example, the Argentine naval ship ARA Libertad was detained in Ghana and prevented from leaving the port city of Tema by a court ordered injunction.[iii] This injunction was won by NML Capital, a subsidiary of US billionaire Paul Singer’s hedge fund Elliot Capital Management, which has been aggressively attacking Argentina and Argentine companies to recover illegitimate debts the vulture fund bought for pennies on the dollar during Argentina’s 2001 economic meltdown.[iv] Argentina has refused to pay the $20 million ransom and filed a motion contesting the ship’s detainment, pointing to the vulture fund stunt as well as immunity for the military vessel.[v] In ruling on that motion two weeks ago, the Ghanaian court upheld the decision to detain the ship, stating that Argentina waived immunity as part of the original loan deal.[vi]
“This ship seizure shows that Elliot is willing to go to any length to collect on unfair debts that take advantage of countries in financial crisis. If they will do this to collect from a G20 nation like Argentina - imagine what they do to the poorest countries and most vulnerable people in our world. This is absolutely unconscionable.” Eric LeCompte, Jubilee USA Network Executive Director.
This case illustrates the clear need for more countries to take action and enact laws like the one implemented in the UK and currently being considered in Jersey. There is even, perhaps, a need to take future laws one step further by protecting middle income countries - like Argentina - from vulture funds as well as low-income countries.[vii] We must stop these vulture funds from preying on countries when they are financially weak, buying distressed bonds extremely cheaply and then attempting to collect in full plus some once the country recovers economically. We must put an end to this destructive behavior that allows billionaires to profit off of the poorest and most vulnerable. While condemning the acts of NML Capital and other vulture funds, we congratulate Jersey on taking a huge step in the right direction - we hope this is the first of many new laws around the world to provide for a more just financial system that protects the world’s poorest.
[i] Sam LeQuesne, “Chief Minister lodges new law on pursuing Third World debtthrough Jersey’s courts,” Isle News, October 1, 2012. http://jersey.isle-news.com/archives/chief-minister-lodges-new-law-on-pursuing-third-world-debt-through-jerseys-courts/13779/
[iv] Joe Weisenthal, “A Hedge Fund Has Physically Taken Control Of A Ship Belonging to Argentina’s Army,” Business Insider, October 4, 2012. http://www.businessinsider.com/hedge-fund-elliott-capital-management-seizes-ara-libertad-ship-owned-by-argentina-2012-10
[v] “Ghana court upholds seizure of Argentinian ship,” The Guardian, October 11, 2012. http://www.guardian.co.uk/world/2012/oct/11/ghana-court-uphold-detention-argentina-ship
[vii]“Campaigners slam latest vulture fund attack on Argentina,” Jubilee Debt Campaign, October 4, 2012. http://www.jubileedebtcampaign.org.uk/Campaigners3720slam3720latest3720vulture3720fund3720attack3720on3720Argentina3720+7857.twl