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Government Supports bill to end Vulture Funds
The British Government has published its response to the consultation on vulture funds which it launched in July 2009. Despite a number of submissions from the financial services industry opposing legislation, the Government has come out clearly supporting legislation.
JDC would like to thank everyone who contributed to the consultation – your responses really helped to ensure the Government position in favour of legislation.
Full details can be found at:
http://www.hm-treasury.gov.uk/development_action.htm
where you can also find details of the UK’s response on Haiti’s debt cancellation.
The Government estimates that legislation could potentially save £145 million for HIPC countries. They believe legislation is necessary from the perspective both of fairness (preventing some creditors free-riding on the cancellation of others) and development. The Government suggests that legislation should have the following features:
- Applicable only to HIPCs. They maintain anything wider would damage lending as a whole. Interestingly, they don’t accept that countries eligible for UK MDRI – the UK’s own debt cancellation scheme which goes beyond HIPC – should be eligible, as UK MDRI is (apparently) about poverty not debt unsustainability.
- Reduction will be based on the HIPC Initiatives Common Reduction Factor (the amount judged necessary to return a country to debt sustainability)
- Will include original creditors as well as ‘vulture funds’
- Will not include transparency requirements as the purpose of the legislation is not a attack on creditor litigation, but only to better ‘enforce’ HIPC
- Will apply to debts contracted before the legislation takes effect (obviously) and will apply to cases where awards have been made but not enforced
- Will apply to foreign cases seeking claims in UK courts and discourage the enforcement of cases brought under UK law in foreign courts
- In a move to pacify creditors, it will exclude any debt on which the creditor does not make an offer to settle on HIPC terms before initial litigation commences (we are concerned about this due to bureaucratic inefficiency in making HIPCs).
Needless to say, these principles are incorporated into Andrew Gwynne’s Bill which will receive its second reading this Friday. Of course we would have liked the bill to go further, but it would represent a significant step forward.
http://www.jubileedebtcampaign.org.uk/
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Jubilee Debt Campaign, 26/02/2010 |
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