The United Kingdom Parliament has passed a bill that bans the so-called Vulture funds. The dodgy loan transfer scheme was used by international finance companies in Europe and America to inflate and recoup debts owed by Highly Indebted Poor Countries.
Last year, an Afrik-news.com report revealed that Finance companies buy up the debts of Highly Indebted Poor Countries (HIPC) at lower rates and aggressively pursue their claims through the seizure of assets, litigation and political pressure, seeking repayments that are far in excess of the amount that they paid for the debt.
The international finance companies had taken more than two African countries to UK and American courts, making heavy gains from the business and profiting a substantial amount from the deal. A particular case that resonates is that of Michael Sheehan, also known as Goldfinger, an American who bought Zambia’s debt for US $3million when it was nearing its cancellation process, and successfully sue in British court, claiming US $15million. Mr Sheehan was exposed by a BBC investigation in 2007.
FG Hemisphere Funds also based in the US had sued the Democratic Republic of Congo for US $105million for a debt of US $30million and Liberia was asked by another company to pay 20million for a 6.5million debt owed in 1980s during the Samuel Doe regime. African countries that refused to pay were threatened and any company dealing with these countries were also threatened with legal action, thereby driving away potential foreign investors.
Rights groups have been advocating for an intervention from the U.S. and U.K. governments since 2007 when the tricks used by these Vulture funds companies were exposed. Experts have warned that monies meant for health, education and other social infrastructures in these countries are being diverted to pay for the excessive fee demanded by the debt collecting companies with many African countries fearing confiscation of their assets and losing foreign investments.
Now the UK parliament has banned them from using the British courts to make these unhealthy financial claims. War-torn Liberia will be the first to benefit from the new law as it will block the claim against the West Africa nation for an inflated debt owed in 1978. Sirleaf Johnson, President of Liberia, earlier this year said her country has no money to pay. “Have a conscience and give this country a break,” she said.
The Democratic Republic of Congo which is also sued but approaching the cancellation process of its HIPC debts will also benefit from the new law.
“It’s the first time since the global credit crunch that financial services companies have been told, ‘Thus far and no further’. They won’t be able to fleece developing countries, and they will have to comply with the same rules on debt relief as the public sector and the more responsible parts of the private sector,” said MP Sally Keeble, who proposed the bill to Parliament.
Ms Keeble however fears that these companies could use other European courts to pursue their claims but believes the UK has set a standard for others in Europe and America to follow.
Nick Dearden of the Jubilee Debt Campaign also said: “It will mean the poorest countries in the world can no longer be attacked by these reprehensible investment funds who grow fat from the misery of others.”