GENEVA (13 December 2011) – The UN Independent Expert on foreign debt and human rights, Cephas Lumina, today urged the Government of Jersey to enact legislation, similar to that adopted in the United Kingdom last year, to limit the ability of ‘vulture funds’* to sue heavily indebted poor countries in its courts.
“‘Vulture funds’ unfairly deprive poor countries of the gains from international debt relief efforts meant for the improvement of delivery of basic social services such as safe drinking water, health care, education, and housing,” Mr. Lumina said. “The international community must not accept this immoral and unfair deprivation of scarce financial resources from the world’s poorest countries.”
In April 2010, the United Kingdom Parliament passed the Debt Relief (Developing Countries) Act to restrict the ability of ‘vulture funds’ to sue heavily indebted poor countries in UK courts, a favourite jurisdiction. However, the Act does not apply to UK Crown Dependencies and Overseas Territories such as Jersey, Guernsey, the British Virgin Islands and Cayman islands.
This loophole has allowed US ‘vulture fund’ FG Capital Management (formerly FG Hemisphere) to sue the Democratic Republic of Congo (DRC) in Jersey’s courts for $100 million of debt obligations, reportedly bought for just 3.3 per cent of their value according to British media reports.
“I welcome the current consultation undertaken by the Government of Jersey on legislation which would limit practices that could undermine international debt relief efforts, and I ask them to enact it as a matter of urgency,” the Independent Expert said, expressing his support for the campaign launched by the debt relief movement, including the Jubilee Debt Campaign, for extension of the UK Debt Relief Act to its Crown Dependencies and Overseas Territories.
In a 2010 report to the UN Human Rights Council, Mr. Lumina called on countries “to urgently consider enacting legislation that would make ‘vulture fund’ profiteering illegal within their respective jurisdictions”.
The DRC, the world’s second poorest country, has been granted debt relief by its main bilateral and multilateral development partners and international financial institutions. The gains from this debt relief are to be devoted to poverty reduction. However, the country has been facing litigation over debts bought up by various ‘vulture funds,’ notably FG Capital Management.
Mr. Cephas Lumina is an Advocate of the High Court for Zambia and an Extra-Ordinary Professor of Human Rights at the University of Pretoria. He was appointed Independent Expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, particularly economic, social and cultural rights by the United Nations Human Rights Council in 2008. He is independent from any government or organization and serves in his individual capacity. The mandate covers all countries.
(*) ‘Vulture funds’ are commercial entities that typically purchase the defaulted debt of developing countries at significant discounts, hold out for other creditors to cancel their debts and then aggressively pursue repayments that are vastly in excess of the amount that they paid for the debt.
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Check the Independent Expert’s 2010 report to the UN Human Rights Council:
OHCHR Country Page – United Kingdom: http://www.ohchr.org/EN/Countries/ENACARegion/Pages/GBIndex.aspx
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