World Leaders Challenge Predatory Hedge Funds in UN Development Agreement

July 13, 2015

from Jubilee USA

Addis Ababa, Ethiopia – At a United Nations development summit, world leaders, the International Monetary Fund and development organizations recommend the elimination of a type of hedge fund that preys on countries in financial crisis. So called “vulture funds” are featured in a global agreement to be signed this week at the Financing for Development Conference.

“These predatory funds undermine development and can destabilize a country’s economy,” said Eric LeCompte, Executive Director of the religious development organization Jubilee USA Network. “From Zambia to Peru, they target, litigate and collect aid monies that should be building schools and hospitals.”

When countries face economic hardship, “vulture funds” buy a country’s debt cheaply and then sue for full repayment. After Zambia received international debt relief in 2006, a hedge fund called Donegal International sued Zambia to collect $55 million on a $15 million debt the fund purchased for $3.3 million on the secondary market. NML Capital sued Argentina over debt holdings and refused to participate in Argentina’s debt restructuring. The Argentina case put a broader spotlight on this type of litigation.

“World leaders are saying enough is enough,” stated LeCompte who is attending the summit and participated in agreement negotiations. “The final agreement recommends changing contracts to prevent the behavior or legislating the funds out of existence.”

On July 1st, Belgium was the latest country to pass a law restricting this behavior. Three of the ten paragraphs in the United Nations agreement that focus on debt, state concern or recommend ways to stop these hedge funds. Two additional paragraphs promote aspects of global bankruptcy and responsible lending and borrowing which further deter this behavior.

“It’s inspiring to see the global community unified against this behavior,” noted LeCompte.

Read the draft Financing for Development agreement as of July 7th. Relevant Paragraphs are 97 through 101.

Jubilee USA Network is an alliance of more than 75 US organizations and 400 faith communities working with 50 Jubilee global partners. Jubilee’s mission is to build an economy that serves, protects and promotes the participation of the most vulnerable. Jubilee USA has won critical global financial reforms and more than $130 billion in debt relief to benefit the world’s poorest people.

Available for interview: Eric LeCompte, Executive Director
Contact: Sophia Har, Communications Director
sophia(at) / (o) (202) 783-3566 x101 (m) 651-815-1818
or in Addis Ababa reach Eric LeCompte directly:

– See more at:

Pope Francis Calls for Global Bankruptcy Process

from Jubilee USA
July 14, 2015

Pope Francis Calls for Global Bankruptcy Process Washington, DC

– Pope Francis called for an international bankruptcy process in a news conference as he left Latin America on Monday. According to the Associated Press, when asked about the Greek debt crisis, Francis stated, “if a company can declare bankruptcy, why can’t a country do so and we go to the aid of others?” Francis offered further comments noting that too many countries are struggling with high debts and he suggested a United Nations bankruptcy proposal could be the solution.‎

“Pope Francis knows that heavy debt loads cause poverty and inequality,” said Eric LeCompte, who consulted the Vatican on its position. LeCompte is the head of the religious development organization Jubilee USA Network. “The Pope’s statement is a logical extension of the Catholic Church’s strong support of debt relief for struggling countries.”

Last year, LeCompte led a delegation of global Jubilee organizations to advise Vatican Secretary of State Cardinal Pietro Parolin on the need for a bankruptcy process to address inequality. The Catholic Church is a founder of Jubilee USA and supports its efforts to win debt relief for struggling countries.

In September of 2014, the United Nations General Assembly voted 124-11 to develop the bankruptcy process that Pope Francis referenced. LeCompte addressed the UN earlier this year on the creation of the process. This Fall, the United Nations is set to review progress on the proposal. Because International Monetary Fund (IMF) studies point to debt as a cause of inequality, the IMF is exploring aspects of a bankruptcy process based on an April 2013 paper. In addition to the debt crisis in Greece, nearly 50 countries‎ face worrying levels of debt distress according to World Bank statistics.

“A bankruptcy process is critical if we want less poverty and if we want to prevent financial crisis,” stated LeCompte, who consulted a recent United Nations Conference on Trade and Development road map that fed into the UN bankruptcy process. “Bankruptcy means less inequality and more global stability.”

Read the United Nations Conference on Trade and Development road map: Sovereign Debt Workouts: Going Forward Roadmap and Guide

Read the IMF’s April 2013 paper on debt restructuring. 

View the United Nations General Assembly Resolution on a legal bankruptcy framework. 

Jubilee USA Network is an alliance of more than 75 US organizations and 400 faith communities working with 50 Jubilee global partners. Jubilee’s mission is to build an economy that serves, protects and promotes the participation of the most vulnerable. Jubilee USA has won critical global financial reforms and more than $130 billion in debt relief to benefit the world’s poorest people.

Available for interview: Eric LeCompte, Executive Director
Contact: Sophia Har, Communications Director
sophia(at) / (o) (202) 783-3566 x101 (m) 651-815-1818

– See more at:

Where the Argentine Debt Case Stands Now, and Why it Still Matters

from North American Congress on Latin America Aldo Caliari 06/04/2015

Jubilee protesters

Allowing a U.S. court ruling to determine the process for international debt repayments sets a dangerous precedent, and exposes gray areas in international legal jurisdiction.

Continue reading Where the Argentine Debt Case Stands Now, and Why it Still Matters

A fair hearing for sovereign debt

from the Guardian

Project Syndicate economists

Project Syndicate is an international association of 404 newspapers in 149 countries, devoted to bringing distinguished voices from across the world to local audiences everywhere

 Protesters demonstrate against vulture funds outside the US Chamber of Commerce in Buenos Aires. Photograph: Victor Caivano/AP

Protesters demonstrate against vulture funds outside the US Chamber of Commerce in Buenos Aires. Photograph: Victor Caivano/AP

Last July, when United States federal judge Thomas Griesa ruled that Argentina had to repay in full the so-called vulture funds that had bought its sovereign debt at rockbottom prices, the country was forced into default, or “Griesafault”. The decision reverberated far and wide, affecting bonds issued in a variety of jurisdictions, suggesting that US courts held sway over contracts executed in other countries.

Ever since, lawyers and economists have tried to untangle the befuddling implications of Griesa’s decision. Does the authority of US courts really extend beyond America’s borders?

Now, a court in the UK has finally brought some clarity to the issue, ruling that Argentina’s interest payments on bonds issued under UK law are covered by UK law, not US judicial rulings. The decision – a welcome break from a series of decisions by American judges who do not seem to understand the complexities of global financial markets – conveys some important messages.

First and foremost, the fact that the Argentinian debt negotiations were pre-empted by an American court – which was then contradicted by a British court – is a stark reminder that market-based solutions to sovereign-debt crises have a high potential for chaos. Before the Griesafault, it was often mistakenly assumed that solutions to sovereign-debt repayment problems could be achieved through decentralised negotiations, without a strong legal framework. Even afterwards, the financial community and the International Monetary Fund hoped to establish some order in sovereign-bond markets simply by tweaking debt contracts, particularly the terms of so-called collective-action clauses (which bind all creditors to a restructuring proposal approved by a supermajority).

But simple modifications like contract amendments will not overcome the system’s deficiencies. With multiple debts subject to a slew of sometimes-contradictory laws in different jurisdictions, a basic formula for adding the votes of creditors – which supporters of a market-based approach have promoted – would do little to resolve complicated bargaining problems. Nor would it establish the exchange rates to be used to value debt issued in different currencies. If these problems are left to markets to address, sheer bargaining power, not considerations of efficiency or equity, will determine the solutions.


The consequences of these deficiencies are not mere inconveniences. Delays in concluding debt restructurings can make economic recessions deeper and more persistent, as the case of Greece illustrates.

This brings us to the second lesson of the British ruling. With the stakes so high and the system so broken, debt markets have little reason to remain in the US. America has always prided itself on the strength of its “rule of law”, a selling point that has made Wall Street host to the largest sovereign-debt market. But Griesa’s ruling, based on a peculiar – and in our view, indefensible – interpretation of certain terms in Argentina’s contract, showed that US commercial interests can dominate its courts’ decisions.

The vaunted American rule of law no longer looks so robust. Perversely, it protects the strong against the weak. The Griesafault is only the latest of many decisions and legal changes that have revealed what one might call a symptom of “corruption, American-style”, in which lobbying and campaign contributions compromise the entire system, even when no individual official is on the take. The US would be wise to react before the sovereign-debt market migrates from New York.

China should stand ready to pick up the slack. Its savings now far outstrip those of the US, and it is striving to make Shanghai a global financial centre. That ambition has become more attainable in view of the damage to the US system’s credibility in the aftermath of the 2008 financial crisis. But, if Shanghai is to emerge as a leader in sovereign lending markets, China should be aware of the shortcomings of legal frameworks elsewhere, and design a more efficient and equitable alternative.

The final, overarching message of the British court’s decision is one that all countries should heed. There is an urgent need to renew the United Nations’ efforts to create a multinational legal framework for sovereign-debt restructuring. Though the US is striving to undermine these efforts, the UK ruling reminds us that America’s judges are not the world’s judges.

That last revelation may not make Wall Street happy; but, for the many countries around the world that rely on sovereign debt, it is very good news indeed.

Joseph E. Stiglitz, a Nobel laureate in economics, is University Professor at Columbia University. His most recent book, co-authored with Bruce Greenwald, is Creating a Learning Society: A New Approach to Growth, Development, and Social Progress. Martin Guzman, a postdoctoral research fellow at the Department of Economics and Finance at Columbia University Business School, is a co-chair of the Columbia Initiative for Policy Dialogue Taskforce on Debt Restructuring and Sovereign Bankruptcy.

© Project Syndicate, 2015.

The Vultures’ Victory

Joseph E. Stiglitz, a Nobel laureate in economics and University Professor at Columbia University, was Chairman of President Bill Clinton’s Council of Economic Advisers and served as Senior Vice Pr…

from Project Syndicate, Sep. 4, 2013

NEW YORK – A recent decision by a United States appeals court threatens to upend global sovereign-debt markets. It may even lead to the US no longer being viewed as a good place to issue sovereign debt. At the very least, it renders non-viable all debt restructurings under the standard debt contracts. In the process, a basic principle of modern capitalism – that when debtors cannot pay back creditors, a fresh start is needed – has been overturned.

The trouble began a dozen years ago, when Argentina had no choice but to devalue its currency and default on its debt. Continue reading The Vultures’ Victory

Argentina vs the Vulture Funds, (ctd)

Published on Tuesday, September 30, 2014  by Common Dreams

Argentina Accuses Judge of ‘Harassment’ in Ongoing Debt Fight

“This new attempt of judicial aggression against Argentina is an act of desperation on behalf of the vulture fund,” said Argentine Foreign Minister Héctor Timerman.

Pity the poor billionaire vulture funds.

Op Ed: Supreme Court Moves Us Closer To Holding Deadbeat Argentina Accountable

Doug Bandow, Forbes Contributor 21/10/2013

Being a creditor is a thankless task. People want your money but hate to pay you back. The worst offenders are governments, whose leaders constantly promise their peoples a free lunch, dinner, and more. When foreign nations cheat creditors, they put their own peoples at risk. Continue reading Pity the poor billionaire vulture funds.

CFK to address vulture funds issue during G20 meeting

Wednesday, September 4, 2013
(from Buenos Aires Herald)

After arriving in St. Petersburg for the G20 meeting, President Cristina Fernández de Kirchner stressed she will be addressing the vulture funds issue during the summit despite the US rejected to mention it in the final statement.

“Vulture funds take advantage of everyone,” she told reporters adding Argentina will discuss the “employment creation, production and investment” which are “the elements which will save global economy amid a context of crisis.” Continue reading CFK to address vulture funds issue during G20 meeting

Market shock after ‘vulture fund’ win on Argentina debt

from the South China Morning Post,

WED, Aug 28, 2013, 9:03am

Argentina debt restructuring, and other deals elsewhere, could unravel after US court backs hedge funds’ claim on defaulted bonds

A US court’s decision to back two hedge funds demanding Argentina pay for defaulted bonds has jolted the multitrillion-dollar market for sovereign debt. The New York appeal court on Friday rejected Buenos Aires’ arguments that the funds – the country brands them “vulture funds” – deserve nothing because they refused to join in a restructuring of the debt on which the country defaulted in 2001.

Rather than ‘recalcitrant debtors,’ we are serial payers ARGENTINIAN PRESIDENT CRISTINA FERNANDEZ DE KIRCHNER

Continue reading Market shock after ‘vulture fund’ win on Argentina debt

UK campaigners condemn ‘vulture capital’ court verdict

from, 24th August, 2013, by agency reporter.

A US court has put rights of billionaire investors above the people of Argentina, say debt activists, slamming a decision for allowing the country to be ‘held to ransom’ by vulture funds.

The reaction from the UK-based Jubilee Debt Campaign came after Argentina lost its appeal in New York against ‘vulture funds’ NML Capital Ltd and Aurelius Capital. The judgement brings Argentina one step nearer to a default. Continue reading UK campaigners condemn ‘vulture capital’ court verdict

Argentina vs the Vulture Fund (Elliott Associates) Explained

Elliott vs Argentina: The Second Circuit’s dangerous game
By Felix Salmon MARCH 4, 2013 (Reuters)

On Friday, the Second Circuit court of appeals issued an order, aimed at Argentina. The order is worth quoting in full, because it helps to explain the reasoning by which the Second Circuit is going to end up pushing Argentina into default:

At oral argument on Wednesday, February 27, 2013, counsel for the Republic of Argentina appeared to propose that, in lieu of the ratable payment formula ordered by the district court in its injunction and accompanying opinion of November 21, 2012, Argentina was prepared to abide by a different formula for repaying debt owed on both the original and exchange bonds at issue in this litigation. Because neither the parameters of Argentina’s proposal nor its commitment to abide by it is clear from the record, it is hereby ordered that, on or before March 29, 2013, Argentina submit in writing to the court the precise terms of any alternative payment formula and schedule to which it is prepared to commit.

The court directs that, among the terms specified, Argentina indicate: (1) how and when it proposes to make current those debt obligations on the original bonds that have gone unpaid over the last 11 years; (2) the rate at which it proposes to repay debt obligations on the original bonds going forward; and (3) what assurances, if any, it can provide that the official government action necessary to implement its proposal will be taken, and the timetable for such action.

A bit of background here: Continue reading Argentina vs the Vulture Fund (Elliott Associates) Explained

IMF Abandons Argentina

July 25, 2013

Walter Russell Mead’s Blog – from The American Interest

Argentina was hoping to have some powerful allies in its courtroom showdown with holdout creditors such as Elliot Capital Management, a New York-based hedge fund that was notably responsible for impounding an Argentine tall ship off the coast of Ghana late last year. But now both the US Treasury and the IMF are backing away from earlier plans to file amicusbriefs when the case goes to the US Supreme Court. Continue reading IMF Abandons Argentina

Stopping vulture funds through national anti-vulture laws


from Bretton Woods Project – Sponsored by ActionAid 

Sponsors: CNCD11.11.11


Gwenaelle Grovonius, Member of Parliament for the Parti Socialiste (Belgium)

Gerhard Schick, Member of Parliament for the Greens in the Bundestag (Germany)

Eric LeCompte, Jubilee USA

Antonio Gambini, CNCD 11.11.11 (Belgium)

Jürgen Kaiser, Erlassjahr (Germany)

Tiago Stichelmans, EURODAD



Gwenaelle Grovonius

  • Issue in Belgium derived from public outrage – leading to probably first anti vulture fund in the world – due to attempts by private creditors to appropriate assets financed by Belgian official development assistance. Subsequently a law was developed in UK related to HPIC countries; these led from civil society campaign
  • This issue not limited to developing countries – not just Argentina – but also in Greece. A €4 billion holdout fund in Greece is to this day being paid in full
  • This led to Belgian parliament voting in 2015 to limit the rights of the creditor to be repaid only a limited amount, if seeking to use an illegitimate advantage, based on a manifest dissonance between how much was paid for the debt and how much is being claimed.
    Additionally, that the debtor was insolvent or in imminent risk of being so, that the creditor is in a tax haven, that the creditor refused to participate in a debt-restructuring agreement, that the debtor has used the weaknesses of the creditor to negotiate, and that the repayment would have a significant impact on the state’s finances and impact on the economic and social welfare on its population
  • This has been constitutionally challenged in Belgian court, Belgian NGOs have joined the legal battle
  • IMF is mandated to safeguard financial stability and promote growth and welfare – its mandate should lead it to support laws such as the Belgian law and advise other countries

Tiago Stichelmans

What are vulture funds?

  • Vulture funds’ existence is permitted by the absence of a framework to deal with restructuring when a state is bankrupt.
  • States have to confront a multitude of creditors
  • Restructurings organised by states are voluntary, allowing creditors to refuse to participate and jeopardise the whole process including by providing an opening to vulture funds
  • VFs buy debts on the secondary market, so not from the state as a creditor, and if in a tax haven, they can do so anonymously
  • They buy debt in the knowledge that the state cannot repay the debt, but they speculate that most creditors’’ will accept restructuring – giving it the capacity to subsequently reimburse the full value of the debt which the vulture funds seek by suing the state, demanding also interest, penalties and legal fees
  • They often win, and even up to 20 times their original investment

What are the implications of their activities?

  • Since VFs usually win, their activity jeopardises state restructuring
  • Hence restructuring is discouraged for all creditors,
  • Restructuring becomes more costly and slower, and risk more costly debt crises
  • States’ investment in development is compromised, as money is diverted to VFs

What are the available solutions?

  • This is why an international mechanism for debt restructuring

Jurgen Kaiser

  • Need to have mechanisms to bind dissenting creditors in order to deny space for vultures to litigate.
  • Recall many of the first cases were not to do with bonds, e.g. Donegal vs. Zambia which was about an official loan from then-socialist Romania
  • $2.6 billion currently exist on 36 HPIC countries by non Paris club creditors that should have been cancelled. Currently these debts are not being served
  • Mozambique is a cause for concern, particularly regarding the recent gas field discoveries – perhaps drawing in vultures now to exploit old debt to appropriate future income
  • The reliance on collective action clauses can help in future but cannot address such old debt
  • Currently the Paris club seeks to impose that no creditor cannot demand better terms than Paris Club
  • We have a theatre of creditor responsibility demanding debtors’ abolish non Paris debt, but without any mechanism to support the debtor to do so – leaving the debtor with all the burden and all the risk

Eric LeCompte

  • National Laws are important
  • IMF paper noted that CACs – should they fail to address problems such as those following Argentina (but prior to the decision) – would also need changes to laws in financial jurisdictions

Gerhard Schick,

  • Focus on German debate; Germany voted against debt resolution mechanism at UN
  • In recent years, beginning with the Greek question in 2010 the issue of debt has been moralized in Germany – relating it to guilt that has to be redeemed at any cost
  • It is a little bit weird, as of course in the private sector a debt resolution mechanism exists for companies etc.
  • For governments, the German position has been radically and overwhelmingly moral
  • Specalised law firms exist to exploit tax law – the idea is to not be tax efficient, but to use tax laws as if they were a gold mine to make money.
  • Currently there is a parliamentary probe into dividend arbitrage that seems to be similar to theft – by seeking a tax refund to which they were e not entitled.
  • hence tax problems are not just evasion or avoidance, but an unrelenting effort to capitalise. Similarly we see free riding in these forms of exploitation of the investment system where no service is provided and is good for almost nobody, especially it exploits responsible creditors
  • Hence a country like Germany should participate in such an activity – we are not home to vulture funds. The moralism and the lack of understanding to protect decent actors in markets has led to a situation of lack of awareness of the behavior of market participants
  • In the Bundestag we have had hearings – but in the current coalition government treaty there is no mention of the vulture fund problem (as opposed to the previous discussion).