June 2007
Response to Jubilee Debt and Oxfam email campaign on Vulture Fund Litigation against Zambia
We share your sense of outrage about the activities of vulture funds and the problems they cause for countries that have received debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative.
Zambia worked very hard to complete the HIPC Initiative and received significant debt relief under HIPC and the Multilateral Debt Relief Initiative (MDRI), reducing its external debt from $7.1 billion in 2004 to $0.5 billion at the end of 2006. It has used some of its savings from debt relief to abolish health fees in rural areas. As a result, thousands of people are receiving free healthcare. The behaviour of vulture funds undermines these successes and diverts much-needed resources away from the fight against poverty.
We congratulate the Government of Zambia on the strong defence it mounted in this legal case. This is the first defence in a case of this kind that has ever been even partially successful, and its impact will be felt across the world. Vulture funds cannot continue to expect to profit from the world's poorest countries.
We are determined to limit the damage done by such funds. The UK will therefore:
- call on the World Bank to make the IDA Debt Reduction Facility available to HIPC countries before they reach Decision Point, in order to help countries to eliminate their commercial debts at the earliest possible opportunity and thereby reduce the likelihood of debts being sold on to aggressive creditors;
- stand ready to scale up our contribution to the Debt Reduction Facility in support of this policy change;
- take forward talks with leading commercial creditors on a voluntary code of conduct that will set out the actions that responsible creditors should take to help reduce the risk of litigation, including the requirement to participate in collective action to reduce unsustainable debts;
- work with our G8 partners to develop a Charter on Responsible Lending that includes a commitment to protect developing countries from vulture fund activity;
- work to ensure that HIPCs have access to the legal assistance they need to defend themselves against litigation, including by supporting proposals at the African Development Bank to develop a Legal Assistance Facility to help countries facing legal action gain access to technical and legal support;
- continue to strengthen debt management capacity amongst HIPCs.
We continue to raise this issue in international fora. At the G8 Finance Ministers meeting on 18th May Ministers expressed their concern about the actions of some litigating creditors against Heavily Indebted Poor Countries and agreed to work together to identify measures to tackle this problem, based on the work of the Paris Club. We will continue to work with our international partners on this issue.
I hope this is helpful.
Yours sincerely,
GORDON BROWN
HILARY BENN
