vulture funds: action trick 2

Last week a high court judge in London ruled whether a so-called ‘vulture fund’, Donegal International, could extract more than $40m from Zambia for a debt which it bought for less than $4m.

In 1979 the Romanian government lent Zambia money to buy Romanian tractors. Zambia was unable to keep up the payments and in 1999 Romania and Zambia negotiated to liquidate the debt for $3m. But before the deal could be finalised a ‘vulture fund’ stepped in and bought the debt from Romania for less than $4m. They are now suing the Zambian government for the original debt plus interest which they calculate at over $40m.

Last week the judge did not accept all the ‘vulture funds’ arguments – and said that their witnesses had at times been “dishonest” – but ruled that legally they are entitled to something from Zambia. The exact total of what Donegal is ‘entitled’ is to be determined, but may be around $20 million. This would be half of the amount that Zambia is due to save from debt relief this year.

BBC Newsnight last week ran the story and attempted to interview the ‘vulture fund’ owner – there is a good report of the story on their website.

Whilst legally the ‘vulture fund’ may be entitled to money from Zambia morally surely the case is clear. The company brought the debt at a highly reduced price in 1999, at a time when it would have known that Zambia was considered poor and indebted enough to qualify for debt relief. One month before Zambia was finally granted debt cancellation in April 2005 – debt relief intended to improve its economy and provide the necessary resources to meet its peoples’ needs – Donegal launched its lawsuit to cash in on Zambia.

Jubilee Debt Campaign, together with Oxfam, is calling on Donegal International not to claim this money. Add your voice to the campaign – email Donegal not to claim money from Zambia

Five years ago Gordon Brown told the United Nations that the vulture funds were perverse and immoral. Jubilee Debt Campaign are also campaigning to outlaw the vulture fund practice. Add your voice to the campaign – email Gordon Brown to outlaw the vulture fund practice.