Jersey Chief Minister Ian Gorst is proposing legislation to limit vulture funds profiteering on debt claims from some of the world’s poorest countries. Vulture funds buy up debt cheaply then hold out for huge profits from the countries concerned.
US vulture fund FG Hemisphere is currently suing the Democratic Republic of Congo for $100 million in the Jersey courts on a debt it bought for just $3 million.
The final appeal in the case is expected to be heard in the next few months. The debt originally comes from loans to Congolese dictator General Mobutu during the Cold War.
Jubilee Debt Campaign report that the proposed legislation will follow a UK Act of Parliament introduced in 2010, which limits debt claims against forty impoverished countries in line with internationally agreed debt relief. However, it only applies to debts which originate prior to 2004, and does not cover all low-income countries.
The UK Treasury estimates the UK Debt Relief (Developing Countries) Act passed in 2010 will save some of the most impoverished countries £145 million over six years.
"This is an important step," said the Jubilee Debt Campaign's Tim Jones, "But the States of Jersey need to implement the bill urgently to prevent a vulture fund claiming $100 million from the Democratic Republic of Congo, one of the most impoverished countries in the world".
He added, "Jersey should act to stop vultures funds profiteering from all countries for good".
Traditionally, vulture funds have preyed on countries in the global South, although they are beginning to target indebted Western countries such as Greece.
There is evidence that vulture fund speculators have been buying up Greek debt at a low price, and are refusing to take part in write-downs of the debt, holding out for large profits. Recent estimates have suggested that speculators could account for as much as €50 billion of Greek debt, and that companies have bought debt at a price suggesting a 75 per cent chance of default.