Britain’s parliament passed a law yesterday limiting the ability of so-called vulture funds to sue some of the world’s poorest countries in British courts for full repayment of debts.
The law applies to the debt of the 40 countries in the World Bank and International Monetary Fund’s Heavily Indebted Poor Countries initiative.
It seeks to ensure creditors cannot pursue debt repayment beyond a level assessed as sustainable by the World Bank.
The law would restrict the activities of vulture funds, which buy developing countries’ sovereign debt at discounted prices, then seek to recover its value in full through the courts.
The law has been rushed through in the last days before parliament is dissolved before the May 6 election.
It gained final approval in the lower House of Commons on Wednesday and in the upper House of Lords yesterday, winning cross-party support.
“I’m delighted. A lot of people have put a lot of efforts into this from both houses of parliament,” Joyce Quin, a lawmaker from the ruling Labour Party who introduced the bill in the House of Lords, told Reuters.
“We’ve seen very distressing examples in Zambia and Liberia and this will stop vulture fund activity, which not only is reprehensible in its own right in trying to make excessive profits out of impoverished countries but also detracts from the aid efforts of governments,” she said.
The law takes effect initially for one year. Parliament will have to decide a year from now whether to extend it for another year or make it permanent.
Nick Dearden, director of Jubilee Debt Campaign, which calls for the cancellation of poor countries’ unpayable debts, said it was a landmark law.
“With this act, the UK has become the first country in the world to stop vulture funds using its courts to profiteer from poverty,” he said. “We now call on other governments, particularly the US administration, to take similar steps to outlaw vulture practices.”