Stop Vulture Culture

1

• Stop Vulture Culture
• A Presentation for the African Diplomatic Corps
• June 24, 2009
• Melinda St. Louis
• Jubilee USA Network

2
Presentation Outline

• Debt cancellation and the threat of vulture funds
  for impoverished countries
• How vulture funds operate
• The Stop VULTURE Funds Act (HR 2932)
• Next steps

3
Jubilee USA Network

• US arm of global Jubilee campaign working in 60
  countries to cancel the unjust and crushing debts
  of impoverished countries
• Today, Network includes 75 religious
  denominations, labor, environmental, and
  solidarity groups

4
The Crisis of Debt

• The crisis of debt faced by developing nations is
  a major barrier to development and global
  economic justice
• Africa pays 13 billion a year in debt service.
  More than 15 billion needed to stem the tide of
  the AIDS pandemic
• Many nations in Africa, Asia, Latin America spend
  more on debt than health or education

5
Debt Cancellation Initiatives

• 1999 - G-8 leaders committed to limited debt
  relief through the Heavily Indebted Poor
  Countries Initiative (HIPC)
• 2005 Multilateral Debt Relief Initiative (MDRI)
• Donor countries have committed over 50 billion
  in bilateral and multilateral debt cancellation
  to promote economic development and
  poverty-reduction

6
Positive Results of Debt Cancellation

• Allowed Tanzania to abolish school fees and put
  1.6 million children in school
• Gave 2.2 million people in
• Uganda access to clean water
• Helped fight HIV/AIDS in Mali,
• Mozambique, Senegal
• The World Bank found that countries that have
  received debt relief have increased social
  spending by 75

7
Enter Vulture Funds
8
Donegal vs. Zambia case

• Donegal bought Zambian debt for 3.28 million in
  1999
• Seven years later, sued the Zambian government
  for 55 million after debt cancellation.
• The British High Court ruled that the government
  of Zambia pay Donegal 15.4 million, 65 percent
  of what was saved in debt relief delivered
  through the MDRI

9
The Debilitating Costs of Vulture Lawsuits

• Ethiopia and Niger - a ratio of lawsuit costs to
  debt service obligations in one year of over 200
  percent
• Niger - lawsuit costs were 52.2 percent of health
  and education expenditure
• Cameroons budget revenue totaled 52.6 million,
  while lawsuit costs totaled 51.7 million, or
  98.3 percent of revenue

10
Coalition to Stop Vulture Funds
United Church of Christ, Justice and Witness
Ministries
And many more organizations and grassroots groups
who support debt cancellation.
11
Types of Sovereign Debt Creditors

• IMF/Work Bank (Multilateral Creditors)
• Paris Club (Official Bilateral Creditors)
• Non-Paris Club Official Creditors
• London Club (Commercial Creditors)
• Holdouts
• Vulture Funds

12
The Problems with Vulture Funds Profiteering in
Defaulted Sovereign Debt

• Preferential Treatment of Vulture Creditors Over
  Taxpayers and Cooperative Creditors
• Profiteers at Expense of the Poor
• Disrupts Trade
• Imposes Indirect Costs/Transaction Costs
• Disrupts Debt Relief Efforts
• Obstructs Transparency

13
Variety of Actions Taken by Vulture Funds to
Coerce Payment

• Direct Litigation Against the Sovereign in
  Foreign Courts
• Attachments of Embassy Property
• Subpoenas to visiting officials
• Seizure of Commercial Assets
• Indirect Litigation
• Against Trading Partners
• Against Financial Service Providers
• Against Government Officials
• Against Cooperative Creditors
• Against Donors
• Lobbying to Disrupt Debt Relief or Aid
• Public Relations
• Lobbying to Obtain Their own Legislative Relief

14
Judgment Evading Foreign States Accountability
Act

• 2008110 HR 7205 (Sep. 28, 2008)
• 2009111 HR 2493 (May 19, 2009)

15
The Development of the Stop VULTURE Funds Act
16
Key Provisions of the Stop VULTURE Funds Act

• Limits on Profiteering
• Prohibits Use of Courts in Aid of Profiteering
• Mandatory Disclosures
• Gate Keeping by Court
• Discovery to Ensure Accuracy of Disclosures

17
I. Limits on Profiteering

• Makes it Illegal to Profiteer in Defaulted
  Sovereign Debt   
• Profiteering in Sovereign Debt is defined as
  attempting to collect more than you paid for
  defaulted sovereign debt, plus six percent (6)
  annual interest on what you paid.
• Applies to US Persons or Persons Acting in the
  United States.

18
II. Prohibits Use of Courts in Aid of
Profiteering

• This would serve to close the door of US Courts
  to lawsuits where creditors seek to win more than
  6 per annum return on the amount they pay for
  defaulted debt.

19
III. Mandatory Disclosures

• Mandatory Certifications by Sovereign Creditors
  Whenever They Seek Judicial Assistance
• How much they paid
• Who they are
• Certification that they have paid no bribes

20
IV. Gate Keeping by Court

• Courts Are Required to Review the Creditors
  Certifications to Ensure Compliance with Act
  Prior to Issuing Any Process for the Collection
  of Defaulted Sovereign Debt
• Judicial Process Issued in Violation of Act Is
  Void

21
V. Discovery to Ensure Accuracy of Disclosures

• Creditors Must Submit To Discovery to Allow Any
  Party in Litigation to Test the Accuracy of Their
  Certifications

22
Other Provisions of the Bill

• Protection Limited to Qualified Poor Countries
• Requires Treasury Department to Maintain a List
  of Qualified Poor Countries
• Conditionality to Protection
• No gross violations of human rights
• No excessive level of military expenditures
• No support for terrorism
• Cooperation on international narcotics control
• Notification to Protected Countries
• Certifications centrally filed and maintained as
  public records

23
Next Steps

• Supporting this legislative initiative and other
  efforts to impede vulture fund activity
• For additional information and follow up
• www.jubileeusa.org
• www.transafricaforum.org
• www.africaaction.org
• Thank you for your kind attention!