A historic law that helps to stop some of the worst abuses of developing countries’ debts has passed Parliament this week. The act will become law next week when it receives Royal Assent from the Queen.
The act, called the ‘Debt Relief (Developing Countries) Act 2010’, outlaws an exploitative practice used by so-called ‘vulture funds’, which are private investment companies that buy up unpayable debt from developing countries at cut prices and then, once the countries have received debt relief on other debts (for example to the World Bank and IMF), sue the countries for repayment in full plus the costs of the lawsuit.
The UK previously had very relaxed laws to govern this practice, and last November two Vulture Funds were awarded $20 million in the High Court from Liberia – the second poorest country in the world – in payment for a debt dating back to the 1970s. This law is expected to make that verdict unenforceable.
The bill applies to the group of 40 countries that are eligible for full debt relief through the World Bank – called the ‘Highly Indebted Poor Countries’. The passing of this bill closes a notorious loophole through which companies could exploit the debt relief given by developed country governments through the World Bank. For more information see the Jubilee Debt Campaign’s website. The full text of the Act can be read here.