Taming the Vultures: Are New Measures Enough to Protect Debt Relief Gains?

Added 28 Aug 2008

The actions of so-called vulture funds – or speculative investors in the debt of distressed companies or sovereign states – have grabbed international media headlines over the past 18 months. Some of the dramatic media headlines have read: Vultures leave the developing world hungry,” “ How top   London law firms help vulture funds devour their prey,” and “Vulture funds against poor countries.” [i]   The issue became a particularly hot topic in 2007 when it was revealed that a company by the name of Donegal International was suing the Government of Zambia in the London courts for US$ 55 million on a debt it had paid just US$ 3.2 million to acquire. The company was eventually awarded US$ 15.4 million. The concern voiced by NGOs and governments alike is that the small gains in debt cancellation which countries such as Zambia have recently benefited from could be instantly wiped-out by aggressive vulture fund litigation.


Since then, there has been a flurry of announcements by individual creditor governments – such as Belgium, the UK and USA – on steps they are taking to combat such practices. International bodies such as the European Commission, Paris Club and World Bank have also announced their own measures to combat so-called vulture funds. This is due in large measure to advocacy and awareness-raising by Eurodad member organisations and other allies in these countries.


This Eurodad report explains and critically assesses some of the recent official policy announcements and asks how robust they are. Will they achieve their stated aims, and what are some of the views and proposals of heavily indebted poor country governments themselves? The paper also highlights the worrying increase in recent cases of vulture fund action, in particular against some of the world’s poorest countries. It ends with a demand for immediate action on a series of proposals which Eurodad believes could be more effective to tackle the problem in the long-term.

In particular, the key recommendations of this report are that:

  1. Governments enact legislative changes at the national level to prevent vulture funds from using national courts to pursue their claims. Legislation should make profiteering in the defaulted sovereign debt of developing countries illegal.
  2. Governments should make it clear that internationally-agreed debt relief measures are binding on all creditors. Governments of industrialised countries should publicly support developing nations’ decisions not to settle commercial speculative litigators’ claims and instead demand that commercial creditors offer the same debt relief terms as other creditors.
  3. The international community should vigorously promote the implementation of some form of fair and transparent debt work-out procedure at the international level. This framework will ensure that all legitimate creditors’ claims are dealt with fairly and efficiently while the citizens of the debtor nations are protected. The UN FfD process should result in a concrete and time-bound plan to take forward this work.
  4. The international community should support the putting in place of international – and legally binding – standards on responsible financing which contain provisions restricting the right of creditors to unilaterally assign the claim to another entity. The proposals outlined in Eurodad’s Charter on Responsible Financing represent one constructive approach.[ii]
  5. The international community should support urgent international action to tackle the tax haven problem. Tax havens facilitate vulture fund activities. Immediate steps to be taken include financial levies on transactions with tax havens and sanctions on tax havens who do not co-operate on the disclosure of information. Governments should actively support measures to force companies to report their financial activities with a breakdown for each country they operate in.
  6. Debtor Governments should improve the loan contraction process at national levels to ensure that it is transparent, participatory and accountable to citizens. This should be combined with urgent attention to improve debt management capacities.

[i] See: Guardian, How top London law firms help vulture funds devour their prey, October 17 2007:, Guardian, Vultures leave the developing world hungry, October 20 2007: and Le Monde, Fonds vautours contre pays pauvres, par Danny Leipziger, 25 juin 2007 :

[ii]   Eurodad Responsible Financing Charter, February 2008: