Stop the Vultures!

Edmund Woodfield investigates the morally-dubious world of the debt vulture.

Like vultures, companies such as Donegal International wait until their prey is vulnerable and swoop down. Campaigners protest against vulture funds outside the court where Zambia’s case was decided. Gordon Brown has called vulture funds perverse and immoral.

Picture the scene: you are walking across a desert desperately trying to reach civilisation. You are sick and have run out of water. Now tilt your neck backwards to look up at the sky. Above you there is a group of birds circling. They can tell you are weak. It won’t be long before they can feast on you.

Here the scene changes. It’s a respectable-looking office building. But appearances can be deceptive. You are still looking at vultures, but of a rather different kind. Welcome to the world of the vulture fund. A world where people watch debtors struggling until the time is right to swoop in. These companies buy unpayable debts at knock-down prices and then sue the indebted person or people for the whole debt amount.

Take the country of Zambia for example. In 1999, a so-called vulture fund bought $30 million of Zambia’s debt for just $3.3 million from Romania. Zambia was negotiating to have this debt cancelled, when a company called Donegal International bought the debt from Romania for a higher price than Zambia could pay. But the thing is, Donegal International weren’t so keen on debt relief and decided that Zambia should pay the whole $30 million plus interest and costs, bringing the total to $55 million. Not a bad investment.

The case went to the British courts, which this month ruled that the $55 million figure was too high. But Zambia will still have to pay some of it – probably $20 million or so. I don’t know about you, but that doesn’t seem like a very satisfactory outcome. But here’s the problem: what vulture funds do isn’t illegal.

Seeing as this demonstrates something of a problem in the laws surrounding this area, I am inclined to agree with Trisha Rogers of Jubilee Debt Campaign who said: “There is a clear need for a fair, comprehensive and binding framework for dealing with poor country debt which will ensure that commercial creditors will never again have the chance to profit in this way.”

Oxfam and Jubilee Debt Campaign are working together against this immoral scandal. You can send an email to the company to lobby them not to take the money from Zambia on Oxfam’s website, and you can tell Gordon Brown to sort out the system to stop this happening again, on JDC’s website.

$20 million would be best spent on providing healthcare and education in Zambia, so let’s make sure the same bad use of funds never happens again.