The Government is today launching a consultation on legislation that would protect 40 of the world’s poorest, most heavily indebted countries from the behaviour of a minority of commercial creditors, such as so-called ‘vulture funds’. These creditors do not co-operate with international debt relief initiatives and instead seek to exploit the debt relief being delivered by the UK, and other creditors, by litigating to extract the full nominal value of these debts through the courts.

The UK has led the international community in providing debt relief to the world’s poorest countries.  Over $110bn has been committed internationally to these countries to support their economic growth and poverty reduction strategies. But the actions of those creditors who do not provide their full share of debt relief, and instead pursue their own claims in full through the courts, threaten to undermine this international approach.  For example, so-called ‘vulture funds’, who buy up defaulted debts at very low prices when a country is in economic distress and aggressively litigate to recoup the debt’s full value. This can negate the benefits of debt relief provided by others. The Government is determined to ensure that these activities do not prevent resources being freed up to finance development and tackle poverty in the poorest countries.

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