Belgian legislation against vulture funds should be preserved – UN rights expert urges

16 June 2016 by Juan Pablo Bohoslavsky , United Nations - Human Rights

Press Conference of the belgian civil society in Brussels, 15 june 2016, to announce the defence of the belgian law against NML Capital

GENEVA (15 June 2016) – The United Nations Independent Expert on foreign debt and human rights, Juan Pablo Bohoslavsky, expressed today his hope that core provisions of a Belgium law limiting vulture funds litigation will survive a constitutional law challenge.

The law, which was passed by the Belgian Parliament in 2015 to prevent ‘vulture funds Vulture funds
Vulture fund
Investment funds who buy, on the secondary markets and at a significant discount, bonds once emitted by countries that are having repayment difficulties, from investors who prefer to cut their losses and take what price they can get in order to unload the risk from their books. The Vulture Funds then pursue the issuing country for the full amount of the debt they have purchased, not hesitating to seek decisions before, usually, British or US courts where the law is favourable to creditors.
’ from making huge profits out of financial crises, has been challenged by a Cayman Islands based hedge fund, NML Capital Ltd., before the Constitutional Court of Belgium.

Vulture funds buy public debt from insolvent States at huge discount, deliberately refuse to participate in debt restructuring efforts, and try to make later gains by litigating against the debtor States with the aim to seek full repayment of the nominal value of the debt and its interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. .

“Vulture fund litigation has significantly increased during the last decades. It encourages hold-out behaviour and makes it more difficult to solve financial crises in a timely, fair and orderly manner,” Mr. Bohoslavsky noted. “Delayed debt restructuring agreements increase the suffering of the people in countries hit by financial crises.

The UN Independent Expert emphasised that “vulture fund litigation has come at a significant cost for some States, diverting public funds into questionable forms of debt service Debt service The sum of the interests and the amortization of the capital borrowed. , which should better be used for fighting poverty, improving public health care or education, and boost the debtors’ economies.

Compared to similar legislation in the United Kingdom protecting heavily indebted poor countries Heavily Indebted Poor Countries
In 1996 the IMF and the World Bank launched an initiative aimed at reducing the debt burden for some 41 heavily indebted poor countries (HIPC), whose total debts amount to about 10% of the Third World Debt. The list includes 33 countries in Sub-Saharan Africa.

The idea at the back of the initiative is as follows: a country on the HIPC list can start an SAP programme of twice three years. At the end of the first stage (first three years) IMF experts assess the ’sustainability’ of the country’s debt (from medium term projections of the country’s balance of payments and of the net present value (NPV) of debt to exports ratio.
If the country’s debt is considered “unsustainable”, it is eligible for a second stage of reforms at the end of which its debt is made ’sustainable’ (that it it is given the financial means necessary to pay back the amounts due). Three years after the beginning of the initiative, only four countries had been deemed eligible for a very slight debt relief (Uganda, Bolivia, Burkina Faso, and Mozambique). Confronted with such poor results and with the Jubilee 2000 campaign (which brought in a petition with over 17 million signatures to the G7 meeting in Cologne in June 1999), the G7 (group of 7 most industrialised countries) and international financial institutions launched an enhanced initiative: “sustainability” criteria have been revised (for instance the value of the debt must only amount to 150% of export revenues instead of 200-250% as was the case before), the second stage in the reforms is not fixed any more: an assiduous pupil can anticipate and be granted debt relief earlier, and thirdly some interim relief can be granted after the first three years of reform.

Simultaneously the IMF and the World Bank change their vocabulary : their loans, which so far had been called, “enhanced structural adjustment facilities” (ESAF), are now called “Growth and Poverty Reduction Facilities” (GPRF) while “Structural Adjustment Policies” are now called “Poverty Reduction Strategy Paper”. This paper is drafted by the country requesting assistance with the help of the IMF and the World Bank and the participation of representatives from the civil society.
This enhanced initiative has been largely publicised: the international media announced a 90%, even a 100% cancellation after the Euro-African summit in Cairo (April 2000). Yet on closer examination the HIPC initiative turns out to be yet another delusive manoeuvre which suggests but in no way implements a cancellation of the debt.

List of the 42 Heavily Indebted Poor Countries: Angola, Benin, Bolivia, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Comoro Islands, Congo, Ivory Coast, Democratic Republic of Congo, Ethiopia, Gambia, Ghana, Guinea, Guinea-Bissau, Guyana, Honduras, Kenya, Laos, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Nicaragua, Niger, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Somalia, Sudan, Tanzania, Togo, Uganda, Vietnam, Zambia.
, the Belgian law is unique as it provides a more comprehensive cover against excessive financial claims by vulture funds,
” he said.

The Belgian law limits the ability of creditors to pursue before its courts claims that are manifestly disproportional to the amount they had paid for the debt. As many vulture funds are based in secrecy jurisdictions, the law targets in particular creditors domiciled in so-called tax havens or in States that refuse to participate in an automatic exchange of tax information.

Under the law to restrict the activities of vulture funds, creditors cannot seek full repayment of public debt held by them, if such payments significantly undermine the public finances of a debtor State and compromise the social-economic development of its population.

“The way vulture funds behave must be regulated to ensure that financial crises can be solved timely and in full respect of economic and social rights,” Mr. Bohoslavsky said. “I am confident that the Belgian Constitutional Court is aware of the international importance of this national law currently under judicial review and its human rights implications.

“I welcome that the Belgian law implements a key recommendation contained in a resolution [1] of the UN Human Rights Council, which called upon States to consider implementing legal frameworks curtailing predatory vulture fund activities within their jurisdictions,” the expert concluded.

Juan Pablo Bohoslavsky (Argentina) was appointed as Independent Expert on the effects of foreign debt and human rights by the United Nations Human Rights Council on 8 May 2014. Before, he worked as a Sovereign Debt Sovereign debt Government debts or debts guaranteed by the government. Expert for the United Nations Conference on Trade and Development UNCTAD
United Nations Conference on Trade and Development
This was established in 1964, after pressure from the developing countries, to offset the GATT effects.

(UNCTAD) where he coordinated an Expert Group on Responsible Sovereign Lending and Borrowing. His mandate covers all countries and has most recently been renewed by Human Rights Council resolution 25/16.

Learn more

Read the report on vulture funds by the former Independent Expert on foreign debt and human rights (A/HRC/14/21)

The Independent Experts are part of what is known as the Special Procedures of the Human Rights Council. Special Procedures, the largest body of independent experts in the UN Human Rights system, is the general name of the Council’s independent fact-finding and monitoring mechanisms that address either specific country situations or thematic issues in all parts of the world. Special Procedures’ experts work on a voluntary basis; they are not UN staff and do not receive a salary for their work. They are independent from any government or organization and serve in their individual capacity.


[1Check the UN Human Rights Council resolution 27/30 from 26 September 2014:

Juan Pablo Bohoslavsky

is the coordinator of the postgraduate program on “Public policies and human rights in Covid-19 times,” Universidad Nacional de Río Negro, Argentina. Previously, he was the United Nations Independent Expert on Foreign Debt and Human Rights (June 2014–May 2020).

Other articles in English by Juan Pablo Bohoslavsky (17)




8 rue Jonfosse
4000 - Liège- Belgique

00324 60 97 96 80