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Belgian legislation against vulture funds should be preserved – UN rights expert urges
by Juan Pablo Bohoslavsky , United Nations - Human Rights
16 June 2016

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’ 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.

“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, 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, 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 Expert for the United Nations Conference on Trade and Development (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.

Footnotes :

[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).

United Nations - Human Rights