TWN Info Service on Finance and Development (Sept14/04)
30 September 2014
Third World Network  

United Nations: Rights Council condemns activities of vulture funds
Published in SUNS #7884 dated 30 September 2014
 
Geneva, 29 Sep (Kanaga Raja) -- The UN Human Rights Council on Friday condemned the activities of vulture funds "for the direct negative effect that the debt repayment to those funds, under predatory conditions, has on the capacity of Governments to fulfil their human rights obligations, particularly economic, social and cultural rights and the right to development."
 
In a resolution (A/HRC/27/L. 26) adopted by a vote, the Council requested its Advisory Committee, composed of 18 experts, to prepare a research-based report on the activities of vulture funds and the impact on human rights, and to present a progress report of that research to the Human Rights Council for its consideration at its thirty- first session.
 
The Human Rights Council held its regular twenty-seventh session from 8-26 September.
 
The resolution on the activities of vulture funds was adopted by a vote of 33 in favour, five against and nine abstentions.
 
Those that voted in favour were Algeria, Argentina, Benin, Botswana, Brazil, Burkina Faso, Chile, China, Congo, Costa Rica, Cote d'Ivoire, Cuba, Ethiopia, Gabon, India, Indonesia, Kazakhstan, Kenya, Kuwait, Maldives, Mexico, Morocco, Namibia, Pakistan, Peru, Philippines, Russian Federation, Saudi Arabia, Sierra Leone, South Africa, United Arab Emirates, Venezuela and Viet Nam.
 
The Czech Republic, Germany, Japan, United Kingdom and the United States voted against the resolution, while Austria, Estonia, France, Ireland, Italy, Montenegro, Republic of Korea, Romania and the former Yugoslav Republic of Macedonia abstained.
 
The draft resolution was introduced at the Human Rights Council by Argentine Foreign Affairs Minister Hector Timerman on behalf of Argentina, Algeria, Bolivia, Brazil, Cuba, Pakistan, Russia, Uruguay, and Venezuela.
 
Pointing out that a total of 74 co-sponsors have supported this draft resolution, the Argentine Minister told the Council on Friday that the issue of foreign debt and its effects on the enjoyment of human rights has been on the agenda of various UN human rights bodies for over two decades.
 
Since 1990, the Human Rights Commission and subsequently the Human Rights Council, in various resolutions and decisions, highlighted the challenges represented by the burden of foreign debt on the full enjoyment of human rights, in particular economic, social and cultural rights, he said.
 
Along these lines, he noted, the independent expert on foreign debt, Mr Cephas Lumina, had referred to vulture funds, describing their activities as those that managed to divert a country's financial resources that was saved from debt cancellation, thereby undermining the capacity of governments to guarantee the human rights of their people.
 
For the most part this has happened in Africa, where the activities of vulture funds have endangered or even removed the capacity of these states to carry out their development and poverty reduction programmes.
 
The Argentine Minister highlighted the need for financial reform along ethical lines that would produce in its turn economic reform to benefit everyone.
 
It is not only developing countries that have highlighted the threat of vulture funds to the full enjoyment of human rights. As far back as 2002, the then finance minister (Chancellor of the Exchequer) of the United Kingdom, and subsequently Prime Minister, Mr Gordon Brown, had referred to the severity of the problem in a special session of the UN General Assembly.
 
According to Mr Timerman, a legal vacuum exists in terms of debt restructuring and it leaves sovereign states vulnerable to the abuse of speculators.
 
In some general comments before the vote, Algeria, referring to a report of the independent expert Mr Lumina, said that vulture funds have negative effects on debt relief measures that have been adopted by the international community and these funds have a destabilising effect on the economies of countries that are the victims of these vulture funds.
 
Algeria said that among the main messages of the draft resolution are the fact that the international financial system is inadequate today and therefore needs to be reformed; that the debt burden has a major impact on developing countries and their development; and that there is need to shed an objective light on the activities of vulture funds and their impact on the right to development.
 
Cuba said that the draft resolution brings before the Council a subject of vital importance to developing countries, namely, the negative effect of vulture funds on the enjoyment of human rights.
 
Venezuela said that for many years it has been hearing in international fora, in particular in the Human Rights Council about the negative effects on the enjoyment of human rights of the excessive and unjust debt burden. Today, this is exacerbated by the global crisis of capitalism, it added.
 
Pakistan said that all countries have a sovereign right with regards to their debt restructuring. Highlighting for this to not be influenced by political and extraneous pressure tactics, it said that these tactics undermine the capacity of states particularly developing countries to fulfil their human rights obligations and to achieve sustainable development.
 
Pakistan further said that vulture funds reflect the inherent flaws in the current financial system and could be used to challenge the sovereignty of indebted countries through economic pressure and huge financial implications.
 
In an explanation of the vote before the vote, the United States said that it will call for a vote and will vote ‘no' on the resolution.
 
It said that it remains committed to the stability of the international financial system. It however said that this resolution raises serious concerns.
 
Discussions on mechanisms to advance orderly debt restructuring are technical in nature and if not handled appropriately, risk creating uncertainties which could drive up borrowing costs or even choke off financing for developing countries, it maintained.
 
There are already active discussions underway in other more appropriate fora that take these complex technical considerations into account, it said, adding that the issue that this resolution purports to address falls outside of the scope and mandate of the Human Rights Council and does not belong in this forum.
 
Italy, on behalf of the European Union members of the Human Rights Council, said that there should be no doubt over its solidarity with countries that have faced or are still facing economic and financial crisis. However, in its view, the Human Rights Council is not the appropriate forum for discussing issues related to financial policy.
 
France, announcing its intention to abstain on the vote, said that the effectiveness of international mechanisms for the restructuring of sovereign debt is a core concern of France. It said its stance and position of amicus curiae in the dispute between Argentina against litigious creditors before the US Supreme Court clearly demonstrates France's commitment.
 
However, it considers that the issue of restructuring of sovereign debt does not fall within the mandate of the Human Rights Council. The issue of sovereign debt restructuring should be discussed within the competent international bodies, which is already the case, it said, citing as examples the International Monetary Fund and the Paris Club.
 
In the resolution adopted on Friday, the Human Rights Council noted the concern expressed in the declaration that Heads of State and Government of the Group of 77 and China issued on the occasion of the summit entitled "For a New World Order for Living Well", held in Santa Cruz de la Sierra, Bolivia, on 14 and 15 June 2014, that reiterates the importance of not allowing vulture funds to paralyse the debt restructuring efforts of developing countries, and that these funds should not supersede the State's right to protect its people under international law.
 
It affirmed that debt burden contributes to extreme poverty and hunger and is an obstacle to sustainable human development, to the realization of the Millennium Development Goals and to the right to development, and is thus a serious impediment to the realization of all human rights.
 
The Council also noted that "the international financial system does not have a sound legal framework for the orderly and predictable restructuring of sovereign debt, which further increases the economic and social cost of non-compliance."
 
It expressed its concern about the voluntary nature of international debt relief schemes which has created opportunities for vulture funds to acquire defaulted sovereign debt at vastly reduced prices and then seek repayment of the full value of the debt through litigation, seizure of assets or political pressure.
 
Condemning the activities of vulture funds, the Council reaffirmed, in this context, that "the activities of vulture funds highlight some of the problems in the global financial system and are indicative of the unjust nature of the current system, which directly affects the enjoyment of human rights in debtor States."
 
It called upon States to consider implementing legal frameworks "to curtail predatory vulture fund activities within their jurisdictions".
 
The Council encouraged all States to participate in the negotiations aimed at establishing a multilateral legal framework for sovereign debt restructuring processes, as referred to in General Assembly resolution 68/304, and invited States participating in the negotiations to ensure that such a multilateral legal framework will be compatible with existing international human rights obligations and standards.