Belgium adopts law against ‘vulture funds’

Jubilee Debt Campaign

Members of the Jubilee Debt Campaign hand in a statement of support for Argentina's right to refuse to pay debts claimed by vulture funds at the Argentine Embassy. London, June 2014. [jubileedebt/Flickr]

Belgium has passed a law to cap how much so-called “vulture funds” can recoup from government debt bought at rock-bottom prices from countries teetering on the brink of default.

Under the new law, approved overwhelmingly by the country’s main political parties, if a Belgian judge determines a fund is acting as a “vulture,” then it cannot claim more than the discounted price paid for the bonds, rather than their face value.

The move comes after Belgium was dragged into a more than decade-long battle between a group of US hedge funds led by NML Capital Management and Argentina over some $1.3 billion of defaulted debt.

In May, NML demanded Argentinian accounts be frozen in Brussels – a move no longer allowed under the new law, which means a Belgian judge can refuse legal decisions made in other countries.

The decision is particularly important as Belgium is home to giant clearing house Euroclear, which processes vast numbers of global financial transactions.

In March, a US judge ordered Euroclear to block any payments concerning Argentine bonds and notify the hedge funds that are claiming the debt.

Ahmed Laaouej, the Socialist MP who first put forward the law, hailed its passing as a “victory over the vultures of finance” that came about “despite strong pressure from several national and international lobby groups”.

“These pressures came from representatives of American finance and law firms operating in Europe and defending the interests of some clients, in this case vulture funds,” he said to AFP.

“This law is a strong signal to unscrupulous investment funds which speculate in a shameful manner on the back of people in difficulty,” he added.

The UN General Assembly passed a landmark resolution in September 2014 that mandates the UN to create a “multilateral legal framework for sovereign debt restructuring”.

The move was prompted by the G77 countries, including China, and triggered by the aggressive “vulture funds” lawsuits against Argentina.

The resolution was welcomed by campaigners as a potential game changer for the way future debt crises are managed, shifting the forum for political debate away from the International Monetary Fund (IMF) and towards the UN.

It comes at a time when the European Union is struggling to keep insolvent Greece inside the eurozone.

>> Read: Vulture funds could hold crisis-hit EU nations to ransom

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