City firms that represent so-called ‘vulture funds’ while claiming to be socially responsible have been accused of hypocrisy by a campaign group on global poverty.
The Jubilee Debt Campaign last week staged a protest outside the London office of US firm Dechert, two days before parliament considered legislation to curb the ability of vulture funds to sue through British courts.
Vulture funds are businesses that buy the sovereign debt of indebted poor countries cheaply and then try to enforce payment for the full amount, often by suing through the courts.
Last November, Dechert represented two funds in the High Court in London, winning a $20 million award against Liberia, one of the poorest countries in the world.
Nick Dearden, director of the Jubilee Debt Campaign, described such funds as ‘anathema to anyone interested in fighting global poverty’. Making money from such cases is ‘shameful behaviour’, he said, warning law firms: ‘You cannot claim on the one hand to be socially responsible and, on the other hand, to be assisting vulture funds, profiting from the misery and poverty of those living in the poorest countries on earth.’
Dechert declined to comment. The firm sponsored a summit on global ethics in New York last week, and is a member of Advocates for International Development, which aims to support the Millennium Development Goals.
Other City firms that have come to the attention of campaigners include Allen & Overy and Weil Gotshal & Manges.
An Allen & Overy spokesman said it did not consider Donegal, the client it represented in relation to Zambia, to operate a vulture fund. It said Donegal acquired the debt to convert into investments in local projects and it was only after years of unsuccessful negotiations with the Zambian government that it was forced to sue. ‘We therefore do not see any ethical dilemma in representing an established client in these circumstances and we do not believe they should be denied legal representation,’ the spokesman said.
Weil Gotshal, which in 1995 acted for US fund Elliott Associates in a successful claim against Peru, declined to comment.
Labour MP Andrew Gwynne last week introduced the Debt Relief (Developing Countries) Bill, which seeks to prevent vulture actions against the world’s poorest countries.
The Bill appears to have wide political support. Last year, the Treasury published a consultation on legislation against vulture funds. In its submission to the consultation, on behalf of its clients, Dechert opposed the proposed legislation as ‘unfair’ and ‘unprincipled’.
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