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<h1>Argentina Takes on Vulture Funds in "Debt Trial of the Century"</h1>

<div><div><div><p><span></span></p>  <p><span>Eric LeCompte is the executive director of the Jubilee USA Network.</span></p>  <p>Last October, soldiers from the West African nation of Ghana boarded an  Argentine naval ship called the Libertad. They overtook the crew and brought  the ship to port in the town of Tema. This was not an act of piracy, at  least not in the sense we normally understand it. <a href="http://www.forbes.com/sites/afontevecchia/2012/10/05/the-real-story-behind-the-argentine-vessel-in-ghana-and-how-hedge-funds-tried-to-seize-the-presidential-plane/">The detaining of the  Libertad took place after hedge fund NML Capital convinced a Ghanaian  court</a> that the ship, which was sailing in Ghanaian jurisdiction, should be held ransom  for a debt the hedge funds claimed Argentina owed them.</p>  <p>The saga began in 2001, when Argentina  was thrown into economic crisis and defaulted on its loans. <a href="http://in.reuters.com/article/2013/02/21/us-argentina-court-idINBRE91K11D20130221">Hedge funds  swooped in and bought Argentine debt for almost nothing</a> and circled  until the country was in recovery to collect the debt in full.</p>  <p>The case is set to be decided in the coming days in the U.S. 2nd Circuit  Court, the jurisdiction in which the original loans were contracted. The  decision will impact whether certain hedge funds commonly known as  "vulture funds"&mdash;funds that buy a struggling country&rsquo;s debt for pennies  on the dollar and then sue for the full amount when a country is in  recovery&mdash;will continue to extort poor countries.</p>  <p>The long 2nd Circuit Court proceedings between Argentina and hedge funds  NML Capital and Aurelius have propelled the international debt crisis  into the spotlight. It&rsquo;s been called the &ldquo;debt trial of the century,&rdquo; and the proceedings could have the most far-reaching impacts on global poverty in  our lifetime.</p>  <p>The U.S. 2nd Circuit Court is the case's last stop before the U.S.  Supreme Court, and if the vulture funds win, it will mean these funds  will be allowed to more aggressively target poor countries in financial  recovery. Argentina would possibly default. But if Argentina wins, it will be  much harder for these types of hedge funds to exploit poor countries in the future,  destabilize emerging economies, and target assets that should be  improving the lives of the world's most vulnerable people.</p>  <p style="text-align: center; "><b>Like what you&rsquo;re reading? YES! is nonprofit and relies on reader support.<a href="https://store.yesmagazine.org/donate/?ica=Don_txt_SupportUs&amp;icl=Content"><br> Click here to chip in $5 or more</a> to help us keep the inspiration coming.</b></p>  <p>Because the U.S. government acknowledges that this behavior hurts  legitimate investors and poor people, the Obama Administration filed a  friend-of-the-court brief that argued that a ruling against Argentina  could make it much harder for poor countries or countries in financial  recovery to access credit and restructure debts. The International  Monetary Fund and the <a href="http://siteresources.worldbank.org/INTPREMNET/Resources/LetsStopVultureFund.pdf">World Bank are similarly critical of vulture  funds.</a></p>  <h3>How they work</h3>  <p>Vulture funds create an international version of a situation that often  takes place on the individual level: You lose your job and you can&rsquo;t pay  your debts. You file for bankruptcy and restructure your debts, but the  owners of your hospital debt and credit card debt refuse to negotiate.  Instead, these debts are sold for almost nothing to collection agencies  when <a href="resolveuid/4bf8846fceefc9367c12609ac50caa27">it could have been resolved directly with you</a>. The collection  agencies hover while you are trying to get back on your feet. When they  find out a relative gave you $200 to take your daughter  to the dentist, the collection agencies seize the money.</p>  <p>The equivalent impacts on a poor country just getting on the other side  of a financial crisis are devastating. In 1999, a vulture fund called<a href="http://news.bbc.co.uk/2/hi/6365433.stm"> Donegal International bought a debt owed by&nbsp;Zambia&nbsp;for a knock-down  price of $3.3 million</a>. Most of Zambia's debt was canceled and the  country began saving $40 million a year when they stopped repaying loans  to the World Bank and International Monetary Fund. After Zambia  received this debt relief, Donegal sued the African nation for <a href="http://donegalinternational.net/project">$55  million</a> and in April 2007, the court ruled that&nbsp;Zambia&nbsp;must pay $15.4  million&mdash;roughly 65 percent of the debt relief that was specifically  directed for development projects. It was a huge profit for the vulture fund  and a theft from the poorest Zambians.</p>  <p>Typically, vulture funds refuse to negotiate with countries who are  indebted to them. They often make 400 percent profits with their legal  proceedings, which often take place in New York or London courts where  previous contracts on the loans were signed. &ldquo;These funds are among the  very worst actors in our international financial system," notes Dr.  Collins Magalasi, executive director of the Zimbabwe-based African Forum  and Network on Debt and Development. "They are aggressive, selfish, and  greedy. In fact, they are so egregious that most legitimate investors  won&rsquo;t stand in the same room with them.&rdquo;</p>  <p>And those running the funds continue to lobby for even greater powers.</p>  <p style="text-align: center; "><a href="resolveuid/4bf8846fceefc9367c12609ac50caa27"><figure><img src="/wp-content/uploads/imports/404798bfc183103b85a5e5a4bd6ceda6.jpg"></figure><br><strong>Occupy Offshoot Set to Cancel Millions in Medical Debts</strong><br></a>Medical debt is the cause of 62 percent of bankruptcies, say organizers  of Strike Debt, which threw last night's offbeat fundraiser for their  new &ldquo;Rolling Jubilee.&rdquo; Ordinary people donated enough money to  collectively buy an estimated $5.9 million in bad debt in order to  cancel it.</p>  <p>Last June, the organization I work for, Jubilee USA Network, along with  our partners at American Jewish World Service, put enough pressure on  New York legislative bodies to stop proposed legislation that would allow  vulture funds to sue a struggling country, even after a court had  rejected their claims.</p>  <p>Then in November, Argentina's case was brought to the U.S. District Court, which  ruled in favor of the hedge funds. Argentina was <a href="http://www.bloomberg.com/news/2013-01-25/aurelius-asks-appealscourt-to-uphold-argentina-rulings.html">ordered to pay $1.3 billion</a> to NML Capital and other creditors it represented. When Argentina  appealed, the 2nd U.S. Circuit Court of Appeals froze the payout to hear  new arguments from both sides.</p>  <p>In February, the federal appeals court heard the arguments and  ultimately asked Argentina to outline a payment plan. The plan the  country laid out would essentially give the holdout creditors the same  deal as 92 percent of the creditors that had previously restructured  after Argentina&rsquo;s default. It still offered a significant profit to the  "vulture" funds.</p>  <p>The hedge funds rejected this plan; now we wait for the U.S. 2nd Circuit Court to <a href="http://www.businessweek.com/news/2013-04-19/argentina-bondholders-reject-plan-to-pay-defaulted-debt">issue a final ruling</a>.</p>  <p>Last October, the Libertad was returned to Argentine waters by Ghana. We  hope to see a similar outcome in the case of NML Capital LTD, v. The  Republic of Argentina. The legal outcome will either offer more  devastation or greater protections for the world&rsquo;s poorest and most  vulnerable people.</p>  <hr><p><strong>Interested?</strong></p>  <ul><li><span><br>Tens of thousands of people from around the world gathered in Tunisia  last week to talk about creating a fairer world. Here are some of the  hottest topics from the panels in Tunis.</span></li>  <li><br>There&rsquo;s a biblical precedent for forgiveness&mdash;of debt. Why churches are  standing by students on one of the Bible&rsquo;s most surprising social  principles.</li>  <li><br>Today is April 15, and that means that taxes are due ... at least for  most of us. Artist and hacker Paolo Cirio tracked down authors and  activists who study  tax havens and asked them about the details.</li>  </ul></div><!-- <img src="fca3e018dac54b2291af7165a75ddc4b"> --></div><!-- <p><span style="text-align: start; float: none; ">Eric LeCompte wrote this op-ed for <a href="http://www.yesmagazine.org">YES! Magazine</a>, a national, nonprofit media organization that fuses powerful ideas and practical actions. Eric</span><span style="text-align: start; float: none; "> is the executive director of Jubilee&#160;USA Network, an alliance of more than 75 U.S. organizations, 250 faith communities and 50 Jubilee&#160;global partners.&#160;&#160;Jubilee&#160;USA Network has won critical global financial reforms and more than $130 billion in debt relief for the world&#8217;s poorest countries. </span><a href="http://www.jubileeusa.org/" style="text-align: start; " target="_blank" rel="noopener noreferrer">www.jubileeusa.org</a></p> --></div><!-- <a href="resolveuid/7c82efcf00c24f64bb87a353c71e7aef">Arab Spring Breakers: 50,000 Gather in Tunisia to Plan People-Powered Economy</a> --><!-- <a href="resolveuid/95c7f33a3601c261d1fb400cc29af468">How the Student Loans Debate Got Religion</a> --><!-- <a href="resolveuid/2cdb44da453d48fc87f2da87e932cea7">Offshore Tax Havens Get Democratized&#8212;in Art</a> -->

<p>This article originally appeared in <a href="https://www.yesmagazine.org">Yes! Magazine</a> at <a href="https://www.yesmagazine.org/social-justice/2013/04/23/argentina-takes-on-vulture-funds">https://www.yesmagazine.org/social-justice/2013/04/23/argentina-takes-on-vulture-funds</a>.</p><link href="https://www.yesmagazine.org/social-justice/2013/04/23/argentina-takes-on-vulture-funds" rel="canonical"/><p>Yes! Magazine is a nonprofit, independent media organization dedicated to telling stories of ... . Learn more at <a href="https://www.yesmagazine.org">Yes! Magazine</a></p><img id="republication-tracker-tool-source" src="https://www.yesmagazine.org/?republication-pixel=true&post=14034&ga4=G-74QJNNY44Z" style="width:1px;height:1px;">

Argentina Takes on Vulture Funds in "Debt Trial of the Century"

Eric LeCompte is the executive director of the Jubilee USA Network.  Last October, soldiers from the West African nation of Ghana boarded an  Argentine naval ship called the Libertad. They overtook the crew and brought  the ship to port in the town of Tema. This was not an act of piracy, at  least not in the sense we normally understand it. The detaining of the  Libertad took place after hedge fund NML Capital convinced a Ghanaian  court that the ship, which was sailing in Ghanaian jurisdiction, should be held ransom  for a debt the hedge funds claimed Argentina owed them.  The saga began in 2001, when Argentina  was thrown into economic crisis and defaulted on its loans. Hedge funds  swooped in and bought Argentine debt for almost nothing and circled  until the country was in recovery to collect the debt in full.  The case is set to be decided in the coming days in the U.S. 2nd Circuit  Court, the jurisdiction in which the original loans were contracted. The  decision will impact whether certain hedge funds commonly known as  "vulture funds"—funds that buy a struggling country’s debt for pennies  on the dollar and then sue for the full amount when a country is in  recovery—will continue to extort poor countries.  The long 2nd Circuit Court proceedings between Argentina and hedge funds  NML Capital and Aurelius have propelled the international debt crisis  into the spotlight. It’s been called the “debt trial of the century,” and the proceedings could have the most far-reaching impacts on global poverty in  our lifetime.  The U.S. 2nd Circuit Court is the case's last stop before the U.S.  Supreme Court, and if the vulture funds win, it will mean these funds  will be allowed to more aggressively target poor countries in financial  recovery. Argentina would possibly default. But if Argentina wins, it will be  much harder for these types of hedge funds to exploit poor countries in the future,  destabilize emerging economies, and target assets that should be  improving the lives of the world's most vulnerable people.  Like what you’re reading? YES! is nonprofit and relies on reader support. Click here to chip in $5 or more to help us keep the inspiration coming.  Because the U.S. government acknowledges that this behavior hurts  legitimate investors and poor people, the Obama Administration filed a  friend-of-the-court brief that argued that a ruling against Argentina  could make it much harder for poor countries or countries in financial  recovery to access credit and restructure debts. The International  Monetary Fund and the World Bank are similarly critical of vulture  funds.  How they work  Vulture funds create an international version of a situation that often  takes place on the individual level: You lose your job and you can’t pay  your debts. You file for bankruptcy and restructure your debts, but the  owners of your hospital debt and credit card debt refuse to negotiate.  Instead, these debts are sold for almost nothing to collection agencies  when it could have been resolved directly with you. The collection  agencies hover while you are trying to get back on your feet. When they  find out a relative gave you $200 to take your daughter  to the dentist, the collection agencies seize the money.  The equivalent impacts on a poor country just getting on the other side  of a financial crisis are devastating. In 1999, a vulture fund called Donegal International bought a debt owed by Zambia for a knock-down  price of $3.3 million. Most of Zambia's debt was canceled and the  country began saving $40 million a year when they stopped repaying loans  to the World Bank and International Monetary Fund. After Zambia  received this debt relief, Donegal sued the African nation for $55  million and in April 2007, the court ruled that Zambia must pay $15.4  million—roughly 65 percent of the debt relief that was specifically  directed for development projects. It was a huge profit for the vulture fund  and a theft from the poorest Zambians.  Typically, vulture funds refuse to negotiate with countries who are  indebted to them. They often make 400 percent profits with their legal  proceedings, which often take place in New York or London courts where  previous contracts on the loans were signed. “These funds are among the  very worst actors in our international financial system," notes Dr.  Collins Magalasi, executive director of the Zimbabwe-based African Forum  and Network on Debt and Development. "They are aggressive, selfish, and  greedy. In fact, they are so egregious that most legitimate investors  won’t stand in the same room with them.”  And those running the funds continue to lobby for even greater powers.  Occupy Offshoot Set to Cancel Millions in Medical DebtsMedical debt is the cause of 62 percent of bankruptcies, say organizers  of Strike Debt, which threw last night's offbeat fundraiser for their  new “Rolling Jubilee.” Ordinary people donated enough money to  collectively buy an estimated $5.9 million in bad debt in order to  cancel it.  Last June, the organization I work for, Jubilee USA Network, along with  our partners at American Jewish World Service, put enough pressure on  New York legislative bodies to stop proposed legislation that would allow  vulture funds to sue a struggling country, even after a court had  rejected their claims.  Then in November, Argentina's case was brought to the U.S. District Court, which  ruled in favor of the hedge funds. Argentina was ordered to pay $1.3 billion to NML Capital and other creditors it represented. When Argentina  appealed, the 2nd U.S. Circuit Court of Appeals froze the payout to hear  new arguments from both sides.  In February, the federal appeals court heard the arguments and  ultimately asked Argentina to outline a payment plan. The plan the  country laid out would essentially give the holdout creditors the same  deal as 92 percent of the creditors that had previously restructured  after Argentina’s default. It still offered a significant profit to the  "vulture" funds.  The hedge funds rejected this plan; now we wait for the U.S. 2nd Circuit Court to issue a final ruling.  Last October, the Libertad was returned to Argentine waters by Ghana. We  hope to see a similar outcome in the case of NML Capital LTD, v. The  Republic of Argentina. The legal outcome will either offer more  devastation or greater protections for the world’s poorest and most  vulnerable people.  Interested?  Tens of thousands of people from around the world gathered in Tunisia  last week to talk about creating a fairer world. Here are some of the  hottest topics from the panels in Tunis.  There’s a biblical precedent for forgiveness—of debt. Why churches are  standing by students on one of the Bible’s most surprising social  principles.  Today is April 15, and that means that taxes are due ... at least for  most of us. Artist and hacker Paolo Cirio tracked down authors and  activists who study  tax havens and asked them about the details.

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