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United Nations Votes for Process to Create Global Bankruptcy Framework

December 8, 2014 By ghadmin

UN Process Could Limit Default and Stop Predatory Funds

The United Nations voted 128 to 16 to formally begin negotiations to create a global bankruptcy process. This resolution comes after the UN General Assembly voted in favor of a legal bankruptcy framework for countries in September. The UN framework could prevent global financial crises, limit country defaults and stop predatory behavior. The 16 countries that voted against include the United States, Japan, Australia and much of the European Union. The United States, European Union, Australia and Japan all expressed support for improving debt restructuring and stopping predatory funds. However, these countries that represent chief financial jurisdictions felt this conversation should take place at the International Monetary Fund (IMF) or the Paris Club rather than the UN.

“It’s incredibly exciting that this vote passed with such strong support,” shared Eric LeCompte, Executive Director of Jubilee USA, a religious group that supports financial reforms to protect poor people. “Even among the countries that voted no, there is universal agreement on the problems.”

The resolution calls for the UN to create a committee that will begin work on the process, with initial meetings set for late January. The committee would be based in New York and the UN Secretary-General would invite member states and other stake-holders to submit testimony to the committee. The resolution calls for the IMF and World Bank to participate as well. The President of the General Assembly would ensure that the committee completes its work before September 2015.

“A global bankruptcy process is necessary to prevent global financial crisis,” said LeCompte, who serves on UN expert groups that work on these issues. “We applaud the UN for its leadership.”

The vote came in the wake of Argentina losing a major sovereign debt case to a group of so called “vulture funds.” The bankruptcy process could reduce litigation by requiring that hold-outs participate in debt restructuring processes. The Argentina case began after the country’s 2001 debt default. NML Capital and other funds refused to participate in Argentina’s debt restructuring deals and sued the country in US courts. A federal judge ruled that Argentina could not pay the 92% of its bond-holders that accepted the restructurings unless it paid the hold-outs in full. The Supreme Court allowed that ruling to stand. In addition to the UN vote in September, the IMF, the G20 and banks and investors all released proposals this year to address the issue.

“This is a global problem and requires a global solution” said LeCompte.

Jubilee USA Network is an alliance of more than 75 US organizations and 400 faith communities working with 50 Jubilee global partners. Jubilee’s mission is to build an economy that serves, protects and promotes the participation of the most vulnerable. Jubilee USA has won critical global financial reforms and more than $130 billion in debt relief to benefit the world’s poorest people. www.jubileeusa.org

UN Vote Tuesday Could Create Global Bankruptcy Process, Deter Predatory Funds

September 8, 2014 By ghadmin

The UN General Assembly votes Tuesday at 3pm (EDT) on a resolution that could create a global bankruptcy mechanism. Such a process could protect poor countries from predatory funds and limit future defaults. Jubilee USA’s leadership, a group of religious leaders and financial experts sent a letter to United States UN Ambassador Samantha Power urging her to support the resolution.

“There’s global consensus to stop predatory behavior,” noted Eric LeCompte, Jubilee USA’s Executive Director who signed the letter. “This resolution is an opportunity to turn consensus into action. A process could begin that allows us to challenge inequality and have real stability.” LeCompte serves on UN expert groups developing a sovereign debt resolution process.

The resolution comes in the wake of Argentina’s legal dispute with predatory hedge funds and hold-out investors. During the course of that dispute, the International Monetary Fund, US Government, United Nations and World Bank all expressed concern that a legal victory for predatory funds would make debt restructurings more difficult. The UN action also follows a proposal from the International Capital Market Association to alter debt rules to curb predatory behavior.

Jubilee USA Network is an alliance of more than 75 US organizations, 400 faith communities and 50 Jubilee global partners. Jubilee’s mission is to build an economy that serves, protects and promotes participation of the most vulnerable. Jubilee USA has won critical global financial reforms and more than $130 billion in debt relief to benefit the world’s poorest people. www.jubileeusa.org

UN Vote Tuesday Could Create Global Bankruptcy Process, Deter Predatory Funds

September 8, 2014 By ghadmin

UN Treaty Could Enact Global Bankruptcy Process and Stop Predatory Funds Jubilee USA Urges and Prays for US Support

September 4, 2014 By ghadmin

The UN General Assembly votes Tuesday on a convention that could enact a global bankruptcy process and stop predatory hedge funds. Bolivia proposed the resolution that if voted upon is expected to pass by a majority. The executive board officers of Jubilee USA sent United States UN Ambassador Samantha Power a letter urging her to support the resolution. Jubilee’s 400 US faith communities are holding the Ambassador in prayer as she prepares to vote.

The UN General Assembly votes Tuesday on a convention that could enact a global bankruptcy process and stop predatory hedge funds. Bolivia proposed the resolution that if voted upon is expected to pass by a majority. The executive board officers of Jubilee USA sent United States UN Ambassador Samantha Power a letter urging her to support the resolution. Jubilee’s 400 US faith communities are holding the Ambassador in prayer as she prepares to vote.

“One out of five people lives in extreme poverty and the International Monetary Fund argues the root of inequality is sovereign indebtedness. Much progress was won, and there is much more progress for us to win together,” states the letter from Jubilee USA’s leadership, a group of religious leaders and experts on global finance. “Unfortunately, much of our bipartisan progress won in previous debt relief initiatives is now threatened by predatory behavior and hold-out investors. In this moment we pray for your leadership again and invite you to protect what we’ve won and finish what we’ve started.”

If the resolution passes without a super majority or consensus vote, the convention would have less weight, but a formal treaty process would still move forward. Argentina initially put forth the resolution that could protect developing countries from predatory funds and create a system where defaults are less likely. Last week, the International Capital Market Association (ICMA) challenged predatory behavior by proposing new rules that would make it more difficult for hold-out investors to stop debt restructurings.

“There’s a global consensus from investors to anti-poverty advocates that the status quo hurts all of us,” stated Eric LeCompte, the head of the religious financial reform coalition known as Jubilee USA Network. “We need global leaders to not only address the behavior in the long term, we need them to outlaw it in the short term. Defaults are too common and we all need stability.”

The UN resolution and the investor proposals come after Argentina’s court defeat to predatory funds. During the course of that legal dispute, the International Monetary Fund, US Government, United Nations and World Bank all expressed concern that a legal victory for predatory funds and hold-out investors would make debt restructurings more difficult.

Banks and Investors Call for New Debt Rules In Wake of Argentina Hedge Fund Case

August 29, 2014 By ghadmin

The International Capital Market Association (ICMA), a group of banks and investors, will call Friday for reforms aimed at preventing repeats of the Argentina/NML Capital debt dispute. The ICMA’s plan would reduce the ability of hold-out creditors to litigate and undermine debt restructurings, in part by using contract clauses to bind all bond-holders to debt restructurings that 75% of all holders agree on.Additionally, the plan will argue that the “pari passu” or parity clauses in existing bond contracts should always mean that hold-out funds should always receive the same restructured bonds that the majority of investors agree on.

“This is a step in the right direction and we really applaud the US government’s leadership on this,” noted Eric LeCompte, Executive Director of the religious debt relief organization Jubilee USA. “I am concerned that this won’t do enough to prevent litigation against poor countries in the next decade. We still need a statutory approach.”

The Argentina/NML case could soon impact other countries facing creditor litigation. Last month, a US judge in New York ordered the Democratic Republic of the Congo (DRC) to pay $68 million to two hedge funds that acquired the country’s debt on the secondary market and then sued. The award included nearly $50 million in interest on loans dating back to the early 1980’s. According to the United Nations, the DRC is the world’s second-poorest country. Meanwhile, the Import-Export Bank of Taiwan is suing the Caribbean nation of Grenada, making an identical legal argument to the one used against Argentina. The case is currently on hold as Grenada attempts to resolve its debt situation.

“The Argentina case has a global impact and we need a global solution,” said LeCompte. “We need an international bankruptcy process to make default less likely and force hold-outs to sit at the table.”

An international bankruptcy process would in theory bind all creditors and debtors to the decisions of a neutral third party. In the wake of the Argentina/NML case, there have been calls for instituting such a system to address the issue of hold-out creditors. As the Financial Times notes, creditor litigation against defaulting nations has doubled in the last decade, while debt levels continue to rise.

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