The Heavily Indebted Poor Countries (Limitation on Debt Recovery) Act 2012 outlaws a practice that undermines international debt relief efforts. The legislation prevents vulture funds from buying up poor nations' debts for a fraction of their original amount and then using the courts to sue for the full value, plus interest and penalty charges.
Treasury Minister Eddie Teare MHK said the move sent a clear message that the Isle of Man was a well-regulated, transparent and co-operative country.
Mr Teare said:
'We have no evidence of vulture fund activity in the Isle of Man and as an internationally responsible country we do not want it here. This legislation will ensure our Island is not used for the disreputable business of exploiting Heavily Indebted Poor Countries.'
The new law, which is equivalent to the UK Debt Relief (Developing Countries) Act 2010, supports an international initiative to provide debt relief to heavily indebted low income countries. The IMF and World Bank estimate that vulture funds are seeking total claims of $1.47bn from countries including Cameroon, Ethiopia, Sudan, Uganda, and the Democratic Republic of Congo.
Minister Teare said:
'Legislation to block vulture funds is further evidence of the Isle of Man’s commitment to playing a full and constructive role in the global community. The Island’s support for the Small Countries Financial Management Programme has earned positive international recognition, and we remain at the very forefront of developments in terms of tax transparency and co-operation.'
The Isle of Man's decision to outlaw vulture funds has been welcomed by Eric LeCompte, Executive Director of Jubilee USA Network, who met Minister Teare in Tokyo in October at the 2012 meetings of the World Bank, IMF and Commonwealth Finance Ministers.
Mr LeCompte, whose organisation has helped to secure important global financial reforms, said:
'We are living in a time when hedge funds known as vulture funds are making enormous profits on the backs of the world's poorest people. The people of the Isle of Man courageously have stood with the world's most vulnerable and we offer an invitation to governments around the world to stand with them.'