For months, while Ethiopia has been trying to agree a debt relief deal with its lenders that would relieve their debt crisis, debt vultures have been threatening to sue them through the UK courts to secure vast profits.
Debt vultures are speculators – rather than lending money directly they buy up the debt of countries in crisis at rock bottom prices. Then they threaten legal action, seemingly strong-arming countries into full repayment, and delivering themselves vast profits by draining much needed resources from communities around the world.
Now, we’ve heard that the vultures have dropped their legal threat against Ethiopia and agreed a deal – and it’s partly down to the pressure you’ve helped create for a debt justice law!
Ethiopia, a country pushed into crisis by climate disasters and debt, has been trying to get some of its debt cancelled for five years. Earlier this year, having rejected multiple generous offers by the Ethiopian government, the debt vultures announced they were suing Ethiopia, seemingly to strong-arm the government into a bad debt deal that would deliver them vast profits.
However, it appears that the UK government threatened to introduce the debt justice law we’ve been calling for, in response to the vultures’ threat to sue, and that this helped push them to drop the case. A debt justice law would prevent any lender from using the threat of legal action as a bargaining chip – it’s the last thing the debt vultures want.
Thanks to mounting calls for a debt justice law, Ethiopia has avoided being sued in the UK. But the vultures, along with banks and hedge funds, are still being paid up to 17% more than Ethiopia’s other lenders – governments and development banks.
The debt vultures involved in the Ethiopia case – VR Capital and Farallon Capital Management – have a history of getting deals that will deliver them huge profits, including by suing in the UK courts.
- Ukraine: Earlier this year, VR Capital acted alongside another debt vulture to secure a deal with the Ukrainian government that will see it paid $3.7 billion on debt with an original value of $2.6 billion. This is twice as much as other lenders received.
- Mozambique: Previously, in 2021, Farallon Capital Management and VR Capital sued the Mozambican government in the UK for defaulting on one of Mozambique’s hidden debts. In 2024 Mozambique settled out of Court with VR Capital and Farallon Capital Management, alongside UBS/Credit Suisse and other owners of the debt. Mozambique agreed to pay VR Capital $12 million and Farallon $15 million. VR Capital and Farallon held around $30 million of Mozambican debt, which they acquired after the hidden debt scandal had emerged and the debt had already become distressed, suggesting they may have purchased it for much less than its face value.
Under the deal just announced with Ethiopia, the debt vultures will receive $100 million more than if they’d agreed the same terms as Ethiopia’s other lenders. These are vital funds that should be invested in education, healthcare and tackling the climate crisis – not lining the pockets of greedy speculators.
However, Ethiopia’s debt deal is better than it would have been without the threat of a new law looming. Thanks to the pressure that you have helped to put on the UK government, the vultures know that a debt justice law here is a real possibility.
The debt vultures have had their wings clipped. The threat of a debt justice law has backed them into a corner – but until it becomes a reality, they are free to strike again on a new target whenever they choose.
The UK government is gearing up to host the G20 presidency next year, with the debt crisis likely to be high on the agenda. As UK decision-makers start thinking about how to make the G20 meetings count, this is the moment to redouble our efforts towards a debt justice law that would help countries in crisis to get debt cancelled.