A/HRC/14/21 itself as “the principal industry trade association for the financial institutions worldwide that buy, sell and hold debt instruments issued by Emerging Markets countries and obligors located therein” and claims that it is “dedicated to promoting the orderly development of fair, efficient and transparent trading markets for Emerging Market instruments … and to helping to integrate the Emerging Markets more fully” into the international financial system61 — contends that the proposed legislation “while intended to provide a very limited ‘benefit’ to certain highly indebted poor countries (HIPCs), would in fact negatively affect market access of all HIPCs, and therefore, limit their long-term prospects for development and economic growth, and jeopardize their further integration into the international financial system”.62 It further claims that the implications of the proposed legislation to the broader market include: “(i) a dramatic reduction of liquidity and price in the secondary market for defaulted claims, (ii) a corresponding reduction in the supply of credit and/or increased cost of financing for HIPC borrowers …, and (iii) potential increased cost of financing across the wider Emerging Markets, as creditors interpret this Legislative Proposal as hostile to creditor rights”.63 However, the submission fails to offer any cogent evidence to support the EMTA claims. 56. Contrary to the claims of the EMTA, legislation designed to protect debt relief gains from the predatory activities of vulture funds would not curtail the secondary debt market. Rather, it would enable the secondary debt market to function in a more transparent and efficient manner. The British legislation does not preclude creditors from obtaining recompense through the legal system for debts owing to them. It only prevents them from obtaining extortionate payments on sovereign debt at the expense of other creditors in much the same way that insolvency law does in relation to private debtors. 57. Vulture fund activity not only dilutes the gains from debt relief, it also complicates the debt relief process and undermines other creditors by forcing debtor countries to grant vulture funds preferential treatment at the expense of responsible creditors who may be involved in debt restructuring with the debtor countries. Unlike vulture funds, responsible secondary debt participants do not acquire sovereign debt for the sole purpose of enforcing payment of usurious interest rates from impoverished countries. Responsible and ethical creditors therefore have nothing to fear from the proposed legislation. 58. Further, vulture fund litigation and freezing of the assets of debtor countries in the course of such litigation jeopardizes the servicing of debt obligations by the affected countries. It also inhibits trade and investment relations with developing countries.64 Illustratively, in 2001, the vulture funds FG Hemisphere Associates LLC and Af-Cap sued CMS Nomeco, an oil and gas company in Texas, in a bid to garnish payments that CMS Nomeco owed to the Republic of the Congo.65 In 2008, FG Hemisphere Associates approached the High Court of Hong Kong, Special Administrative Region of China to try to force the China Railway Group to hand over part of its infrastructure investment in the Democratic Republic of the Congo. Such actions provide a disincentive for companies to trade with or invest in countries targeted by vulture funds and therefore harm the development prospects of these countries.66 61 62 63 64 65 66 GE.10-13156 Letter from Michael Chamberlin, Executive Director of EMTA to the Judicial Appeal Committee, House of Lords, 23 June 2007. See also EMTA, “Submission” (see footnote 60 above), p. 1. EMTA, “Submission”, p. 1. Ibid., p. 13. Jubilee Debt Campaign, “The business case”. See FG Hemisphere Associates v. République du Congo, 455 F.3d 575 (5th Circ. 2006) and Af-Cap Inc v. The Republic of Congo, 462 F.3d 417 (5th Cir. 2006). For a discussion of the difficulties faced by companies doing business with poor countries being targeted by vulture funds, see A.B. Derman and A. Melsheimer, “Recent developments in foreign 17