The United Nations General Assembly has passed a resolution to create a new legal framework for dealing with government debts when they are no longer able to be paid. The motion, passed by 124 votes to 11, has decided that the UN will create “a multilateral legal framework for the sovereign debt restructuring processes”. At present, there are no rules regarding how to restructure government debts when they can no longer be paid, leading to prolonged debt crises, expensive bank bailouts and vulture funds seeking huge profits out of crises.
The creation of such rules could, amongst other things, solve the current impasse over Argentina’s debt, where two vulture funds NML Capital and Aurelius Capital Management are seeking a gigantic profit after speculating on the South American country’s debt, have refused to accept a debt restructuring agreed by 93% of other creditors, and have had their claim backed by a US court, forcing the country into its second debt default in 13 years.
The UK voted against the motion, a decision agreed jointly by George Osborne and Danny Alexander. This is despite previous commitments to tackling the problems of unjust debt; the Liberal Democrats have a policy to “lead international calls for the creation of a fully transparent international debt arbitration service”, the 2010 coalition agreement says that the government “will review what action can be taken against vulture funds”, and over this year over 100 backbench British MPs publicly supported creating “a fair, independent and transparent arbitration mechanism for sovereign debt.”
As part of the UK, Scotland does not vote separately on UN resolutions, but the Scottish Government’s White Paper states:
“The Scottish Government will give careful consideration to the question of “unjust” debts…and support moves to establish Scotland as an international centre for debt arbitration”
Alys Mumford, Director of Jubilee Scotland said:
“This motion passing brings us one step closer to achieving debt justice and ending devastating debt crises which force the most vulnerable people into poverty around the world. The UK Government have let down the people of the UK who support action on unjust debt by opposing this motion and siding with profit-makers instead.”
It is thought that the UK abstained because George Osborne and Danny Alexander want all discussions on debt to take place in the International Monetary Fund, where the UK has a disproportionately large voice, and most developing countries have little say. Now the resolution has passed, negotiations on what kind of framework to create should begin at the UN, where every country has an equal voice to call for justice.