DEVELOPING countries could face legal challenges if they try to suspend their debt payments in the way in which the G20 has requested, the charity the Jubilee Debt Campaign has said.
Last month, the G20 agreed to suspend debt payments owed by 77 of the world’s poorest countries for the period between May and December 2020, owing to the effects of Covid-19 (News, 17 April). The Jubilee Debt Campaign has calculated, however, that $4.3 billion of the payments, due as foreign currency bonds, are made up of interest, and a further $5.1 billion consists of debt that is less transparent, adding up to $9.4 billion owed by 46 out of 77 developing countries in the rest of 2020 to private-sector lenders.
Ninety per cent of these foreign-currency bonds are governed by English law, meaning that if developing countries suspend their payments, they could face legal action in UK courts from the owners of their debts.
This month, there are 16 bond payments, worth $620 million, owed by nine countries: Angola, Cameroon, Ghana, Grenada, Kenya, Mongolia, Nigeria, Rwanda, and Senegal. The first payment due to private lenders after the G20 deal was $22.5 million, by Mongolia, on 1 May, followed by $13.25 million by Rwanda on 4 May.
The head of policy at the Jubilee Debt Campaign, Tim Jones, said, however: “No country should be forced to choose between paying a debt or providing health care in this time of crisis. The UK Government can and must urgently pass legislation to prevent any country suspending debt payments due to the coronavirus crisis from being sued in London.
“The UK is the key jurisdiction for international debt contracts. The UK Parliament has passed legislation in the past to protect poor countries from being sued by lenders who refuse to participate in internationally agreed debt deals. We need the Government to act now and update the law to prevent this immoral practice.”
Previous UK legislation to protect developing countries from litigation has included the 2010 Debt Relief (Developing Countries) Act, which limits the ability of any creditor to bring legal action against one of the 40 countries eligible for the Heavily Indebted Poor Countries initiative. Campaigners hope that similar legislation could be enacted in response to the global economic hardship caused by Covid-19.