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Over the past few years, several countries have undertaken to regulate the speculation in sovereign debt pursued by so-called “vulture funds.” The various realizations and attempts present a series of loopholes that make a new regulation of this speculation advisable. A proposal for a new regulation, legally justified and precisely framed, is all the more desirable given that some legislators, in particular from the New York State Legislature, have recently taken up the issue of speculation.

Debt sustainability is the only realistic regulation benchmark. It is inconceivable to ban debt purchases on the secondary market as this would significantly impact the liquidity of sovereign debt and the cost of the borrowed money. Nevertheless, sovereign debt speculation is unacceptable if it undermines the human rights of the populations of the debtor countries. Therefore, some limitations should be set. Every endeavor undertaken by a creditor to get paid should be endorsed by a court informed about the terms of the debt. The claims of speculative funds should be capped at the amount paid to acquire the debt instruments. Besides this amount, the creditor should be able to obtain interest on his investment. This interest offsets the risk that the creditor may not recoup the money.


This paper is a working paper produced while Justin Vanderschuren was an International and Comparative Law Research Fellow at the University of Michigan Law School, 2022-2023 academic year. This working paper was written while being a recipient of a Fellowship of the Belgian American Educational Foundation.