Low and Middle-income Countries: Debt Restructuring

Lord Browne of Ladyton Excerpts

Tuesday 12th March 2024 Lords Chamber

[Lord Cameron of Chipping Norton (Con)]

If bonds are the form of lending, there are collective action clauses that can prevent private sector hold-outs. With loans, you have these majority voting provisions so that a group of private investors cannot hold up the resolution of those debts. That is the right way forward. On Sri Lanka, we welcome the official creditor group deal that was reached on 29 November 2023; the bondholder committee is currently in negotiations with the Government of Sri Lanka. We do not comment on ongoing restructuring programmes, but we hope that a deal will be arranged soon.

[Lord Browne of Ladyton (Lab)]

My Lords, the 2010 Act was an excellent example of cross-party co-operation because it was passed by the Labour Government and implemented by the coalition. The United Kingdom and New York have a unique power to take leadership of this issue, which is important to a substantial part of the world, because 90% of the private lender contracts that are causing the problem are written under either English or New York law. Does the Foreign Secretary acknowledge and approve the efforts of New York to bring in legislation to make sure that private creditor terms are equivalent to those of other creditors, which they are not? If so, what steps are we taking, if any, to co-ordinate with New York to ensure that similar legislation can be enacted here?

[Lord Cameron of Chipping Norton (Con)]

I thank the noble Lord for his question. It is true that what was teed up by Gordon Brown was nodded into the net by the coalition Government, and rightly so. We do not think that the law in Albany, New York state, is actually likely to get through; it has been sitting around for a long time. It is good in its intentions because it is trying to sort out the issue. But the IMF advice and the Treasury advice is that if we legislate in this way, particularly unilaterally, it would affect the cost and availability of finance to other countries, and it may mean that more of these financial deals are written elsewhere in a less advantageous way than is currently the case.