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Eric LeCompte is the executive director of the Jubilee USA Network.

Last October, soldiers from the West African nation of Ghana boarded an Argentine naval ship called the Libertad. They overtook the crew and brought the ship to port in the town of Tema. This was not an act of piracy, at least not in the sense we normally understand it. that the ship, which was sailing in Ghanaian jurisdiction, should be held ransom for a debt the hedge funds claimed Argentina owed them.

The saga began in 2001, when Argentina was thrown into economic crisis and defaulted on its loans. and circled until the country was in recovery to collect the debt in full.

The case is set to be decided in the coming days in the U.S. 2nd Circuit Court, the jurisdiction in which the original loans were contracted. The decision will impact whether certain hedge funds commonly known as “vulture funds”—funds that buy a struggling country’s debt for pennies on the dollar and then sue for the full amount when a country is in recovery—will continue to extort poor countries.

The long 2nd Circuit Court proceedings between Argentina and hedge funds NML Capital and Aurelius have propelled the international debt crisis into the spotlight. It’s been called the “debt trial of the century,” and the proceedings could have the most far-reaching impacts on global poverty in our lifetime.

The U.S. 2nd Circuit Court is the case’s last stop before the U.S. Supreme Court, and if the vulture funds win, it will mean these funds will be allowed to more aggressively target poor countries in financial recovery. Argentina would possibly default. But if Argentina wins, it will be much harder for these types of hedge funds to exploit poor countries in the future, destabilize emerging economies, and target assets that should be improving the lives of the world’s most vulnerable people.

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Because the U.S. government acknowledges that this behavior hurts legitimate investors and poor people, the Obama Administration filed a friend-of-the-court brief that argued that a ruling against Argentina could make it much harder for poor countries or countries in financial recovery to access credit and restructure debts. The International Monetary Fund and the

How they work

Vulture funds create an international version of a situation that often takes place on the individual level: You lose your job and you can’t pay your debts. You file for bankruptcy and restructure your debts, but the owners of your hospital debt and credit card debt refuse to negotiate. Instead, these debts are sold for almost nothing to collection agencies when it could have been resolved directly with you. The collection agencies hover while you are trying to get back on your feet. When they find out a relative gave you $200 to take your daughter to the dentist, the collection agencies seize the money.

The equivalent impacts on a poor country just getting on the other side of a financial crisis are devastating. In 1999, a vulture fund called. Most of Zambia’s debt was canceled and the country began saving $40 million a year when they stopped repaying loans to the World Bank and International Monetary Fund. After Zambia received this debt relief, Donegal sued the African nation for and in April 2007, the court ruled that Zambia must pay $15.4 million—roughly 65 percent of the debt relief that was specifically directed for development projects. It was a huge profit for the vulture fund and a theft from the poorest Zambians.

Typically, vulture funds refuse to negotiate with countries who are indebted to them. They often make 400 percent profits with their legal proceedings, which often take place in New York or London courts where previous contracts on the loans were signed. “These funds are among the very worst actors in our international financial system,” notes Dr. Collins Magalasi, executive director of the Zimbabwe-based African Forum and Network on Debt and Development. “They are aggressive, selfish, and greedy. In fact, they are so egregious that most legitimate investors won’t stand in the same room with them.”

And those running the funds continue to lobby for even greater powers.

Occupy Offshoot Set to Cancel Millions in Medical Debts
Medical debt is the cause of 62 percent of bankruptcies, say organizers of Strike Debt, which threw last night’s offbeat fundraiser for their new “Rolling Jubilee.” Ordinary people donated enough money to collectively buy an estimated $5.9 million in bad debt in order to cancel it.

Last June, the organization I work for, Jubilee USA Network, along with our partners at American Jewish World Service, put enough pressure on New York legislative bodies to stop proposed legislation that would allow vulture funds to sue a struggling country, even after a court had rejected their claims.

Then in November, Argentina’s case was brought to the U.S. District Court, which ruled in favor of the hedge funds. Argentina was to NML Capital and other creditors it represented. When Argentina appealed, the 2nd U.S. Circuit Court of Appeals froze the payout to hear new arguments from both sides.

In February, the federal appeals court heard the arguments and ultimately asked Argentina to outline a payment plan. The plan the country laid out would essentially give the holdout creditors the same deal as 92 percent of the creditors that had previously restructured after Argentina’s default. It still offered a significant profit to the “vulture” funds.

The hedge funds rejected this plan; now we wait for the U.S. 2nd Circuit Court to .

Last October, the Libertad was returned to Argentine waters by Ghana. We hope to see a similar outcome in the case of NML Capital LTD, v. The Republic of Argentina. The legal outcome will either offer more devastation or greater protections for the world’s poorest and most vulnerable people.

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