[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6796 Introduced in House (IH)]







110th CONGRESS
  2d Session
                                H. R. 6796

   To prevent speculation and profiteering in the defaulted debt of 
            certain poor countries, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             August 1, 2008

   Ms. Waters (for herself, Mr. Conyers, Mr. Gutierrez, Ms. Moore of 
Wisconsin, Mr. Payne, Ms. Lee, Mr. Hinchey, and Ms. Wasserman Schultz) 
 introduced the following bill; which was referred to the Committee on 
the Judiciary, and in addition to the Committee on Financial Services, 
for a period to be subsequently determined by the Speaker, in each case 
for consideration of such provisions as fall within the jurisdiction of 
                        the committee concerned

_______________________________________________________________________

                                 A BILL


 
   To prevent speculation and profiteering in the defaulted debt of 
            certain poor countries, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Stop Very Unscrupulous Loan 
Transfers from Underprivileged countries to Rich, Exploitive Funds 
Act'' or the ``Stop VULTURE Funds Act''.

SEC. 2. FINDINGS.

     The Congress finds the following:
            (1) Many poor countries have been struggling under the 
        burden of international debts for many years.
            (2) In 1996, the international community created the 
        Heavily Indebted Poor Countries Initiative (the HIPC 
        Initiative) to reduce the debt burden that curtailed spending 
        on economic development and poverty-reducing programs in many 
        impoverished countries.
            (3) Since adoption of the original HIPC Initiative in 1996 
        and the Enhanced HIPC Initiative in 1999, donor countries have 
        committed more than $50,000,000,000 in bilateral and 
        multilateral debt cancellation to eligible countries.
            (4) Congress has demonstrated its support for bilateral and 
        multilateral debt relief through the enactment of comprehensive 
        debt relief initiatives for heavily indebted poor countries 
        in--
                    (A) title V of H.R. 3425 of the 106th Congress, as 
                enacted into law by section 1000(a)(5) of the Act, 
                entitled ``An Act making consolidated appropriations 
                for the fiscal year ending September 30, 2000, and for 
                other purposes.'', approved November 29, 1999 (Public 
                Law 106-113; 113 Stat. 1501-311) and the amendments 
                made by such title;
                    (B) title II of H.R. 5526 of the 106th Congress, as 
                enacted into law by section 101(a) of the Act, entitled 
                ``An Act making appropriations for foreign operations, 
                export financing, and related programs for the fiscal 
                year ending September 30, 2001, and for other 
                purposes.'', approved November 6, 2000 (Public Law 106-
                429; 114 Stat. 1900A-5); and
                    (C) title V of the United States Leadership Against 
                HIV/AIDS, Tuberculosis, and Malaria Act of 2003 (Public 
                Law 108-25; 117 Stat. 747) and the amendment made by 
                such title.
            (5) A number of countries, including the United States, 
        have canceled 100 percent of the bilateral loans made by such 
        countries to countries that are eligible for debt relief under 
        the Enhanced HIPC Initiative, and other major donor nations 
        have canceled a large percentage of such loans. However, a 
        number of countries eligible for such debt relief will continue 
        to owe substantial debts to international financial 
        institutions such as the International Monetary Fund, the 
        International Development Association, and the African 
        Development Fund.
            (6) At the same time that the international community has 
        been extending debt relief to the poor countries of the world, 
        a new form of business has emerged for the purpose of 
        speculating in and profiteering from defaulted sovereign debt 
        at the expense of both the impoverished citizens of the poor 
        nations and the taxpayers of the world who have participated in 
        international debt relief.
            (7) So-called ``vulture'' creditors acquire, either by 
        purchase, assignment, or some other form of transaction, the 
        defaulted obligations of, and sometimes actual court judgments 
        against, impoverished nations. Vulture creditors usually 
        acquire the debt for the payment of a sum far less than the 
        face value of the defaulted obligation. They do so for the sole 
        purpose of collecting through litigation, seizure of assets, 
        political pressure, or other means, preferential payment of the 
        defaulted debt on terms and in amounts far in excess of the 
        amount paid by the vulture creditor to acquire the debt. The 
        vulture creditors seek payments far in excess of the rates of 
        payment made to other similarly situated creditors, including 
        multilateral creditors (such as the International Monetary 
        Fund, the International Development Association, and the 
        African Development Fund), bilateral official creditors such as 
        those working through the Paris Club of Official Creditors or 
        direct negotiations, or commercial creditors working through 
        the London Club mechanism of sovereign debt restructuring.
            (8) Profiteering in defaulted sovereign debt is made 
        possible by the absence of the same type of bankruptcy 
        protections for sovereign debtors that are available to private 
        debtors. Bankruptcy or other insolvency laws protect private 
        debtors through, among other things, stays of execution pending 
        reorganization or restructuring of debt, suspension of the 
        accrual of interest, ``cram-down'' powers which allow the 
        majority of creditors to force so-called ``hold-out'' creditors 
        to accept a debt restructuring that will optimize the recovery 
        of all creditors and avoid preferential payments to a minority 
        of creditors, and the ability to discharge debts and 
        obligations as part of a debt restructuring process.
            (9) Preferential payments to vulture creditor holders of 
        the defaulted sovereign debt of poor countries serve to 
        transfer the benefits of international debt relief efforts from 
        their intended beneficiaries, the citizens of the poor nations 
        of the world, to the speculators in sovereign debt who can 
        experience exorbitant and usurious rates of return on their 
        speculation.
            (10) In pursuit of their collection activities, vulture 
        creditors have engaged in litigation in the courts of the 
        United States, which has, and continues to have, a negative 
        effect on the foreign relations of the United States, and 
        hinders trade between the United States and the poor countries 
        whose defaulted debts have been acquired by vulture creditors. 
        Such disruptive activities have included, among other actions, 
        attempting to levy against the embassies of foreign states, 
        seeking to have foreign states held in contempt of court, 
        issuing subpoenas to visiting foreign dignitaries, and accusing 
        foreign governments of violating the Racketeer Influenced and 
        Corrupt Organizations Act.
            (11) Many vulture creditor holders of defaulted sovereign 
        debt act through ``offshore'' entities, incorporated in foreign 
        states, despite being substantially owned and operated by 
        United States citizens or conducting substantial business in 
        the United States, with the purpose of avoiding regulation and 
        taxation of their activities in the United States.
            (12) The direct or indirect speculation and profiteering in 
        defaulted sovereign debt by United States citizens, and the use 
        of the courts in the United States to advance such 
        profiteering, is contrary to the foreign relations interests of 
        the United States and negatively affects the interstate 
        commerce of the United States.
            (13) In order to successfully prevent the speculation and 
        profiteering in the defaulted sovereign debt of poor countries 
        in a uniform fashion, and prevent the use of the courts of the 
        United States to assist in such profiteering, national 
        legislation is required to regulate the practices and 
        procedures used in litigation against foreign sovereigns.
            (14) To be effective and properly regulate the use of 
        judicial forums in an area affecting the foreign relations of 
        the United States, national legislation is required that will 
        mandate the public disclosure of relevant information 
        concerning the acquisition, ownership, and consideration 
        provided by creditors in obtaining their property interests in 
        the defaulted sovereign debt of poor countries.

SEC. 3. DEFINITIONS.

    In this Act:
            (1) Vulture creditor.--The term ``vulture creditor'' means 
        any person who directly or indirectly acquires defaulted 
        sovereign debt at a discount to the face value of the 
        obligation so acquired, except that the term does not include 
        the Government of the United States or any agency of the 
        Government of the United States, any foreign state, or any 
        international financial institution (as defined in section 
        1701(c)(2) of the International Financial Institutions Act).
            (2) Sovereign debt.--The term ``sovereign debt'' means a 
        commercial obligation of a foreign state, whether evidenced by 
        a claim, contract, note, negotiable instrument, award, or 
        judgment.
            (3) Defaulted sovereign debt.--The term ``defaulted 
        sovereign debt'' means any sovereign debt for which payment has 
        been refused by a foreign state, which is subject to an 
        announced moratorium, upon which an award or judgement has been 
        entered, or upon which a payment of interest or principal has 
        not been paid according to the terms of the debt obligation.
            (4) Sovereign debt profiteering.--The term ``sovereign debt 
        profiteering'' means any act by a vulture creditor seeking, 
        directly or indirectly, the payment of part or all of defaulted 
        sovereign debt of a qualified poor country, in an amount that 
        exceeds the total amount paid by the vulture creditor to 
        acquire the interest of the vulture creditor in the defaulted 
        sovereign debt (excluding any amount paid for attorneys' fees 
        or other fees and costs associated with collection), plus 6 
        percent simple interest per year on the total amount, 
        calculated from the date the defaulted sovereign debt was so 
        acquired, but the term does not include the purchase or sale of 
        such a debt, or the acceptance of a payment in satisfaction of 
        the debt obligation, without threat of, or recourse to, 
        litigation.
            (5) United states person.--The term ``United States 
        person'' means--
                    (A) a national of the United States (as defined in 
                section 101(a)(22) of the Immigration and Nationality 
                Act); and
                    (B) a corporation, partnership, association, joint 
                stock company, business trust, unincorporated 
                organization, or sole proprietorship that is--
                            (i) organized under the laws of the United 
                        States or of any political subdivision thereof; 
                        or
                            (ii) owned or controlled by a citizen or 
                        resident of the United States.
            (6) Foreign state.--The term ``foreign state'' includes a 
        political subdivision of a foreign state, or an agency or 
        instrumentality of a foreign state (as defined in paragraph 
        (7)).
            (7) Agency or instrumentality of a foreign state.--The term 
        ``agency or instrumentality of a foreign state'' means an 
        entity--
                    (A) which is a separate legal person, corporate or 
                otherwise;
                    (B) which is an organ of a foreign state or 
                political subdivision thereof, or a majority of whose 
                shares or other ownership interest is owned by a 
                foreign state or political subdivision thereof; and
                    (C) which is neither a citizen of a State of the 
                United States (as defined in section 1332(c) and (e) of 
                title 28, United States Code), nor created under the 
                laws of any third country.
            (8) United states.--The term ``United States'' includes all 
        territory and waters, continental or insular, subject to the 
        jurisdiction of the United States.
            (9) Qualified poor country.--The term ``qualified poor 
        country'' means a foreign state identified on the list 
        maintained by the Secretary of the Treasury under section 
        6(a)(2).

SEC. 4. PROHIBITIONS ON SOVEREIGN DEBT PROFITEERING; PENALTIES.

    (a) Prohibitions.--It shall be unlawful for any United States 
person, directly or indirectly, to engage in sovereign debt 
profiteering, or for any person, directly or indirectly, to engage in 
sovereign debt profiteering in the United States.
    (b) Penalties.--Whoever willfully violates subsection (a) shall be 
fined an amount equal to the total amount sought by the person through 
the sovereign debt profiteering.
    (c) Effective Date.--This section shall take effect 90 days after 
the date of the enactment of this Act.

SEC. 5. PROHIBITION ON USE OF COURTS OF THE UNITED STATES TO FURTHER 
              SOVEREIGN DEBT PROFITEERING.

    (a) In General.--A court in or of the United States may not issue a 
summons, subpoena, writ, judgment, attachment, or execution, in aid of 
a claim under any theory of law or equity a purpose of which would be 
furthering sovereign debt profiteering.
    (b) Disclosures Required in Actions Involving Collection of 
Sovereign Debt.--A court in or of the United States may not issue a 
summons, subpoena, writ, judgment, attachment, or execution against a 
foreign state or any debtor or creditor of a foreign state, with 
respect to collection of sovereign debt of the foreign state, unless 
the court has required each party seeking the summons, subpoena, writ, 
judgment, attachment, or execution to file with the court, and the 
court has received, affidavits, under oath, setting forth--
            (1) a statement that written notice of the claim against 
        the foreign state has been provided to the Department of the 
        Treasury;
            (2) a copy of the list of qualified poor countries 
        maintained under section 6(a)(2), which is current as of the 
        date of the affidavit; and
            (3) if the foreign state is identified on the list--
                    (A) a statement of the names and addresses of all 
                persons who, directly or indirectly hold any interest 
                in the claim against the foreign state;
                    (B) a statement of the total amount paid by all 
                persons, directly or indirectly holding an interest in 
                the claim against the foreign state, to acquire the 
                interest, including the date the interest was acquired 
                and the identity of any person from whom the interest 
                was acquired;
                    (C) a statement containing a calculation of 6 
                percent simple interest per year on the total amount so 
                paid, for the period beginning with the date the 
                interest was acquired, as of the date of each action 
                sought from the court;
                    (D) a statement that the claim against the foreign 
                state has not been further assigned or encumbered by 
                the party;
                    (E) a statement that neither the holder of the 
                debt, nor any owner, employee, or agent of the holder 
                has given anything of value to a foreign state, or any 
                officer or agent of a foreign state, in exchange for 
                any action in connection with the acquisition or 
                collection of the debt, or any information concerning 
                the acquisition or collection of the debt;
                    (F) a statement that each person against whom any 
                legal process is sought in the case has been served 
                with a copy of this Act, a copy of the complaint or 
                initial process in which the claim is stated, and 
                copies of the affidavits required by this subsection; 
                and
                    (G) a statement that copies of the affidavits 
                required by this paragraph have been provided to the 
                Department of the Treasury.
    (c) Judicial Process Issued in Violation of This Section Is Void.--
A summons, subpoena, writ, judgment, attachment, or execution issued in 
violation of any provision of this section shall be void.
    (d) Dismissal of Actions Brought or Maintained in Violation of This 
Section.--If it appears to a court in or of the United States that an 
action brought in the court constitutes, or is in furtherance of, 
sovereign debt profiteering, the court shall, on its own initiative or 
at the request of any interested party, promptly dismiss the action.
    (e) Entitlement to Discovery.--A party against whom a summons, 
subpoena, writ, judgment, attachment, or execution is sought in an 
action brought with respect to collection of sovereign debt of a 
foreign state, and the foreign state, shall be entitled to discovery to 
determine the veracity of the matters attested to in any affidavit 
required by subsection (b).
    (f) Requirement To Serve Affidavits on All Persons Against Whom Any 
Legal Process Is Sought.--Each party seeking a summons, subpoena, writ, 
judgment, attachment, or execution pursuant to subsection (b) shall 
serve on each person against whom any legal process is sought a copy of 
this Act, a copy of the complaint or initial process in which the claim 
is stated, and copies of the affidavits required by subsection (b).
    (g) Information Required To Be Provided to the Treasury 
Department.--Each party seeking a summons, subpoena, writ, judgment, 
attachment, or execution pursuant to subsection (b) shall present to 
the Secretary of the Treasury--
            (1) written notice of the claim involved; and
            (2) copies of the affidavits required by subsection (b)(3).
    (h) Effective Date.--This section shall apply to actions brought or 
pending on or after the date of the enactment of this Act.

SEC. 6. DUTIES OF THE DEPARTMENT OF THE TREASURY.

    (a) Maintenance of Lists.--The Secretary of the Treasury shall 
compile and maintain, and make available to the public--
            (1) an up-to-date list of the foreign states that are 
        eligible for financing from the International Development 
        Association but not from the International Bank for 
        Reconstruction and Development; and
            (2) an up-to-date list of the foreign states listed under 
        paragraph (1) with respect to which the Secretary of the 
        Treasury, in consultation with the Secretary of State, has not 
        determined that--
                    (A) the government of the state (including its 
                military or other security forces) engages in a pattern 
                of gross violations of internationally recognized human 
                rights (as defined in section 116 of the Foreign 
                Assistance Act of 1961 (Public Law 87-195));
                    (B) the government of the state has an excessive 
                level of military expenditures;
                    (C) the government of the state has provided 
                support for acts of international terrorism, as 
                determined by the Secretary of State under section 
                6(j)(1) of the Export Administration Act of 1979 (50 
                U.S.C. App. 2405(j)(1)), or section 620A(a) of the 
                Foreign Assistance Act of 1961 (22 U.S.C. 2371(a)); or
                    (D) the government of the state is failing to 
                cooperate with the United States on international 
                narcotics control matters.
    (b) Maintenance of Affidavits as Public Records.--On presentation 
of an affidavit pursuant to section 5(g), the Secretary of the Treasury 
shall accept the affidavit and maintain the affidavit as a public 
record.
    (c) Notification of Poor Countries of the Provisions of This Act.--
Within 90 days after the date of the enactment of this Act, the 
Secretary of the Treasury shall provide written notice to each foreign 
state referred to in subsection (a)(1) of the provisions of this Act.
    (d) Annual Reports.--Within 1 year after the date of the enactment 
of this Act, and annually on the anniversary of the date the first 
report is submitted under this subsection, the Secretary of the 
Treasury shall submit to the Committees on Financial Services and on 
the Judiciary of the House of Representatives and the Committees on 
Foreign Relations and on the Judiciary of the Senate, and make 
available to the public, a report that--
            (1) explains how the Secretary determined which countries 
        would be included in the list of foreign states maintained 
        under subsection (a)(2);
            (2) summarizes the affidavits presented to the Secretary 
        pursuant to subsection (b) during the period covered by the 
        report; and
            (3) discusses how this Act has advanced the policies of the 
        United States with respect to poor countries and supported the 
        goals and purposes of the Enhanced HIPC Initiative (as defined 
        in section 1625(e)(3) of the International Financial 
        Institutions Act), the Multilateral Debt Relief Initiative, and 
        other international efforts to provide debt relief to poor 
        countries.

SEC. 7. RELATIONSHIP TO STATE LAW.

    In the event of a conflict between this Act and a provision of 
State law, this Act shall control.

SEC. 8. SEVERABILITY.

    If any provision of this Act or the application thereof to any 
person or circumstance is held invalid, the invalidity does not affect 
other provisions or applications of this Act which can be given effect 
without the invalid provision or application, and to this end, the 
provisions of this Act are severable.
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