[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.
<all>