1.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
.
2.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.
3.In this Act:
(1)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)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)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
profiteeringThe 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)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)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 stateThe 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)The term United States includes all territory
and waters, continental or insular, subject to the jurisdiction of the United
States.
(9)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).
4.Prohibitions on
sovereign debt profiteering; penalties
(a)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)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)This section shall take
effect 90 days after the date of the enactment of this Act.
5.Prohibition on use
of courts of the United States to further sovereign debt profiteering
(a)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 debtA 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)Legal process
issued in violation of this section is voidA 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 sectionIf 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)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
soughtEach 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 DepartmentEach 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)This section shall apply
to actions brought or pending on or after the date of the enactment of this
Act.
6.Duties of the
Department of the Treasury
(a)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 recordsOn 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 ActWithin 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)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.
7.Relationship to
State lawIn the event of a
conflict between this Act and a provision of State law, this Act shall
control.
8.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.