[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5564 Introduced in House (IH)]

111th CONGRESS
  2d Session
                                H. R. 5564

 To prevent wealthy and middle-income foreign states that do business, 
 issue securities, or borrow money in the United States, and then fail 
to satisfy United States court judgments totaling $100,000,000 or more 
based on such activities, from inflicting further economic injuries in 
  the United States, from undermining the integrity of United States 
     courts, and from discouraging responsible lending to poor and 
developing nations by undermining the secondary and primary markets for 
                            sovereign debt.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             June 22, 2010

 Mr. McMahon (for himself, Mr. Carnahan, Mrs. Maloney, Mr. Towns, Mr. 
Higgins, Ms. Markey of Colorado, Ms. Kosmas, Mr. Burton of Indiana, Mr. 
 Shuler, Mr. Garrett of New Jersey, Mr. Wilson of South Carolina, Mr. 
Hall of New York, Mr. Owens, Ms. Fallin, Mr. Maffei, Mr. Murphy of New 
 York, Ms. Loretta Sanchez of California, Mr. Johnson of Georgia, Mr. 
 Baca, Mr. Tonko, and Mr. Posey) introduced the following bill; which 
was referred to the Committee on Financial Services, and in addition to 
   the Committee on Foreign Affairs, 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 wealthy and middle-income foreign states that do business, 
 issue securities, or borrow money in the United States, and then fail 
to satisfy United States court judgments totaling $100,000,000 or more 
based on such activities, from inflicting further economic injuries in 
  the United States, from undermining the integrity of United States 
     courts, and from discouraging responsible lending to poor and 
developing nations by undermining the secondary and primary markets for 
                            sovereign debt.

    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 ``Judgment Evading Foreign States 
Accountability Act of 2010''.

SEC. 2. STATEMENT OF PURPOSE.

    The purpose of this Act is to prevent certain wealthy and middle-
income foreign states that do business, issue securities, or borrow 
money in the United States, and then fail to satisfy United States 
court judgments totaling $100,000,000 or more based on such activities, 
from inflicting further economic injuries in the United States, from 
undermining the integrity of United States courts, and from 
discouraging responsible lending to poor and developing nations by 
undermining the secondary and primary markets for sovereign debt.

SEC. 3. FINDINGS.

    Congress finds the following:
            (1) Foreign states that do business, issue securities, or 
        borrow money in the United States, and then refuse to satisfy 
        judgments of United States courts entered against them in 
        connection with disputes resulting from these or other 
        commercial activities, directly or indirectly inflict billions 
        of dollars of damage in United States, and undermine the 
        credibility of the United States courts.
            (2) Foreign states that engage in such behavior can infect 
        the management of corporations and other entities that they own 
        or control with their profligate and irresponsible habits. When 
        the lax ethical standards that permit government officials to 
        flout lawful judgments corrupt the behavior of the management 
        of their state-owned corporations, the injury to United States 
        taxpayers is multiplied.
            (3) The Republic of Argentina is a primary example of a 
        foreign state that has incurred large debts in the United 
        States, defaulted on those debts, and then refused to honor 
        lawful judgments of United States and other courts ordering 
        repayment. In 2001, Argentina defaulted on more than 
        $81,000,000,000 in sovereign debt, the largest such default in 
        history. In 2005, after refusing all efforts by creditors to 
        negotiate the terms of an exchange offer, Argentina 
        unilaterally offered lenders approximately 27 cents on the 
        dollar in its restructuring deal, far below the international 
        norm for sovereign debt restructurings. Argentina repudiated 
        the debts owed to the unprecedented proportion of bondholders 
        who rejected that offer.
            (4) Argentina still owes United States bondholders more 
        than $3,500,000,000. Overall, the default and restructuring by 
        Argentina have cost United States bondholders, taxpayers, and 
        shareholders more than $10,000,000,000.
            (5) Argentina has the capacity to pay its external 
        creditors. The nation now holds more than $45,000,000,000 in 
        reserves. Argentina chose to pay off its $9,800,000,000 debt to 
        the International Monetary Fund in full in 2005, years before 
        it was due, and has similarly announced an intention to pay 
        sovereign creditors of the Paris Club of Official Creditors in 
        full and partially in advance.
            (6) United States bondholders have won numerous court 
        rulings against Argentina relating to Argentina's default on 
        debt owed to such bondholders, and Argentina's decision to 
        repeatedly ignore these judgments undermines respect for the 
        United States legal system. Despite having agreed to submit to 
        the jurisdiction of the State of New York and to waive claims 
        of sovereign immunity, Argentina is now contesting at least 163 
        lawsuits and refusing to honor 88 judgments against it.
            (7) Argentina has demonstrated a similar disregard for 
        claims brought by United States investors before the 
        International Centre for Settlement of Investment Disputes 
        (ICSID). Argentina is the respondent in more ICSID cases than 
        any other nation, now accounting for more than a quarter of the 
        tribunal's caseload. Argentina has behaved in a manner that 
        undermines the viability of the ICSID process, thereby 
        endangering the worldwide investments of United States 
        businesses that rely upon this forum for adjudication of 
        disputes.
            (8) Argentina's debts are legitimate, though the country 
        has attempted to argue that the borrowings it seeks to 
        repudiate are somehow ``odious''. Any assertion that the 
        Argentine debt now outstanding was incurred by the repressive, 
        nondemocratic regimes that ruled Argentina in the late 1970s 
        and early 1980s is inaccurate. The bonds currently held by 
        United States creditors were not incurred by nondemocratic 
        regimes; rather, they were issued by democratically elected 
        Argentine governments.
            (9) While it is true that the Argentine military junta--
        which caused tremendous suffering during a tyrannical 7-year 
        reign--borrowed from foreign banks, 96 percent of that debt was 
        refinanced in 1993 when Argentina's ``Brady Plan'' 
        restructuring was completed. That restructuring was 
        underwritten by the United States Government. Prior to the 
        Brady Plan restructuring, Argentina had undergone two ``major 
        restructurings'' of its foreign debt--the first in 1985, and 
        the second in 1987.
            (10) None of the debt now held by United States creditors 
        dates from the days of the Argentine military junta. Further, 
        even if it were fair to characterize the debt issued in the 
        1993 Brady Plan restructuring as somehow derivative of junta-
        era debt--a notion that maligns the United States policymakers 
        who approved and underwrote the Brady Plan on behalf of the 
        American people--only 5 percent of the defaulted debt now held 
        by United States creditors was issued during or before 1993. 
        Fully 95 percent of the defaulted debt held by United States 
        creditors was incurred after 1993 by freely elected Argentine 
        governmental officials and has no relationship to the military 
        junta.
            (11) Argentina's defaults have badly undermined its own 
        economy. According to a team of Argentine economists led by 
        Martin Krause, Argentina loses more than $6,000,000,000 in 
        foreign direct investment every year as a result of its default 
        and debt repudiation and the resultant risk profile.
            (12) Argentina's serial defaults have encouraged other 
        nations to take the same course. On December 12, 2008, Ecuador 
        selectively defaulted on $3,800,000,000 in obligations to 
        investors--including United States creditors--who had purchased 
        its sovereign bonds, citing Argentina as its example. Ecuador 
        earned record income from oil exports in 2008 and has ample 
        funds to honor its debts. Ecuadorian President Rafael Correa 
        apparently plans to force its foreign bondholders (including 
        United States bondholders) to accept restructuring terms that 
        will result in substantial losses to foreign investors who lent 
        Ecuador funds in good faith.
            (13) Unfortunately, many persons in the United States are 
        unaware of this irresponsible behavior and disregard for the 
        rule of law, and continue to invest in, lend to, and do 
        business with Argentina and other foreign states and their 
        state-owned corporations, unaware of the associated risks.
            (14) Worse still, those who are injured as a result of this 
        conduct often have little or no recourse. Judgment evading 
        foreign states and their state-owned corporations enjoy a safe 
        haven within their national borders, and this fact often 
        presents an insurmountable obstacle to recovery for those who 
        are injured by the behavior of those states.
            (15) The absence of a remedy for defaults by such foreign 
        states undermines nations that badly need to access capital 
        from foreign lenders, with disproportionate harm falling on 
        responsible and democratic poor nations. By undermining 
        confidence in the secondary market for sovereign debt, judgment 
        evading foreign states significantly increase the risk that 
        primary lending to less-advantaged nations will be curtailed, 
        depriving deserving sovereign borrowers of access to the 
        international capital markets.
            (16) Action by the United States Government to combat this 
        growing problem must include measures that both protect against 
        the irresponsible conduct of judgment evading foreign states 
        and their state-owned corporations, and motivate such states 
        and corporations to raise their standards of behavior.
            (17) An effective means of achieving this important 
        objective is to deprive judgment evading foreign states and 
        their state-owned corporations of the privilege of issuing 
        securities or borrowing in the United States, and requiring 
        that warnings of their irresponsible behavior be given to 
        persons in the United States who are contemplating investing 
        in, lending to, or doing business with such states and 
        businesses, until those states demonstrate that such measures 
        are no longer necessary.

SEC. 4. DEFINITIONS.

    For purposes of this Act:
            (1) Agency or instrumentality of a foreign state.--The term 
        ``agency or instrumentality of a foreign state'' has the 
        meaning given that term in section 1603(b) of title 28, United 
        States Code.
            (2) Final judgment.--The term ``final judgment'' means any 
        judgment of a United States district court, the Court of 
        International Trade, or the court of any State, that is no 
        longer eligible to be appealed to any court in the United 
        States.
            (3) Foreign state.--The term ``foreign state'' has the 
        meaning given that term in section 1603(a) of title 28, United 
        States Code, except that it does not include an agency or 
        instrumentality of a foreign state.
            (4) International organization.--The term ``international 
        organization'' means an entity designated by the President as 
        being entitled to enjoy the privileges, exemptions, and 
        immunities provided by the International Organizations 
        Immunities Act (22 U.S.C. 288 et seq.).
            (5) Judgment evading foreign state.--The term ``judgment 
        evading foreign state'' means any foreign state that--
                    (A) has one or more judgments entered against it by 
                any United States district court, the Court of 
                International Trade, or the court of any State, the 
                combined amount of which judgments exceeds 
                $100,000,000;
                    (B) fails to satisfy in full any such judgment for 
                a period of more than 2 years after the judgment 
                becomes a final judgment, regardless of whether such 
                judgment became a final judgment before the date of the 
                enactment of this Act;
                    (C) is not a foreign state eligible for--
                            (i) financing through the International 
                        Development Association but not from the 
                        International Bank for Reconstruction and 
                        Development; and
                            (ii) debt relief under the Enhanced HIPC 
                        Initiative (as defined in section 1625(e)(3) of 
                        the International Financial Institutions Act) 
                        or under the Multilateral Debt Relief 
                        Initiative.
            (6) State-owned corporation of a judgment evading foreign 
        state.--The term ``state-owned corporation of a judgment 
        evading foreign state'' means any corporation or entity, other 
        than a natural person--
                    (A) that is an agency or instrumentality of a 
                foreign state that is a judgment evading foreign state; 
                or
                    (B) a majority of the shares or other ownership 
                interest of which is held, either directly or 
                indirectly, by a judgment evading foreign state or by 
                an agency or instrumentality of a foreign state that is 
                a judgment evading foreign state.
            (7) State.--The term ``State'' means each of the several 
        States, the District of Columbia, and any commonwealth, 
        territory, or possession of the United States.

SEC. 5. STATEMENT OF POLICY.

    It shall be the policy of the United States--
            (1) to advocate within the governing bodies of 
        international organizations and in other foreign policy 
        settings for the full compensation and fair treatment of United 
        States taxpayers and other persons in whose favor judgments 
        have been awarded by the United States courts;
            (2) to seek to protect the economic interests of such 
        taxpayers and other persons and of nations that benefit from a 
        reliable flow of foreign capital by--
                    (A) restricting the access to the United States 
                capital markets of judgment evading foreign states and 
                their state-owned corporations;
                    (B) requiring that such persons be warned of the 
                dangers of investing in, lending to, or doing business 
                with such states and state-owned corporations; and
                    (C) subjecting to congressional scrutiny requests 
                for aid made by judgment evading foreign states to the 
                United States Government; and
            (3) to seek to protect the authority of the United States 
        courts by preventing judgment evading foreign states from 
        willfully flouting the judgments of those courts.

SEC. 6. BAR ON ACCESS TO UNITED STATES LENDERS AND INVESTORS.

    (a) Measures With Respect to Judgment Evading Foreign States.--The 
Securities and Exchange Commission shall--
            (1) take all necessary measures to deny every judgment 
        evading foreign state access to United States capital markets, 
        including the ability, directly or indirectly, to borrow money 
        or sell securities in the United States, unless the proceeds of 
        such borrowing or securities issuance are to be used, in the 
        first instance, to satisfy in full all final judgments entered 
        against such judgment evading foreign state that form the basis 
        of the state's designation as a judgment evading foreign state; 
        and
            (2) require that all periodic filings made by the judgment 
        evading foreign state with the Securities and Exchange 
        Commission under the securities laws bear the following legend 
        prominently on the cover page: ``WARNING: THIS REPORT IS 
        SUBMITTED BY A FOREIGN STATE THAT HAS BEEN DETERMINED BY THE 
        UNITED STATES DEPARTMENT OF THE TREASURY TO BE A JUDGMENT 
        EVADING FOREIGN STATE BASED UPON ITS FAILURE TO SATISFY 
        OUTSTANDING UNITED STATES COURT JUDGMENTS.''.
    (b) Measures With Respect to State-Owned Corporations of Judgment 
Evading Foreign States.--If any judgment evading foreign state remains 
in default on any final judgment for more than 3 years, irrespective of 
whether such judgment became final before the date of the enactment of 
this Act, the Securities and Exchange Commission shall--
            (1) take all necessary measures to deny any state-owned 
        corporation of a judgment evading foreign state access to the 
        United States capital markets, including the ability to issue 
        debt, equity or other securities, or borrow money, unless the 
        proceeds of such borrowing of securities issuance are to be 
        used, in the first instance, to satisfy in full all final 
        judgment against its parent judgment evading foreign state; and
            (2) require that all periodic filings made by each state-
        owned corporation of a judgment evading foreign state with the 
        Securities and Exchange Commission under the securities laws 
        bear the following legend prominently on the cover page: 
        ``WARNING: THIS REPORT IS SUBMITTED BY A STATE-OWNED 
        CORPORATION OF A FOREIGN STATE THAT HAS BEEN DETERMINED BY THE 
        DEPARTMENT OF THE TREASURY TO BE A JUDGMENT EVADING FOREIGN 
        STATE BASED UPON ITS FAILURE TO SATISFY OUTSTANDING UNITED 
        STATES COURT JUDGMENTS.''.

SEC. 7. REQUESTS FOR AID OR ASSISTANCE FROM JUDGMENT EVADING FOREIGN 
              STATES.

    (a) Bilateral Assistance.--Whenever any proposal is made to a 
department, agency, or other instrumentality of the United States 
Government to extend aid, a loan, or any other form of assistance to a 
judgment evading foreign state, the head of the department, agency, or 
other instrumentality may consider the proposal only if it bears 
prominently the legend described in subsection (c).
    (b) Multilateral Assistance.--Whenever any proposal is made to an 
international organization to extend aid, a loan, or any other form of 
assistance to a judgment evading foreign state, the Secretary of State 
shall provide prompt notice of such proposal to the Congress. Such 
notice shall bear prominently the legend described in subsection (c).
    (c) Legend Described.--The legend of a proposal referred to in 
subsection (a) and the legend of a notice referred to in subsection (b) 
is the following: ``REQUEST FOR GRANT-IN-AID OR LOAN BY A JUDGMENT 
EVADING FOREIGN STATE.''.

SEC. 8. REPORTS; RECOMMENDATIONS OF ADDITIONAL MEASURES.

    (a) Annual Reports to Congress.--Not later than January 31 of each 
year, the Secretary of the Treasury shall provide a report, in writing, 
to the Congress identifying each judgment evading foreign state, and, 
for each such judgment evading foreign state--
            (1) quantifying the impact on the United States economy, 
        and cost to United States taxpayers, of the unsatisfied final 
        judgments outstanding against the judgment evading foreign 
        state; and
            (2) describing all measures that the Secretary of the 
        Treasury and the Securities and Exchange Commission have taken 
        in the preceding year to carry out this Act.
    (b) Consideration of Documents and Other Information.--The 
Secretary of the Treasury may consider documents and other information 
received from third parties and from judgment evading foreign states in 
preparing each report under subsection (a).
    (c) Termination of Designation.--At such time as the Secretary of 
the Treasury determines that any judgment evading foreign state no 
longer qualifies as a judgment evading foreign state, the Secretary 
shall so certify to the Congress no later than in the next annual 
report to Congress under subsection (a), at which time the requirements 
and prohibitions under this Act shall no longer apply to such former 
judgment evading foreign state, or to any state-owned corporation of 
such judgment avoiding foreign state. The Secretary may consider 
documents and other information received from third parties and from 
the judgment evading foreign state in making this determination.
    (d) Other Public Reports To Include Information About Judgment 
Evading Foreign States.--The Secretary of State, the Secretary of the 
Treasury, and the Secretary of Commerce shall each reference the 
findings of the Secretary of the Treasury from the Secretary's most 
recent annual report to Congress under subsection (a) relating to the 
unsatisfied final judgments outstanding against the judgment evading 
foreign state in every report prepared for the public relating to the 
country risk or investment climate of such judgment evading foreign 
state.
    (e) Additional Measures.--The Secretary of the Treasury shall 
recommend to the Congress in writing additional measures to carry out 
the purposes of this Act.
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