Judgment Evading Foreign States Accountability Act of 2011 - States the policy of the United States regarding: (1) advocacy within the governing bodies of international organizations and other foreign policy settings for the full compensation and fair treatment of persons in whose favor judgments have been awarded by U.S. courts; (2) protection of economic interests of persons and nations that benefit from a reliable flow of foreign capital by restricting the access to U.S. capital markets of judgment evading foreign states (foreign states that fail to fully satisfy a final judgment exceeding a certain amount for more than two years) and their state-owned corporations, warning of the dangers of dealing financially with such states and state-owned corporations, and calling upon international financial institutions to vote against providing funding or foreign capital to judgment evading foreign states; and (3) further solidification of the authority of the U.S. courts by preventing such states from willfully flouting the judgments of those courts.
Directs the Securities and Exchange Commission (SEC) to: (1) deny a judgment evading foreign state access to U.S. capital markets; and (2) require all periodic filings made by such a state with the SEC to bear prominently a warning describing its failure to satisfy outstanding judgments. Imposes similar restrictions on state-owned corporations of such states.
Requires: (1) a proposal to extend bilateral or multilateral assistance to a judgment evading state to bear notice that such state is a judgment evading state; and (2) the Secretary of the Treasury to notify Congress promptly of the proposal.
[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1798 Introduced in House (IH)]
112th CONGRESS
1st Session
H. R. 1798
To prevent 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
May 6, 2011
Mr. Mack (for himself, Mr. King of New York, Ms. Loretta Sanchez of
California, Mr. Carnahan, and Mrs. Maloney) 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 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 2011''.
SEC. 2. STATEMENT OF PURPOSE.
The purpose of this Act is to prevent 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 the 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
negligent ethical standards permit government officials to
repudiate lawful judgments, 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 bond holders more
than $3,500,000,000. Overall, the default and restructuring by
Argentina have cost United States bondholders, taxpayers, and
share holders more than $10,000,000,000.
(5) Argentina has the capacity to pay its external
creditors. Argentina now holds more than $54,000,000,000 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 which the United
States is owed $360,000,000.
(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 threatens 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 170
lawsuits and refusing to honor 100 judgments against it,
totaling more than $7,000,000,000.
(7) Argentina has demonstrated a similar disregard for
claims brought by United States investors before the
International Centre for Settlement of Investment Disputes
(ICSID), a tribunal of the World Bank. Argentina is the
respondent in more ICSID cases than any other nation, now
accounting for more than a quarter of the tribunal's caseload.
It is important to note that Argentina's arguments for
nonpayment have been outright rejected by both the Department
of State and the ICSID. Argentina is currently receiving
$5,810,000,000 from the World Bank and has requested an
additional $1,630,000,000 in funding. Argentina has behaved in
a manner that undermines the viability of the ICSID process,
thereby alarming the worldwide investments of United States
businesses that rely upon this forum for adjudication of
disputes.
(8) Argentina's debts are legitimate. 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 five percent of the defaulted debt now
held by United States creditors was issued during or before
1993. Ninety-five 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 raised the costs of
borrowing for both the public and private sectors. If the
country took action to remediate its debts, its annual interest
expense would certainly decline. Argentina's defaults have
discouraged foreign direct investment. One study from 2007
states that Argentina loses over $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) An October 2010 evaluation report by the Financial
Action Task Force (FATF), an intergovernmental body that
analyzes financial systems for criminal activity, gave
Argentina the most negative evaluation of any G-20 nation. FATF
evaluated Argentina on 49 financial standards, of which
Argentina failed to meet 47 out of the 49 standards. Argentina
was given an original timeline of three months, then an
additional ten months to demonstrate compliance to the
standards or face being blacklisted due to financial corruption
and deficiencies in combating financing of terrorism (CFT) and
anti-money laundering (AML) systems.
(13) Drawing further conclusions, FATF reported several
shortcomings in Argentina's financial sector, most notably
corruption and the poor enforcement of Argentine financial
laws. The lack of enforcement has prompted wide-spread money
laundering in Argentina's financial sector creating an
environment that puts Argentina at risk of becoming a hub for
terrorism and drug trafficking in the Western Hemisphere.
(14) Many persons in the United States are unaware of
Argentina's irresponsible behavior and disregard for the rule
of law. Further, United States citizens continue to invest in,
lend to, and do business with Argentina and are unfamiliar with
the associated risks.
(15) 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.
(16) 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 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.
(17) 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.
(18) 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 two 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; and
(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, international financial
institutions such as the World Bank and the International
Monetary Fund, and other foreign policy settings for the full
compensation and fair treatment of United States taxpayers 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) call on the World Bank, the International
Monetary Fund, and other international financial
institutions to vote against providing funding or
foreign capital to judgment evading foreign states; and
(3) to further solidify the authority of the United States
courts by preventing judgment evading foreign states from
willfully disregarding 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; 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 three 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.
<all>
Introduced in House
Introduced in House
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.
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.
Referred to the Subcommittee on International Monetary Policy and Trade.
Referred to the Subcommittee on Capital Markets and Government Sponsored Enterprises.
Referred to the Subcommittee on Terrorism, Nonproliferation, and Trade.
Referred to the Subcommittee on the Western Hemisphere.
Subcommittee Consideration and Mark-up Session Held.
Forwarded by Subcommittee to Full Committee in the Nature of a Substitute (Amended) by Voice Vote .
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