[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H. Con. Res. 160 Introduced in House (IH)]
110th CONGRESS
1st Session
H. CON. RES. 160
Regarding the endorsement of U.S. citizens' claims for payment by
Chinese Government of defaulted Chinese bonds.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
May 24, 2007
Mr. Lincoln Davis of Tennessee submitted the following concurrent
resolution; which was referred to the Committee on Financial Services
_______________________________________________________________________
CONCURRENT RESOLUTION
Regarding the endorsement of U.S. citizens' claims for payment by
Chinese Government of defaulted Chinese bonds.
Whereas China issued full faith and credit long term (e.g. 47 years) sovereign
government bonds from 1913 through 1938, with the following language
printed on the face of each of these bonds and the original loan
agreement, ``These obligations are intended to be binding upon the
Government of China and any successor government'', and were sold to
investors based upon these representations;
Whereas the established conventions of international law with respect to the
obligation of a successor government to honor the full faith and credit
sovereign obligations of a predecessor government is a fundamental tenet
of international trade and commerce;
Whereas on March 31, 1921, the New York Times advertised the sale and purchase
of these bonds on behalf of Cowen & Company to United States citizens;
Whereas on April 20, 1921, the New York Times published a display ad advertising
these bonds for sale to United States citizens on behalf of Pynchon &
Company, a registered member of the New York Stock Exchange;
Whereas on April 26, 1921, the New York Times advertised the sale and purchase
of these bonds to United States citizens on behalf of Bull & Eldredge, a
registered member of the New York Stock Exchange;
Whereas on May 22, 1921, the New York Times published an advertisement for the
sale and purchase of these bonds to United States citizens for Ernest
Smith & Company-Dealers in Foreign Government Bonds;
Whereas on October 18, 1924, the New York Times published the ``Bid and Asked
quotes'', for these bonds;
Whereas on November 11, 1932, the New York Times published the price and yield
of these bonds for the previous days trading;
Whereas China defaulted on all of its public debt in 1939;
Whereas the People's Republic of China (in this resolution referred to as
``PRC'') became the official government of China, assuming its assets as
well as its liabilities in 1949;
Whereas in 1955, the People's Republic of China issued an official communique
from the Minister of Foreign Affairs and the Minister of Finance
addressed to all Chinese embassies around the world advising that the
PRC had not the ability to pay this debt burden (U.S. translation from
Mandarin Chinese);
Whereas the People's Republic of China replaced the Republic of China in the
United Nations as the officially recognized government of China on
November 23, 1971, and was subsequently recognized as the government of
all China;
Whereas in 1979, the Chinese Government negotiated a Treaty with the United
States providing compensation to U.S. Nationals who suffered a taking of
property by the government of the PRC. Because no positive action was
taken as of the date of the Treaty by the government of the PRC, with
respect to the debt, the bonds were excluded from the scope of the
Treaty, (Title V of the International Claims Settlement Act does not
provide any statutory authority for the Foreign Claims Settlement
Commission to address takings prior to 1949, therefore, lacking
authority to negotiate the settlement of the defaulted bonds of the
PRC);
Whereas in 1983, the People's Republic of China, Minister of Foreign Affairs
issued an official Aide Memoire to the United States Department of State
asserting that the PRC should have no obligation to pay the debts and
advising that they would hold the U.S. Department of State and the
United States Government responsible should the PRC be required to honor
this debt and demanded that the PRC be protected from suit in United
States Courts on this issue citing a mandate of Sovereign Immunity
Protection for the PRC, which has subsequently continued to be upheld in
the United States court system;
Whereas the government of the People's Republic of China concluded a
discriminatory settlement of these bonds with respect to British
bondholders in 1987, and which excludes United States bondholders from
participation. This is known as the 1987 China-Brit Treaty;
Whereas on May 24, 2000, the United States granted Permanent Normal Trade Status
to the People's Republic of China;
Whereas on December 22, 2000, notices from the law firm of Stites & Harbison
were submitted to the United States Securities and Exchange Commission
(in this resolution referred to as ``SEC''), the White House, United
States Department of State and the Federal Trade Commission seeking
their assistance in the collection efforts of China's defaulted
sovereign debt;
Whereas on January 29, 2001, U.S. Senator Bill Frist sent written notice to the
SEC expressing support of this collection effort and requesting the SEC
to actively assist on this issue;
Whereas on June 13, 2001, the SEC, working jointly and collectively with the
State Department, the National Security Council and the Senior Associate
Counsel to the President recommended seeking the assistance of the
Foreign Bondholders Protective Council (in this resolution referred to
as ``FBPC'') to assist in the collection efforts of this claim. The FBPC
was enacted under Presidential Executive Order in 1933 by President
Franklin D. Roosevelt to assist U.S. citizens in collecting on foreign
defaulted debt. The FBPC with the U.S. Government's endorsement has
successfully settled over 40 bond settlements for U.S. citizens from
defaulted bonds issued by foreign governments;
Whereas on August 16, 2001, the American Bondholders Foundation, LLC (in this
resolution referred to as ``ABF'') was created to represent the
consolidated efforts of bondholders holding defaulted sovereign
obligations of the People's Republic of China;
Whereas on February 5, 2002, the ABF through its legal representatives Stites &
Harbison, PLLC made formal written demands to the PRC requesting fair
settlement of these claims. Several subsequent notices have been sent
since that time, all of which the PRC has continued to ignore and evade
the issue;
Whereas on May 17, 2002, the United States Congress, initiated by Congressman
Bart Gordon, sent written notice to President George W. Bush supporting
the efforts of the ABF to receive a fair settlement from the PRC and
requesting action by the Administration to hold the Chinese Government
accountable to American citizens for a fair resolution of their claims
as holders of defaulted Chinese Government bonds. This letter was
endorsed by over 50 members of the United States House of
Representatives;
Whereas on September 25, 2002, Congressman Walter Jones submitted H. Con. Res.
485 requesting the United States Government to take appropriate action
to urge the PRC to provide for a fair resolution of the claims of United
States citizens holding defaulted Chinese Government bonds. Congressman
Walter Jones and several other Members of Congress held a press
conference outside the Cannon House Office Building to announce the
resolution. This resolution was assigned to the Committee on Financial
Services and was endorsed and supported by Chairman Michael Oxley,
however, was unable to be entered onto the calendar for hearings prior
to the ending of the 107th Congress;
Whereas on February 27, 2003, Congressman Walter Jones re-submitted the previous
Resolution H. Con. Res. 485, which then became H. Con. Res. 60. H.
Con. Res. 60 was referred to the Committee on International Relations,
Chairman Henry Hyde;
Whereas on June 17, 2003, Congressman Walter Jones issued a letter stating that
under International Law, China is clearly obligated to pay American
citizens. In Congressman Jones' letter, he encouraged the ABF to pursue
other, non-legislative avenues of seeking redress and compensation for
the bondholders. Mr. Jones wrote, ``A possible tender of the valid full
faith and credit obligations of the Chinese Government, which the
People's Republic of China is obligated to accept under International
Law as a means of cancellation of Iraq's existing external sovereign
debt to the PRC, would reinforce accepted conventions of international
trade and commerce as well as free Iraq from an otherwise oppressive
debt burden. It would enable Iraq to conserve its economic resources for
economic development and nation building, while possibly resulting in a
measure of just compensation for U.S. bondholders. This avenue should be
fully explored.'';
Whereas on October 21, 2003, the Committee on International Relations, United
States Congress, House of Representatives, Chairman Henry Hyde held
formal hearings in the Rayburn House Office Building in Washington, DC
entitled: Reassessing the U.S. Economic Relationship with China. Mrs.
Jonna Bianco, President of the American Bondholders Foundation, was
requested by the International Relations Committee to testify before the
Committee. Ms. Bianco spoke about the activities of the American
Bondholders Foundation (ABF) representing the consolidated claims of
U.S. citizens who are holders of sovereign bonds issued by the
government of China and on which that government has defaulted and
continues to evade payment. Ms. Bianco also presented the International
Offset Structure enabling countries that have outstanding debts owed to
the People's Republic of China to acquire these bonds discounted from
the ABF and then utilize the bonds under full contractual value to
extinguish such debts owed to the PRC;
Whereas on October 30, 2003, Senator Richard Shelby issued a letter endorsing
the ABF's International Offset Structure. Other Members of the House and
Senate have issued letters endorsing the same, including the Chairman of
the International Relations Committee, Chairman Henry Hyde;
Whereas in September 2005, the World Bank hosted a special luncheon and invited
heads of banks and finance ministers to meet with the ABF to begin
communications working towards reducing foreign governments' debts owed
to the PRC through the International Offset Structure presented by the
ABF;
Whereas from June 22-October 31, 2006, Members of the United States Congress
issued multiple letters endorsing the ABF's Offset Structures and
supported any entity, whether government or private, to acquire these
defaulted bonds discounted from the ABF then utilizing them under full
contractual value to extinguish their debts owed to the PRC;
Whereas in 2006, the People's Republic of China officially continued to assert
its position mandating sovereign immunity protections as evidenced in
the case of Marvin Morris v. the People's Republic of China in the
United States District Court for the Southern District of New York, upon
which the courts granted;
Whereas in May 2007, it is estimated that American companies are losing 250 to
300 billion dollars in capital due to China's intellectual property
thefts;
Whereas participation in the globalized economy requires nations affirm their
international trade and treaty obligations through concrete actions,
such as those associated with the World Trade Organization (in this
resolution referred to as ``WTO''). This was not only the expectation
but the clear pre-condition of Congressional support of the People's
Republic of China's admission to the WTO. Continuing to monitor China's
actions to adhere to international trade and investment laws and
practices is a natural oversight responsibility of Congress. The PRC's
recognition and settlement of defaulted obligations is a litmus test of
their overall good economic intentions. The initiative of the ABF in
taking on the settlement of the defaulted bonds, pursued in a manner
consistent with recognized international standards, is helping to
reinforce the multilateral system where nations trade and invest
globally. Without effective enforcement of accepted norms of
international trade and commerce, the global financial system is placed
in jeopardy;
Whereas the PRC continues to have open and unfettered access to all U.S. capital
markets while at the same time continuing its practices of exclusionary
settlement, discriminatory payments, selective default, and rejection of
the successor government doctrine of settled international law; and
Whereas to preserve the integrity of public debt contracts and enhance financial
markets discipline and transparency for all participants, and consistent
with the terms and conditions established with the People's Republic of
China's entry into the World Trade Organization, specifically the PRC's
acknowledgment and acceptance to be a financially responsible trading
partner and to be economically responsible; and with substantial
evidence confirming that the PRC has not complied with the terms and
conditions with accepted conventions of international law including the
terms and conditions of the aforementioned: Now, therefore, be it
Resolved by the House of Representatives (the Senate concurring),
That Congress hereby recommends that the People's Republic of China be
denied access to all U.S. capital markets until such time as the PRC
fully complies with the terms and conditions of the WTO Agreement and
fully honors repayment of its outstanding defaulted public debts owed
to United States citizens consistent with the efforts of the American
Bondholders Foundation.
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