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[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.
                                 <all>
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