Interest Payments Subject to Attachment

Recent judicial decisions enable defaulted creditors holding sovereign obligations to successfully assert pari passu doctrine to attach PRC payments to all creditors, including current and future investors in PRC sovereign bonds:

• Elliott Associates, L.P., General Docket No. 2000/QR/92 (Court of Appeals of Brussels, 8th Chamber, Sept. 26, 2000)
• Republic of Nicaragua v. LNC Investments and Euroclear Bank SA (Injunction issued against paying agent by Belgian Commercial Court, Sept. 8, 2003)
  
• Red Mountain Finance, Inc. v. Democratic Republic of Congo and National Bank of Congo, Case No. CV00-0164R (C.D.Cal. May 29, 2001)

Expressing the sense of Congress that the People’s Republic of China and all enterprises owned or controlled by the People’s Republic of China should make proper disclosures with the Securities and Exchange Commission regarding the selective default status of certain bonds


Expressing the sense of the House of Representatives that the People’s Republic of China and all enterprises owned or controlled by the People’s Republic of China should make proper disclosures with the Securities and Exchange Commission regarding the selective default status of certain bonds.

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Resolution of the United States Congress to Deny the Communist Chinese Government Access to the U.S. Capital Markets



 
The Great Global Credit Meltdown of 2007 - Brought to You Courtesy of the SEC: How Complacency, Failure to Regulate Credit Rating Firms Led to Subprime Credit Rout

Concurrent Resolution of the United States Congress condemning the wrongful actions of the government of the People's Republic of China and expressing the Sense of the Congress to bar future issuances of Chinese securities within the United States until such time as the communist Chinese government fully honors the repayment of China's defaulted full faith and credit sovereign debt.

 










Credit Rating Agencies Score Big Profits as SEC Looks the Other Way

Letter to Credit Rating Agencies re: Improper Sovereign Rating Classifications and Inadequate Disclosure of Risks

RE: On Behalf of Defaulted Creditors of the Government of China: COMPLAINT Misleading Sovereign Credit Ratings and Inadequate Disclosure Pertaining to the Offer, Sale and Trading of Debt Securities of the People’s Republic of China: Deceptive Practices and Violations of International Law.

RE: Initial Complaint filed in the United States on behalf of the American Bondholders Foundation.

RE: Legal Confirmation of China's Financial Obligations to U.S. Bondholders

RE: Complaint Filed On Behalf of Default Creditors of the Government of China Alleging Misleading Sovereign Credit Ratings and Inadequate Disclosure Pertaining to the Offer, Sale and Trading of Debt Securities of the People’s Republic of China Including Violations of International Law.

2. Enforcement of SEC Regulatory Mandate Pertaining to Nationally Recognized Statistical Rating Organizations.

RE: Complaint filed with the Division of Market Regulation on behalf of defaulted creditors of the Government of China.

On Monday June 7, 2004, the United States Supreme Court handed down a decision in Austria v. Altmann that the 1976 U.S. Foreign Sovereign Immunities Act may be retroactively applied to fraudulent and deceptive commercial transactions perpetrated by foreign sovereign nations against United States citizens.  The Court found that it was the intent of the United States Congress to apply the provisions of the Act to any such pre-enactment actions of foreign governments.

As a result of the Supreme Court decision, the People’s Republic of China is now subject to civil suits in U.S. Courts by United States citizens holding defaulted full faith and credit sovereign obligations of the Chinese Government.

The exposure to litigation and the probability of adverse judgments act to create a substantially adverse risk profile for newly-issued as well as outstanding obligations of the People’s Republic of China.  Holders of defaulted full faith and credit sovereign bonds of the People’s Republic of China may now obtain a judicial order attaching interest payments on recently-issued and outstanding PRC sovereign obligations.

A comprehensive risk assessment of investment in obligations of the People’s Republic of China (the “PRC”) was privately commissioned for a client of Sovereign Advisers.  An abstract of this assessment appears on this website with the express permission of Sovereign Advisers.  Please note that the complete assessment is not available to the general public.

Summary of Risk Factors

The sovereign downgrade research bulletin describes a set of revised risk metrics associated with investment in both outstanding as well as newly-issued PRC government bonds:

Judicial risk (i.e., risk of interest attachment / coupon seizure by defaulted creditors);

• Elliott Associates, L.P., General Docket No. 2000/QR/92

  (Court of Appeals of Brussels, 8th Chamber, Sept. 26, 2000)

• Republic of Nicaragua v. LNC Investments and Euroclear Bank SA

  (Injunction issued against paying agent by Belgian Commercial Court, Sept. 8, 2003)

• Red Mountain Finance, Inc. v. Democratic Republic of Congo and National Bank of Congo, Case No. CV00-0164R

  (C.D.Cal. May 29, 2001)

• Republic of Austria v. Maria V. Altmann, Docket No. 03-13

  (United States Supreme Court, June 7, 2004)

  U.S. Supreme Court decision enabling the 1976 U.S. Foreign Sovereign Immunities Act to be retroactively applied to fraudulent and deceptive commercial transactions perpetrated by foreign sovereign nations against United States citizens.  The Court found that it was the intent of the United States Congress to apply the provisions of the Act to any such pre-enactment actions of foreign governments.  As a result, the People’s Republic of China is now subject to civil suits in U.S. Courts by United States citizens holding defaulted full faith and credit sovereign obligations of the Chinese Government.  Holders of defaulted full faith and credit sovereign bonds of the People’s Republic of China may now obtain a judicial order attaching interest payments on recently-issued and outstanding PRC sovereign obligations.

Legislative risk (i.e., risk of U.S. capital markets or trade sanctions);

http://www.globalsecuritieswatch.org/joint_economic_committee_press_release.pdf

http://www.uscc.gov/pressreleases/2004/04_06_15annualreport.pdf

http://wwwc.house.gov/International_Relations/108/bian2021.htm

Liquidity risk (i.e., risk of regulatory agency sanctions imposed on dealers and ban on quotation pursuant to the U.S. Johnson Debt Default Act);

http://www.globalsecuritieswatch.org/US_Johnson_Debt_Default_Act

Repayment risk accruing from the "willingness to pay" metric (i.e., reassessment of the PRC's willingness to honor outstanding obligations in the event of future adverse economic conditions); and

http://www.riskcenter.com/story.php?id=9418

International setoff risk (i.e., vulnerability to international setoff, adversely affecting the PRC's balance of payments position and impairing the PRC's ability to maintain its current level of external debt).

http://www.globalsecuritieswatch.org/congressional_endorsement_of_international_setoff.html

http://www.globalsecuritieswatch.org/international_setoff_transaction_templates.html

NATIONAL BANK v. REPUBLIC OF CHINA, 348 U.S. 356

Statement by the United States Supreme Court
affirming right of international setoff:

We have a foreign government invoking our law but resisting a claim against it which fairly would curtail its recovery. It wants our law, like any other litigant, but it wants our law free from the claims of justice.
...unjustly enforced by disregarding legitimate claims against the Republic of China.
...the individual can set off all debts properly due him from the sovereign.
The judgment of the Court of Appeals must be reversed and the case remanded to the District Court with directions to reinstate the counterclaims and for further proceedings not inconsistent with this opinion.

PRAVIN BANKER ASSOCIATES v. BANCO POPULAR DEL PERU
aff'd 109 F.3d 850 (2d Cir. 1997), aff'g 895 F. Supp. 660 (S.D.N.Y. 1995)

Decision by the Court of Appeals for the Second Circuit affirming claimant's right to recieve full contractual value of defaulted sovereign debt

Peru's arguments to the United States Court for the Southern District of New York centered on the claim that Pravin had purchased the debt in the secondary market at a substantial discount and face value recovery was therefore not contemplated and would constitute unjust enrichment by enabling Pravin to reap a windfall profit from Peru's economic misfortune. The U.S. Court disregarded these arguments and asserted the following: (a) Pravin was within its full legal rights to seek a full-servicing of the debt it had acquired regardless of the price it had paid in the secondary market; (b) the U.S. has a strong interest in ensuring the enforceability of valid debts under contract law; and (c) that Pravin sought merely to enforce the terms of the debt agreement as written. The Court of Appeals for the Second Circuit concurred with the Court's findings and affirmed the decision of the S.D.N.Y.

Note: The Global Association of Risk Professionals recently reported on the downgrade of the long-term credit of the People’s Republic of China to sub-investment grade status.  The justification for the downgrade of the PRC’s credit rating is predicated upon the continuing evasion of payment on a series of defaulted full faith and credit sovereign bonds of the Chinese Government.  Discriminatory settlements of the defaulted sovereign series increases the risk of interest payments seizure by defaulted creditors.  The article may be viewed online at:

http://www.globalsecuritieswatch.org/Global_Association_of_Risk_Professionals/Top_Stories.pdf


China Economic Assessment and Outlook

Full faith and credit sovereign debt obligations of the People’s Republic of China

Issued during any of the years appearing below

You may have recourse to recover any losses which you have incurred or may incur with respect to such investments.  If you are a purchaser or offeree of these securities and the risk factors described on this website including those metrics described in detail in the letter addressed to the Honorable Eliot Spitzer, Attorney General for the State of New York, were not disclosed to you prior to your having purchased the subject securities, please inform the United States law firms shown below by clicking on the following links:

Description of Series of Obligations

People’s Republic of China Full Faith and Credit Sovereign Bonds

Year of Issue

1993 - 2004

Please Contact the Following Plaintiffs Law Firms

Milberg LLP

  http://www.milberg.com/contact/reportafraud.aspx

Coughlin Stoia Geller Rudman & Robbins LLP

http://www.csgrr.com/csgrr-cgi-bin/mil?templ=contact/report-fraud.html

Sovereign Advisers

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Tucson, Arizona 85718

Telephone: (520) 327-2482

E-mail: info@sov-advisers.com

 

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