IN THE KEYS HEAVILY INDEBTED POOR COUNTRIES (LIMITATION ON DEBT RECOVERY) BILL 202 Explanatory Memorandum. This Bill is promoted by the Counil of Ministers. 2. Clause provides for the short title of the resulting At. Clause 2 sets out the purpose of the At whih is to support the enhaned Heavily Indebted Poor Countries Initiative of the International Monetary Fund and the World Bank ( the Initiative ) by preventing the reovery of ertain historial debts against ountries and territories supported by the Initiative where the amount of debt to be enfored exeeds the amount of debt that would remain were the reditor to provide the level of debt relief that the Initiative expets. 3. Clause 3 sets out definitions for ertain words and phrases to be used in the At. Debt is defined in lause 4. 4. Clause 5 sets out the debts to whih the At applies. The At is limited to those debts of ountries on whih relief is expeted under the Initiative and whih are inurred before ommenement of the At. The debt essentially either has to have been inurred by a State, an arm of its government, its monetary authority or a orporate body ontrolled by any of them. Alternatively one of them has to have been the guarantor of the debt. The debt must have been inurred prior to the oming into operation of the At or have replaed suh a debt. In addition the reditor must not have been resident in the ountry eligible for debt relief at the time a deision was made that the ompany was so eligible, if this was before the At ommened, otherwise at the time it ommened. 5. Clause 6 limits the amount reoverable in respet of debts and auses of ation assoiated with them in the ase of a ountry overed by the Initiative to the amount whih the reditor would reover if the reditor provided the level of debt relief expeted by the Initiative. In the ase of ountries identified as potentially eligible for debt relief, reovery is limited to 33% of the amount otherwise reoverable. If the amount reoverable is less than these amounts due to a ompromise of the debt, resheduling the terms of its repayment or replaing the debt, only this lower amount is reoverable. 6. Clause 7 makes similar provision as in lause 6 so as to limit the amount that may be enfored in respet of a judgment or award made following arbitration proeedings. Under lause 8 the At will not apply to laims, judgments or awards where proeedings are brought and the debtor does not make an offer at least equal to the amount reoverable by virtue of the At. 7. Clause 9 disapplies the At with respet to foreign judgments or arbitration awards required to be enfored by EU law or an international obligation. Clause
Explanatory Memorandum Heavily Indebted Poor Countries (Limitation on Debt Reovery) Bill 202 0 prevents the At from requiring repayment by the reditor of an amount already paid by the debtor in relation to any of the liabilities overed by the At. Clause limits the legislation so that future hanges that might be made to the onditions for eligibility for the Initiative would not extend or redue the debts to whih the At applies. 8. The Bill is not expeted to have any impat on resoures. 9. The Bill potentially engages Artile 6 and Artile of the First Protool of the European Convention on Human Rights. However, it supports the Initiative, whih is an internationally-agreed framework for reduing debts of the poorest ountries. Regarding the interferene with property rights proteted by Artile of the First Protool, reditors would not be totally deprived of their property; they would still retain an asset of some eonomi value. It is onsidered moreover that there is an obvious and ompelling publi interest for the provisions to be retrospetive and apply to debts inurred and judgments obtained, sine the aim of the legislation is to deal with histori debt and prevent the ativities of the so-alled vulture funds that buy sovereign debt at a substantial disount on the open market and then pursue private legal ations against the poor ountry onerned to reover the full sum. Artile 6 is potentially engaged beause the At will redue the enforeability of judgments, inluding judgments already given before the At s ommenement. However, the Island will not be a party to the proeedings and nor are there other measures that ould be adopted to ahieve the At s objetives. The aim of the At would be signifiantly hindered if it did not extend to judgment debts, given the number of reditors who have obtained judgments on their debts against ountries overed by the Initiative. 0. Aordingly any interferene with Human Rights is onsidered to be proportionate and within the margin of appreiation afforded to signatories to the Convention. Therefore, in the view of the member moving the Bill its provisions are ompatible with the Convention rights within the meaning of the Human Rights At 200. Page ii
Heavily Indebted Poor Countries (Limitation on Debt Reovery) Bill 202 Index e HEAVILY INDEBTED POOR COUNTRIES (LIMITATION ON DEBT RECOVERY) BILL 202 Index Setion Page Short title... 5 2 Purpose... 5 3 Interpretation... 5 4 Meaning of debt... 6 5 Debts to whih this At applies... 7 6 Limitation on amount reoverable: general... 7 7 Limitation on amount reoverable under judgment or award... 8 8 Exeption where debtor fails to make offer to pay reoverable amount... 9 9 Exeption for overriding EU or international obligations... 9 0 Payments already made in satisfation of debt... 0 Disregard of future hanges to HIPC Initiative... 0 Page 3
Heavily Indebted Poor Countries (Limitation on Debt Reovery) Bill 202 Setion e HEAVILY INDEBTED POOR COUNTRIES (LIMITATION ON DEBT RECOVERY) BILL 202 2 A BILL to limit the reovery of ertain debts against ertain poor ountries and territories; and for onneted purposes. BE IT ENACTED by the Queen s Most Exellent Majesty, by and with the advie and onsent of the Counil and Keys in Tynwald assembled, and by the authority of the same, as follows: 3 4 5 6 7 8 9 0 2 3 4 5 6 7 8 9 20 2 22 23 24 Short title The short title of this At is the Heavily Indebted Poor Countries (Limitation on Debt Reovery) At 202. 2 Purpose The purpose of this At is to support the enhaned Heavily Indebted Poor Countries Initiative of the International Monetary Fund and the World Bank by preventing the reovery of ertain debts (a) existing, or treated by this At as existing, prior to its oming into operation; (b) against ountries and territories eligible or potentially eligible for debt relief under the HIPC Initiative; and () over and above the amount of debt that would remain if the reditor had provided the level of relief expeted under that Initiative. 3 Interpretation P200/22/(2)&(7),5(2)&(5)&6(3) () In this At deision point means the point at whih the Exeutive Boards of the International Monetary Fund and the World Bank formally deide on the eligibility of a ountry or territory for debt relief; foreign judgment means a judgment (however desribed) of a ourt or tribunal of a ountry or territory other than the Island and inludes Page 5
Setion 4 Heavily Indebted Poor Countries (Limitation on Debt Reovery) Bill 202 2 3 4 5 6 7 8 9 0 2 3 4 anything (other than an arbitration award) that is enforeable as if it were suh a judgment; HIPC Initiative means the enhaned Heavily Indebted Poor Countries Initiative of the International Monetary Fund and the World Bank; judgment inludes an order; qualifying ountry means a ountry or territory to whih the HIPC Initiative applies or that (a) the International Monetary Fund and World Bank identify as potentially eligible for debt relief under that Initiative; and (b) in respet of whih deision point has not been reahed; relevant laim means a laim for or relating to a debt and a laim under an agreement ompromising a debt. (2) Deision point is regarded as having been reahed in respet of a ountry or territory if it is so regarded for the purposes of the HIPC Initiative. 5 6 7 8 9 20 2 22 23 24 25 26 27 28 29 30 3 32 33 34 35 36 37 38 4 Meaning of debt P200/22/2(2)-(4) () For the purposes of this At debt inludes (a) a liability falling to be disharged otherwise than by the making of a payment; (b) an obligation to repurhase property that arises under an agreement for the sale and repurhase of property (whether or not the same property); and () a liability of the lessee under a finane lease, other than a liability relating to the operation or maintenane of property subjet to the lease. (2) However, debt does not inlude (a) a liability to pay for goods or servies that arose on the delivery of the goods or the provision of the servies; (b) a liability falling to be disharged within a year of its being inurred, unless it was due to be disharged more than a year before (i) the oming into operation of this At; or (ii) where deision point has been reahed in respet of the qualifying ountry, more than a year before deision point; or () a liability inurred after the oming into operation of this At that replaes anything that was (at the time of replaement) within paragraph (a) or paragraph (b). Page 6
Heavily Indebted Poor Countries (Limitation on Debt Reovery) Bill 202 Setion 5 2 3 4 5 6 7 8 9 0 2 3 4 5 6 7 8 9 20 2 22 23 24 25 26 27 28 29 30 3 32 33 34 35 36 37 38 39 5 Debts to whih this At applies P200/22/(3)-(5), 2(5)-(0) () This At applies to any debt inurred before its oming into operation that falls within the following provisions of this setion. (2) The debt must satisfy subsetion (3) or subsetion (4). (3) The debt must be inurred (a) by a qualifying ountry or any part of it, whether defined by geographial area, administrative boundary or otherwise; (b) by the government of, or of any part of, the qualifying ountry, or by any arm of suh government; () by any monetary authority of the qualifying ountry; or (d) by an body orporate ontrolled either diretly or indiretly by anything within paragraphs (a), (b) or (). (4) The debt must (a) have been guaranteed, the guarantee being entered into before this At ame into operation and, where deision point has been reahed in respet of the qualifying ountry, before it was reahed; and (b) fall within subsetion (3) if it had been inurred by the guarantor, and if only part of the debt satisfied paragraphs (a) and (b), that part only satisfies this subsetion. (5) The reditor of the debt must not be resident in the qualifying ountry (a) if deision point was reahed in respet of the ountry before the oming into operation of this At, at the time it was reahed; or (b) otherwise, at the time this At omes into operation, and in any proeedings to whih the reditor is a party, this subsetion is to be treated as satisfied unless the ontrary be proved. (6) For the purposes of this setion a debt inurred after the oming into operation of this At or after deision point is treated as having been inurred before it ame into operation or before deision point (as the ase may be) if and to the extent that it replaes one inurred before its oming into operation or deision point (as the ase may be). 6 Limitation on amount reoverable: general P200/22/3&4 () The amount reoverable in respet of a debt, or any ause of ation relating to it, is limited to (a) if the debt relates to a ountry or territory to whih the HIPC Initiative applies, the amount that the debt would be if it were redued in aordane with that Initiative; and Page 7
Setion 7 Heavily Indebted Poor Countries (Limitation on Debt Reovery) Bill 202 2 3 4 5 6 7 8 9 0 2 3 4 5 6 7 8 9 20 2 22 23 (b) if the debt relates to any other qualifying ountry, 33% of the amount that would be reoverable but for this At. (2) Subsetion (3) applies if (a) an agreement has been made that ompromises a laim in respet of a debt or ause of ation mentioned in subsetion (); or (b) an agreement has been made (i) that hanges the terms for repayment of a debt so as to redue its net present value; or (ii) by virtue of whih that original debt is replaed by a new debt, the present net value of whih is less than the original debt. (3) Where this subsetion applies (a) subsetion () does not apply; but (b) the amount reoverable is limited to the amount that would have been reoverable under that subsetion if no agreement mentioned in subsetion (2) had been made and subsetion () did apply. (4) However, subsetion (3) does not apply if the effet of so applying it would be to inrease the amount that would otherwise be reoverable. (5) Referenes in this setion to the amount reoverable inlude the amount reoverable on the enforement of any seurity. (6) This setion applies whether or not the law appliable to any laim, agreement or seurity mentioned in this setion is the law of the Island. 24 25 26 27 28 29 30 3 32 33 34 35 36 37 38 7 Limitation on amount reoverable under judgment or award P200/22/5 () This setion applies to (a) a judgment on a relevant laim given by any ourt in the Island; (b) a foreign judgment on a relevant laim (whenever given); and () an award made (at any time) on a relevant laim in an arbitration (whether onduted under the law of the Island or that of any other ountry or territory). (2) The amount of the judgment or award is to be the same as it would be if the ourt, tribunal or arbitrator had applied setion 6 in relation to the relevant laim or, if the judgment or award gives effet to a ompromise of a relevant laim, the same as it would be if the relevant laim had not been ompromised and setion 6 had been so applied. (3) However, subsetion (2) does not apply if the effet of so applying it would be to inrease the amount of the judgment or award. Page 8
Heavily Indebted Poor Countries (Limitation on Debt Reovery) Bill 202 Setion 8 2 3 4 5 6 7 8 9 0 2 3 4 5 6 7 8 9 20 2 22 23 24 25 26 27 28 29 30 3 32 33 34 35 36 8 Exeption where debtor fails to make offer to pay reoverable amount P200/22/6 () This At does not apply to a relevant laim or a judgment or award mentioned in setion 7 if (a) proeedings are brought in respet of the laim, judgment or award; and (b) before the relevant time the debtor does not make an offer in aordane with whih the net present value of payments to be made is greater than or equal to the net present value of the payment required to satisfy the laim, judgment or award (redued in aordane with this At). (2) This setion applies whenever the proeedings were brought, exept where the relevant time ourred before the oming into operation of this At. (3) In this setion proeedings means proeedings in the Island, inluding proeedings for (a) the registration of a foreign judgment or arbitration award; or (b) permission to enfore an arbitration award in the same manner as a judgment of the ourt, but does not inlude proeedings for the enforement of a judgment or award; relevant time means the earliest of the following (a) the time when a ourt first gives judgment on the relevant laim; (b) the time when the foreign judgment or arbitration award is registered; or (as the ase may be); () the time when permission is given to enfore the arbitration award in the same manner as a judgment of the ourt. 9 Exeption for overriding EU or international obligations P200/22/7 () Nothing in this At applies to a foreign judgment or an arbitration award that is required to be enfored in full by (a) European Union law; or (b) an international obligation, that applies to the Island, even in ases where suh enforement is ontrary to the publi poliy of the Island. (2) Aordingly, this At does not apply to an award to whih setion of the Arbitration (International Investment Disputes) At 983 applies. 6 Page 9
Setion 0 Heavily Indebted Poor Countries (Limitation on Debt Reovery) Bill 202 2 (awards made under the Convention on the settlement of investment disputes between States and nationals of other States). 3 4 5 6 7 8 9 0 2 3 4 5 6 7 8 0 Payments already made in satisfation of debt P200/22/8 () Nothing in this At enables a person to reover anything paid in total or partial satisfation of any liability, whether arising under an agreement, judgment, order, award or otherwise. (2) But anything paid in the irumstanes mentioned in subsetion () is still to be taken into aount in assessing the amount reoverable under setion 6(). Disregard of future hanges to HIPC Initiative P200/22/()&(2) For the purposes of this At any hanges made to the terms of the HIPC Initiative after the oming into operation of this At so as to affet a ondition as to (a) the level of a qualifying ountry s inome or debt; or (b) the size of its eonomy, are to be disregarded. 9 20 Page 0
IN THE KEYS HEAVILY INDEBTED POOR COUNTRIES (LIMITATION ON DEBT RECOVERY) BILL 202 A BILL to limit the reovery of ertain debts against ertain poor ountries and territories; and for onneted purposes. Approved by the Counil of Ministers for introdution in the House of Keys. MR TEARE MAY 202 Printed (by Authority) by the Isle of Man Post Offie No.555849