Washington, DC - Rep. Edolphus Towns (D-NY) today announced his support of legislation that would impose penalties on foreign states that refuse to honor their contracts with American taxpayers and flout U.S. court decisions requiring them to pay their debts.

"When New York families accrue debts or lose court judgments, we have to pay what we owe," said Rep. Towns. "Unfortunately, the same common-sense rule doesn’t apply to foreign nations. This legislation will change that."

The bill, H.R. 7205, the Judgment Evading Foreign States Accountability Act of 2008, was introduced by Rep. Sheila Jackson Lee (D-TX) and immediately referred to both the House Financial Services Committee and the House Foreign Affairs Committee. Rep. Towns is an original cosponsor of the legislation.

The measure would deny access to U.S. capital markets to foreign nations that have been in default on U.S. court judgments totaling more than $1 million for more than six months. It would also require the U.S. to oppose lending and grants by international lending organizations to such states and would deny U.S. foreign aid until they pay their debts.

The bill would affect only wealthy and middle-income countries. It specifically excludes poor nations eligible to receive debt relief through the Heavily Indebted Poor Countries Initiative (HIPC) of the World Bank.

Argentina is a particularly egregious example of the problem the bill targets. In 2001, Argentina defaulted on $81 billion in obligations to investors, the largest sovereign debt default in history. Today, Argentina still owes investors more than $29 billion - $3 billion of which is owed to U.S. citizens, including New York investors and taxpayers.

Many holders of Argentine bonds have taken their case to court – and won. Judge Thomas P. Griesa of the Southern District of New York has issued multiple judgments ordering Argentina to pay her debts. But Argentina has refused to honor its obligations, even as it has accrued more than $45 billions in reserves.

If Argentina would honor New York court judgments and pay its debts, New York State would realize tens of millions in tax revenues.

American pensioners, including the nation’s teachers, have also suffered devastating losses. Pension funds representing hundreds of thousands of educators lost more than $100 million in the default, putting New York teachers’ retirement savings at risk.

"When other nations ignore their debts and thumb their noses at our courts, it undermines our justice system, it undercuts international lending organizations and it denies American citizens their due," Towns said. "That shouldn’t be tolerated, and when this bill becomes law, it won’t be."

The bill would also require the Secretary of the Treasury to issue annual reports naming these states and analyzing the effect of their behavior on the U.S. economy.

Rep. Towns will assist in seeking cosponsors for the legislation in the current session and will support reintroduction of the bill in the 111th Congress.

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