S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   7562
 
                        2021-2022 Regular Sessions
 
                           I N  A S S E M B L Y
 
                               May 13, 2021
                                ___________
 
 Introduced by M. of A. DAVILA, J. D. RIVERA -- read once and referred to
   the Committee on Banks
 
 AN ACT to amend the banking law, in relation to restructuring unsustain-
   able sovereign and subnational debt
 
   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:

   Section 1. The banking law is amended by adding a  new  article  7  to
 read as follows:
                                 ARTICLE 7
                      SOVEREIGN AND SUBNATIONAL DEBT
 SECTION 300. LEGISLATIVE INTENT.
         301. DEFINITIONS.
         302. PETITION FOR RELIEF; RECOGNITION.
         303. NOTIFICATION OF CREDITORS.
         304. AUDITING PROCESS.
         305. SUBMISSION, CONTENTS AND VOTING ON PLAN.
         306. FINANCING THE RESTRUCTURING.
         307. PRIORITY OF REPAYMENT.
         308. ADJUDICATION OF DISPUTES.
         309. APPLICATION; OPT IN.
   §  300.  LEGISLATIVE INTENT. THE PURPOSE OF THIS ARTICLE IS TO PROVIDE
 EFFECTIVE  MECHANISMS  FOR  RESTRUCTURING  UNSUSTAINABLE  SOVEREIGN  AND
 SUBNATIONAL DEBT SO AS TO REDUCE:
   1. THE SOCIAL COSTS OF SOVEREIGN AND SUBNATIONAL DEBT CRISES;
   2. SYSTEMIC RISK TO THE FINANCIAL SYSTEM;
   3. CREDITOR UNCERTAINTY; AND
   4.  THE  NEED  FOR  SOVEREIGN AND SUBNATIONAL DEBT BAILOUTS, WHICH ARE
 COSTLY AND CREATE MORAL HAZARD.
   § 301. DEFINITIONS. FOR PURPOSES OF THIS ARTICLE:
   1. "CREDITOR" MEANS A PERSON OR ENTITY THAT  HAS  A  CLAIM  AGAINST  A
 STATE;
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
              

                                                            LBD09859-02-1

 A. 7562                             2
 
   2.  "CLAIM"  MEANS A PAYMENT CLAIM AGAINST A STATE FOR MONIES BORROWED
 OR FOR THE STATE'S GUARANTEE OF,  OR  OTHER  CONTINGENT  OBLIGATION  ON,
 MONIES BORROWED; THE TERM "MONIES BORROWED" SHALL INCLUDE THE FOLLOWING,
 WHETHER OR NOT IT REPRESENTS THE BORROWING OF MONEY:  MONIES OWING UNDER
 BONDS;  DEBENTURES;  NOTES, OR SIMILAR INSTRUMENTS; MONIES OWING FOR THE
 DEFERRED PURCHASE PRICE  OF  PROPERTY  OR  SERVICES,  OTHER  THAN  TRADE
 ACCOUNTS  PAYABLE  ARISING  IN  THE  ORDINARY COURSE OF BUSINESS; MONIES
 OWING ON CAPITALIZED LEASE OBLIGATIONS; MONIES OWING ON OR WITH  RESPECT
 TO LETTERS OF CREDIT, BANKERS' ACCEPTANCES, OR OTHER EXTENSIONS OF CRED-
 IT;  AND MONIES OWING ON MONEY MARKET INSTRUMENTS OR INSTRUMENTS USED TO
 FINANCE TRADE;
   3. "COMPREHENSIVE AUDIT" MEANS A SUPERVISORY ACTION TAKEN  TO  EXAMINE
 AND  EVALUATE  THE  PUBLIC DEBT CONTRACTING, REFINANCING, OR NEGOTIATION
 PROCESS, IN ORDER TO DETERMINE THE  LAWFULNESS,  TRANSPARENCY,  QUALITY,
 EFFICACY, EFFICIENCY, AND SUSTAINABILITY THEREOF;
   4.  "PLAN"  MEANS  A  DEBT  RESTRUCTURING PLAN CONTEMPLATED BY SECTION
 THREE HUNDRED FIVE OF THIS ARTICLE;
   5. "STATE" MEANS A SOVEREIGN NATION; OR UNINCORPORATED  TERRITORY;  OR
 ANY  SUBNATIONAL  UNIT THEREOF, EXCLUDING ANY MUNICIPALITY WHOSE ADJUST-
 MENT OR DEBTS IS GOVERNED BY 11 U.S.C. 9; AND
   6. "SUPERVISORY AUTHORITY" MEANS AN INDEPENDENT BODY REFERRED  BY  THE
 NEW YORK STATE SENATE FINANCE COMMITTEE.
   §  302. PETITION FOR RELIEF; RECOGNITION. 1. A STATE MAY INVOKE APPLI-
 CATION OF THIS ARTICLE BY FILING A VOLUNTARY PETITION  FOR  RELIEF  WITH
 THE SUPERVISORY AUTHORITY.
   2. SUCH PETITION SHALL CERTIFY THAT THE STATE:
   (A)  SEEKS  RELIEF  UNDER  THIS ARTICLE, AND HAS NOT PREVIOUSLY SOUGHT
 RELIEF UNDER THIS ARTICLE, OR UNDER ANY OTHER LAW THAT IS  SUBSTANTIALLY
 IN THE FORM OF THIS ARTICLE, DURING THE PAST TEN YEARS;
   (B) NEEDS RELIEF UNDER THIS ARTICLE TO RESTRUCTURE CLAIMS THAT, ABSENT
 SUCH RELIEF, WOULD CONSTITUTE UNSUSTAINABLE DEBT OF THE STATE;
   (C)  AGREES  TO RESTRUCTURE THOSE CLAIMS IN ACCORDANCE WITH THIS ARTI-
 CLE;
   (D) AGREES TO ALL OTHER TERMS, CONDITIONS AND PROVISIONS OF THIS ARTI-
 CLE; AND
   (E) HAS DULY ENACTED ANY NATIONAL OR SUBNATIONAL LAW NEEDED TO  EFFEC-
 TUATE  THESE AGREEMENTS. IF REQUESTED BY THE SUPERVISORY AUTHORITY, SUCH
 PETITION SHALL ALSO  ATTACH  DOCUMENTS  AND  LEGAL  OPINIONS  EVIDENCING
 COMPLIANCE WITH THIS PARAGRAPH.
   3. IMMEDIATELY AFTER SUCH A PETITION FOR RELIEF HAS BEEN FILED, AND SO
 LONG  AS SUCH FILING HAS NOT BEEN DISMISSED BY THE SUPERVISORY AUTHORITY
 FOR LACK OF GOOD FAITH, THE TERMS, CONDITIONS, AND  PROVISIONS  OF  THIS
 ARTICLE SHALL:
   (A)  APPLY  TO  THE DEBTOR-CREDITOR RELATIONSHIP BETWEEN THE STATE AND
 ITS CREDITORS TO THE EXTENT SUCH RELATIONSHIP IS GOVERNED BY THE LAW  OF
 THIS JURISDICTION;
   (B)  APPLY  TO  THE DEBTOR-CREDITOR RELATIONSHIP BETWEEN THE STATE AND
 ITS CREDITORS TO THE EXTENT SUCH RELATIONSHIP IS GOVERNED BY THE LAW  OF
 ANOTHER  JURISDICTION  THAT HAS ENACTED LAW SUBSTANTIALLY IN THE FORM OF
 THIS ARTICLE; AND
   (C) BE RECOGNIZED IN,  AND  BY,  ALL  OTHER  JURISDICTIONS  THAT  HAVE
 ENACTED LAW SUBSTANTIALLY IN THE FORM OF THIS ARTICLE.
   §  303. NOTIFICATION OF CREDITORS.  1. WITHIN THIRTY DAYS AFTER FILING
 ITS PETITION FOR RELIEF, THE STATE SHALL NOTIFY ALL OF ITS KNOWN  CREDI-
 TORS OF ITS INTENTION TO NEGOTIATE A PLAN UNDER THIS ARTICLE.

 A. 7562                             3
 
   2. THE SUPERVISORY AUTHORITY SHALL PREPARE AND MAINTAIN A CURRENT LIST
 OF  CREDITORS  OF THE STATE AND VERIFY CLAIMS FOR THE PURPOSES OF SUPER-
 VISING VOTING UNDER THIS ARTICLE.
   § 304.  AUDITING PROCESS. 1. A COMPREHENSIVE AUDIT SHALL BE CONDUCTED.
   2.  THE  SUPERVISORY  AUTHORITY  SHALL  CHOOSE  AN INDEPENDENT BODY TO
 CONDUCT SUCH COMPREHENSIVE AUDIT.
   3. THE COSTS ASSOCIATED WITH A COMPREHENSIVE AUDIT SHALL BE  BORNE  BY
 THE STATE.
   4.  THE AUDIT PROCESS SHALL ABIDE BY THE GENERAL PRINCIPLES RELATED TO
 THE INTERNATIONAL STANDARDS OF SUPREME AUDIT INSTITUTIONS 100 ISSUED  BY
 THE INTERNATIONAL ORGANIZATION OF SUPREME AUDIT INSTITUTIONS.
   §  305.  SUBMISSION,  CONTENTS  AND  VOTING  ON PLAN. 1. THE STATE MAY
 SUBMIT A PLAN TO ITS CREDITORS AT ANY TIME, AND MAY  SUBMIT  ALTERNATIVE
 PLANS FROM TIME TO TIME.
   2. NO OTHER PERSON OR ENTITY MAY SUBMIT A PLAN ON BEHALF OF THE STATE.
   3. A PLAN SHALL:
   (A)  DESIGNATE CLASSES OF CLAIMS IN ACCORDANCE WITH SUBDIVISION SIX OF
 THIS SECTION;
   (B) SPECIFY THE PROPOSED TREATMENT OF EACH CLASS OF CLAIMS;
   (C) PROVIDE THE SAME TREATMENT FOR EACH CLAIM OF A  PARTICULAR  CLASS,
 UNLESS THE HOLDER OF A CLAIM AGREES TO A LESS FAVORABLE TREATMENT;
   (D) DISCLOSE ANY CLAIMS NOT INCLUDED IN THE PLAN'S CLASSES OF CLAIMS;
   (E)  PROVIDE  ADEQUATE  MEANS FOR THE PLAN'S IMPLEMENTATION INCLUDING,
 WITH RESPECT TO ANY CLAIMS, CURING OR WAIVING ANY DEFAULTS  OR  CHANGING
 THE  MATURITY  DATES, PRINCIPAL AMOUNT, INTEREST RATE, OR OTHER TERMS OR
 CANCELING OR MODIFYING ANY LIENS OR ENCUMBRANCES; AND
   (F) CERTIFY THAT, IF THE PLAN BECOMES EFFECTIVE  AND  BINDING  ON  THE
 STATE  AND  ITS  CREDITORS  UNDER  SUBDIVISION FOUR OF THIS SECTION, THE
 STATE'S DEBT WILL BECOME SUSTAINABLE.
   4. A PLAN SHALL BECOME EFFECTIVE AND BINDING  ON  THE  STATE  AND  ITS
 CREDITORS  WHEN IT HAS BEEN SUBMITTED BY THE STATE AND AGREED TO BY EACH
 CLASS OF SUCH CREDITORS' CLAIMS DESIGNATED IN THE PLAN UNDER SUBDIVISION
 THREE OF THIS SECTION. THEREUPON, THE STATE SHALL BE DISCHARGED FROM ALL
 CLAIMS INCLUDED IN THOSE CLASSES OF CLAIMS, EXCEPT AS  PROVIDED  IN  THE
 PLAN.
   5.  A  CLASS  OF  CLAIMS  HAS AGREED TO A PLAN IF CREDITORS HOLDING AT
 LEAST TWO-THIRDS IN AMOUNT AND MORE  THAN  ONE-HALF  IN  NUMBER  OF  THE
 CLAIMS OF SUCH CLASS VOTING ON SUCH PLAN AGREE TO THE PLAN.
   6. EACH CLASS OF CLAIMS SHALL CONSIST OF CLAIMS AGAINST THE STATE THAT
 ARE EQUAL IN PRIORITY, PROVIDED THAT:
   (A) EQUAL CLAIMS NEED NOT ALL BE INCLUDED IN THE SAME CLASS;
   (B)  CLAIMS  OF GOVERNMENTAL OR MULTI-GOVERNMENTAL ENTITIES EACH SHALL
 BE CLASSED SEPARATELY; AND
   (C) CLAIMS THAT ARE GOVERNED BY THIS ARTICLE OR  THE  LAW  OF  ANOTHER
 JURISDICTION THAT IS SUBSTANTIALLY IN THE FORM OF THIS ARTICLE SHALL NOT
 BE CLASSED WITH OTHER CLAIMS.
   § 306. FINANCING THE RESTRUCTURING. 1. SUBJECT TO SUBDIVISION THREE OF
 THIS  SECTION  THE  STATE  SHALL  HAVE THE RIGHT TO BORROW MONEY ON SUCH
 TERMS AND CONDITIONS AS IT DEEMS APPROPRIATE.
   2. THE STATE SHALL NOTIFY ALL OF ITS KNOWN CREDITORS OF ITS  INTENTION
 TO  BORROW  UNDER  SUBDIVISION ONE OF THIS SECTION, THE TERMS AND CONDI-
 TIONS OF THE BORROWING, AND THE PROPOSED USE OF THE LOAN PROCEEDS.  SUCH
 NOTICE  SHALL  ALSO DIRECT THOSE CREDITORS TO RESPOND TO THE SUPERVISORY
 AUTHORITY WITHIN THIRTY DAYS AS TO WHETHER THEY APPROVE OR DISAPPROVE OF
 SUCH LOAN.

 A. 7562                             4
 
   3. ANY SUCH LOAN SHALL BE APPROVED BY CREDITORS HOLDING AT LEAST  TWO-
 THIRDS IN AMOUNT OF THE CLAIMS OF CREDITORS RESPONDING TO THE SUPERVISO-
 RY AUTHORITY WITHIN THAT THIRTY-DAY PERIOD.
   4.  IN ORDER FOR THE PRIORITY OF REPAYMENT, AND CORRESPONDING SUBORDI-
 NATION, UNDER SECTION THREE HUNDRED SEVEN OF THIS ARTICLE TO  BE  EFFEC-
 TIVE,  ANY SUCH LOAN SHALL ADDITIONALLY BE APPROVED BY CREDITORS HOLDING
 AT LEAST TWO-THIRDS IN PRINCIPAL AMOUNT OF THE  COVERED  CLAIMS  OF  THE
 CREDITORS RESPONDING TO THE SUPERVISORY AUTHORITY WITHIN THAT THIRTY-DAY
 PERIOD.  CLAIMS  SHALL  BE  DEEMED TO BE COVERED IF THEY ARE GOVERNED BY
 THIS ARTICLE OR BY THE LAW OF ANOTHER JURISDICTION THAT IS SUBSTANTIALLY
 IN THE FORM OF THIS ARTICLE.
   § 307. PRIORITY OF REPAYMENT. 1. THE STATE SHALL REPAY LOANS  APPROVED
 UNDER THIS ARTICLE PRIOR TO PAYING ANY OTHER CLAIMS.
   2. THE CLAIMS OF CREDITORS OF THE STATE ARE SUBORDINATED TO THE EXTENT
 NEEDED  TO  EFFECTUATE  THE  PRIORITY PAYMENT UNDER THIS SECTION.   SUCH
 CLAIMS ARE NOT SUBORDINATED FOR ANY OTHER PURPOSE.
   3. THE PRIORITY OF PAYMENT,  AND  CORRESPONDING  SUBORDINATION,  UNDER
 THIS  SECTION  IS  EXPRESSLY  SUBJECT TO THE APPROVAL BY CREDITORS UNDER
 SUBDIVISION FOUR OF SECTION THREE HUNDRED SIX OF THIS ARTICLE.
   § 308. ADJUDICATION OF DISPUTES. A COURT OF COMPETENT JURISDICTION MAY
 APPOINT A REFEREE OR A SPECIAL MASTER TO  MAKE  RECOMMENDATIONS  TO  THE
 COURT  REGARDING THE RESOLUTION OF ANY DISPUTES ARISING UNDER THIS ARTI-
 CLE.
   § 309. APPLICATION; OPT IN. 1. THIS ARTICLE APPLIES WHERE, BY CONTRACT
 OR OTHERWISE,
   (A) THE LAW OF NEW YORK STATE GOVERNS THE DEBTOR-CREDITOR RELATIONSHIP
 BETWEEN A STATE AND ITS CREDITORS; AND
   (B) THE APPLICATION OF THIS ARTICLE  IS  INVOKED  IN  ACCORDANCE  WITH
 SECTION THREE HUNDRED TWO OF THIS ARTICLE.
   2.  WHERE  THIS  ARTICLE  APPLIES, IT SHALL OPERATE RETROACTIVELY AND,
 WITHOUT  LIMITING  THE  FOREGOING,  SHALL   OVERRIDE   ANY   CONTRACTUAL
 PROVISIONS THAT ARE INCONSISTENT WITH THE PROVISIONS OF THIS ARTICLE.
   3.  ANY CREDITORS OF THE STATE WHOSE CLAIMS ARE NOT OTHERWISE GOVERNED
 BY THIS ARTICLE MAY CONTRACTUALLY OPT IN TO THIS ARTICLE'S TERMS, CONDI-
 TIONS, AND PROVISIONS.
   4. THE TERMS, CONDITIONS, AND PROVISIONS OF THIS ARTICLE  SHALL  APPLY
 TO  THE  DEBTOR-CREDITOR  RELATIONSHIP  BETWEEN  THE STATE AND CREDITORS
 OPTING IN UNDER SUBDIVISION ONE OF THIS SECTION AS IF SUCH  RELATIONSHIP
 WERE  GOVERNED  BY THE LAWS OF NEW YORK STATE UNDER SUBDIVISION THREE OF
 SECTION THREE HUNDRED TWO OF THIS ARTICLE.
   § 2. This act shall take effect immediately.