b) Equity between Bondholders and Property Claimants
As the Minister will know, the property claimants affected by the Russian Order have complained about difference in treatment between them and the bond claimants of which the separate registration of bond claims is just one feature. It is likely that this will be an issue raised in the debate on the second Russian Order, scheduled for Wednesday 4 November.
The Minister should be aware that the same differentiation
appears in the China Order. While property claimants will have their claims judicially determined and valued at time of loss with the FCC given discretion to apply the exchange rate they consider most relevant (likely to be the one at the date of loss or nearest to it), bonds will be registered and valued at their face value with non-sterling bonds converted into sterling at the rate of exchange prevailing on the date of issue of the bond. Provision is also again made for the Secretary of State to direct that an interim payment be made to bond claimants on the basis of appropriate reports from the FCC. Given the likely complexity of evaluation of the property claims, an interim payment will be made to property claimants only if the Commission so decide, with the approval of the Secretary of State.
The differentiation can be defended on the same grounds as in the case of the Russian distribution. It would be a blow to fragile international confidence in bonded debt if we were to value the bonds at less than their face value. The bond claims under the procedures in the Order can be valued much more rapidly than the property claims and it would be unfair to the bondholders to delay an interim payment to them until most of the property claims had been evaluated. Moreover whereas most of the property losses occurred in the 1950s and 1960s, the Chinese ceased to service their bonded debt from 1938 onwards. The bondholders have had longer to wait for recompense.
I should be grateful for confirmation that the Minister is content. It is appreciated that the Minister may wish to consider thse issues in the light of what is said in the debate of November 4.
c) Bond Provisions
The bond provisions as presently drafted are based on those in the Russian Ordersin Council. There is no compensation for loss of guaranteed interest and bonds are valued at the nominal capital value on the face of the bond.
The total value of sterling bonds (which are those most likely to be held by British nationals) is £60 million. We have no means of knowing how many bonds in French francs (total value
/140,750,000