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LAW LAW ON THE NATIONAL DEBT 22 August 1996 No. I-1508 (As amended by 11 November 1997 N. VIII-501) Vilnius Article 1. O

LAW LAW ON THE NATIONAL DEBT 22 August 1996 No. I-1508 (As amended by 11 November 1997 N. VIII-501) Vilnius Article

  1. Objective of the Law This Law regulates the relationship of the national debt to domestic and foreign creditors. Article
  2. Definitions As used in this Law:
  3. National debt means the amount of domestic and foreign debt of the Republic of Lithuania.
  4. Domestic debt means liability of the Republic of Lithuania in national currency under loan agreements, agreements with government guarantee or other debt instruments whereunder funds, valuables or services have been acquired and have not yet been repaid, also the amount of undischarged liability under the guarantees given to banks by the guarantee institution set up under this Law or by the insurance company.
  5. Foreign debt means liability of the Republic of Lithuania in foreign currency under loan agreements, agreements with the government guarantees or other debt instruments whereunder funds, valuables or services have been acquired and have not yet been repaid, also the amount of undischarged liability under the guarantees given to banks by the guarantee institution set up under this Law or by the insurance company.
  6. Domestic creditors means legal or natural persons of the Republic of Lithuania or enterprises without the rights of legal persons who have lent funds under loan agreements or other debt instruments.
  7. Foreign creditors means foreign states, international financial organisations, foreign banks, other legal or natural persons who have lent funds under loan agreements or other debt instruments.
  8. Foreign loan means funds, valuables or services received in the name of the State under loan agreements or other debt instruments from domestic or foreign creditors and repayable in foreign currency.
  9. Domestic loan means funds, valuables or services received in the name of the State under loan agreements or other debt instruments from domestic or foreign creditors and repayable in national currency.
  10. Loan guaranteed by the government means funds, valuables or services received by a legal or natural person of the Republic of Lithuania or an enterprise without the rights of legal person from domestic or foreign creditors under loan agreement or debt instrument the fulfilment of terms whereof is guaranteed by the government.
  11. Government guarantee means the liability of the Republic of Lithuania to repay the loan wholly or in part and, in the event of the borrower’s default or partial default in meeting the obligations under the loan agreement or other debt instruments, to cover other debt-related expenses to the domestic or foreign creditor for the borrower the fulfilment of whose obligations is guaranteed by the government.
  12. Government guarantee for the guarantees given by the guarantee institution means the liability of the Bank of Lithuania to fulfil all obligations of the guarantee institution or insurance company whose performance of guarantees is guaranteed by the government in the event of full or partial default of the institution or insurance company in meeting its obligations under the guarantee documents.
  13. Borrower means a legal or natural person of the Republic of Lithuania or an enterprise without the rights of legal person who has received a loan under a loan agreement concluded with the State or under any other debt instrument and who assumes the obligation to the State to meet the requirements of loan use and repayment.
  14. Guarantee institution or insurance company, the performance of whose guarantees is guaranteed by the government means the legal person of the Republic of Lithuania which acts, accordingly, in compliance with either the regulations approved by the Government of the Republic of Lithuania or the Articles of Association approved in the manner laid down in the Law on Insurance of the Republic of Lithuania, gives guarantees to banks as security for loans issued to economic entities, and the performance of whose guarantees is guaranteed by the government.
  15. Borrower, the fulfilment of whose obligations is guaranteed by the government means a natural or legal person of the Republic of Lithuania or an enterprise without the rights of legal person who has received a loan under a loan agreement concluded with domestic or foreign creditors or under any other debt instrument the meeting of terms and conditions whereunder is guaranteed by the government.
  16. National currency means litas, the standard monetary unit of the Republic of Lithuania.
  17. Foreign currency means the currency of any foreign state or the currency used by two and more foreign states, including the ECU (European Currency Unit) and SDRs (IMF, Special Drawing Rights).
  18. Loan currency means foreign or national currency used by the borrower to repay the loan, pay interest and other loan fees provided under the loan agreement. Article
  19. Basic Principles of Government Borrowing and Provision of Guarantees
  20. Decision concerning annual borrowing limits on foreign and internal loans or on loans with government guarantee taken from foreign or domestic creditors shall be adopted, on the proposal of the Government of the Republic of Lithuania, by the Seimas in the course of approval of the annual State Budget of the Republic of Lithuania or in the process of passing of other laws of the Republic of Lithuania.
  21. Domestic and foreign loans in the name of the Republic of Lithuania shall be taken and guarantees shall be provided by the Government of the Republic of Lithuania in compliance with the limits laid down by the laws of the Republic of Lithuania.
  22. The Ministry of Finance shall represent the Government of the Republic of Lithuania in the management of the national debt.
  23. On the instruction of the Government of the Republic of Lithuania, the Ministry of Finance shall: 1) borrow funds from international financial organisations, banks, and borrow on the domestic and foreign markets by taking loans, issuing securities and other debt instruments of the Government of the Republic of Lithuania; 2) set the specifications and conditions of issuance of the Government of the Republic of Lithuania securities; 3) perform operations in securities of the Government of the Republic of Lithuania on domestic and foreign markets; 4) borrow and offer national programme crediting.
  24. The Ministry of Finance must: 1) keep records of the national debt; 2) register all domestic and foreign loans, government guarantees; 3) keep the originals of all loan agreements and government guarantees; 4) generalise and plan the borrowing needs, prepare draft programmes of borrowing; 5) control the extension and repayment of loans, loan application as well as the fulfilment of other loan-related financial obligations.
  25. Domestic and foreign loans that are received and repaid, also expenses related to the servicing of loans must be provided for in the revenue and expenditure sides of the State Budget.
  26. All possible state revenue sources including new liabilities of the state shall be used to fulfil the obligations arising out of the relationships regulated by this Law.
  27. The national debt may be expressed by loan agreements, government guarantees, securities or entries in securities accounts as well as in other debt instruments.
  28. All legal standards applicable to securities shall also apply to the national debt expressed by entries in securities accounts.
  29. The available or future state assets may not be pledged in order to secure the fulfilment of state liabilities.
  30. Gold and foreign currency reserves of the Bank of Lithuania may not be pledged in order to secure the fulfilment of state liabilities. The Bank of Lithuania shall not be held responsible for the liabilities of the Republic of Lithuania except in cases when the Bank of Lithuania assumes such liabilities or such liabilities are provided for under the laws of the Republic of Lithuania.
  31. The Government of the Republic of Lithuania may apply the borrowed funds only for the purposes provided for by this Law.
  32. The Government of the Republic of Lithuania shall have the right to on-lend domestic or foreign loans received in the name of the state to legal and natural persons of the Republic of Lithuania or enterprises without the rights of legal person, unless loan agreements provide otherwise. Loan agreements with the borrowers shall be signed by the Minister of Finance or the Ministry of Finance officers authorised by him.
  33. All borrowers or borrowers, fulfilment of whose obligations is guaranteed by the government, must timely repay the loan, pay interest and perform other obligations provided for by the loan agreement.
  34. Without a written permission of the Ministry of Finance borrowers or borrowers, fulfilment of whose obligations is guaranteed by the government, shall have no right to perform the following actions before the full repayment of the loan: 1) to reorganise an enterprise; 2) to reduce the authorised capital; 3) to sell, lease or mortgage long-term assets; 4) to warrant or guarantee by way of their property the fulfilment of other entities’ obligations; 5) to extend loans (except short-term trade credits), 6) to invest the property acquired for the obtained loan in other economic facilities. Article
  35. State Borrowing Purposes
  36. The Government may take loans in the name of the Republic of Lithuania for the following purposes: 1) to finance the national budget deficit; 2) to finance State investments and to increase current assets of enterprises; 3) to cover the expenses related to the national debt and to repay the national debt; 4) for other purposes if there is a separate law of the Republic of Lithuania. Article
  37. Foreign Loan
  38. The decision to take a foreign loan exceeding LTL 40 million, except a loan for the financing of the national budget deficit, shall be taken by the Seimas at the proposal of the Government of the Republic of Lithuania and shall be enacted by a separate law.
  39. The decision to take a foreign loan of less than LTL 40 million shall be taken by the Government of the Republic of Lithuania pursuant to the Law on the State Budget of the Republic of Lithuania of the corresponding year.
  40. Foreign loan agreements and other debt instruments shall be considered to be commercial agreements. A foreign loan agreement or other debt instruments shall be signed by the Minister of Finance or, on the proposal of the Minister of Finance, by other state officials granted authorisation on the decision of the Government of the Republic of Lithuania.
  41. Legal findings concerning a foreign loan or other debt instruments shall be signed by the Minister of Justice.
  42. All foreign loan agreements - both those ratified by the Seimas of the Republic of Lithuania and concerning which resolutions of the Seimas of the Republic of Lithuania are passed as well as those that are not ratified and in relation whereto no separate decision is passed by the Seimas of the Republic of Lithuania shall have a binding effect.
  43. A foreign loan shall be taken, disbursed and repaid through the fiscal agent of the State - the Bank of Lithuania or, upon the approval of the Bank of Lithuania, through another bank.
  44. The procedure for obtaining, distributing and repaying a foreign loan as well as the functions and responsibilities of the institutions participating in the process shall be provided under a joint Decree of the Government of the Republic of Lithuania and the Bank of Lithuania. Article
  45. Domestic Loan
  46. Domestic loan agreements and other debt instruments shall be signed by the Minister of Finance.
  47. Book-entry securities of the Government of the Republic of Lithuania shall be entered in the securities accounts to be managed in accordance with the procedure established by the Central Depository.
  48. The Ministry of Finance shall have the right to appoint the fiscal agent for performing operations of trading in Government securities.
  49. In order to ensure that the loans are used for their proper purpose, the Government of the Republic of Lithuania shall establish the procedure for obtaining, distributing and repaying domestic loans, as well as the functions and responsibilities of institutions participating in this process. Article
  50. Loan Guaranteed by the Government
  51. Decisions to provide government guarantee to the loan extended by domestic or foreign creditor under the loan agreement, which exceeds LTL 40 million, shall be passed by the Seimas of the Republic of Lithuania on the proposal of the Government.
  52. Decisions to provide government guarantee to the loan extended by domestic or foreign creditor under the loan agreement, which is less than LTL 40 million shall be passed by the Government of the Republic of Lithuania pursuant to the Law on State Budget of the Republic of Lithuania of the relevant year.
  53. The government guarantee shall be signed by the Minister of Finance, whereas legal findings concerning the guarantee shall be signed, at the request of the creditor, by the Minister of Justice.
  54. The procedure for giving the government guarantee to the loan being received, the procedure for receiving and repaying the loans with the government guarantee as well as the functions and responsibilities of the institutions participating in this process shall be established by a joint Decree of the Government of the Republic of Lithuania and the Bank of Lithuania. Article 7

(1). Establishment of Guarantee Institutions or Insurance Companies and Government Guarantee for the Guarantees Given by Guarantee Institutions or Insurance Companies
  1. The Government of the Republic of Lithuania shall have the right to establish guarantee institutions or insurance companies which would give bank guarantees for loans made to economic entities, provided funds are allocated in the annual state budget for the implementation of certain programmes. Insurance companies shall be set up and their Articles of Association shall be approved based on the Law on Insurance of the Republic of Lithuania. The manager of allocations set aside for a certain programme shall be charged to perform the functions of the guarantee institution or insurance company founder.
  2. The decision to give government guarantee for the guarantees provided by the guarantee institution or insurance company shall rest with the Government of the Republic of Lithuania. The government guarantee may not exceed the triple amount of the allocations set aside for a certain programme in the annual state budget by the Government of the Republic of Lithuania
  3. The contracts of guarantees given by the guarantee institution or insurance company shall be signed by the institution or insurance company manager in the manner prescribed by the Government of the Republic of Lithuania. The government guarantee for the liability to be assumed in the current year for the guarantees given by the guarantee institution or insurance company shall be signed by the Minister of Finance.
  4. Implementing the Government’s business support policy, the guarantee institution or the insurance company shall, in the manner prescribed by the Government of the Republic of Lithuania, screen the applications of economic entities requesting bank guarantees, keep records of guarantees given, supervise the implementation of business plans based on guarantees and apply enforcement measures in respect of business entities which default on terms and conditions of the guarantees.
  5. The institution designated by the Government of the Republic of Lithuania shall monitor the activities of the guarantee institution and determine its accountability.
  6. The activities of the insurance company shall be overseen in accordance with the procedure laid down by the Law on Insurance of the Republic of Lithuania. 7.The guarantee institution or the insurance company must, within 3 months after the close of the financial year, submit to the Government of the Republic of Lithuania the annual financial account together with the audit findings.
  7. If losses incurred by the guarantee institution or insurance company total half the amount of funds set aside by the Government of the Republic of Lithuania for providing loan guarantees from the current year’s state budget allocations earmarked for a certain programme, the Government must suspend the provision of new guarantees. Article
  8. Control of Financial Activities of Borrowers or the Borrowers, Fulfilment of whose Obligations is Guaranteed by the Government
  9. Borrowers and the borrowers, fulfilment of whose obligations is guaranteed by the government, except for the institutions maintained out of the state budget funds, must furnish to the Ministry of Finance: 1) the auditor’s finding - prior to the receipt of a loan; 2) the auditor’s finding concerning the annual performance during the period of the utilisation of the loan; 3) on the instructions of the Ministry of Finance or the administration of the borrower or the borrower fulfilment of whose obligations is guaranteed by the government, the auditor’s finding for another period.
  10. The audit may be carried out by the auditing firm that has a licence issued by the Ministry of Finance.
  11. The auditing services shall be provided under contract between the auditing firm and the borrower or the borrower, fulfilment of whose obligations is guaranteed by the government. The services shall be paid for from the funds of the borrower or the borrower, fulfilment of whose obligations is guaranteed by the government.
  12. The auditing firm must furnish the findings of the audit to the administration of the borrower or the borrower, fulfilment of whose obligations is guaranteed by the government, and to the Ministry of Finance.
  13. The State Control institutions shall have the right, in accordance with the procedure established by laws, to inspect economic and financial activities of the borrowers and those borrowers fulfilment of whose obligations is guaranteed by the government, as well as the obtaining of foreign loans received in the name of the State or with the guarantee of the government, their distribution, utilisation and repayment.
  14. The borrower or the borrower, fulfilment of whose obligations is guaranteed by the government, must furnish to the Ministry of Finance, the auditing firm and the State Control institutions the documents required by them. Article
  15. Sanctions
  16. The Ministry of Finance shall have the right to recover from the defaulting borrower an interest of 0.1 percent on the outstanding amount for each overdue day.
  17. The Ministry of Finance shall recover without suit from the bank accounts of the borrower the outstanding loan or a part thereof, arrears of interest on the loan, penalties or other charges provided for in the loan agreement.
  18. If the funds of the borrower are not sufficient to cover the outstanding amounts, such amounts shall be recovered from other property of the borrower, i.e. a lien shall be held against the borrower’s accounts or against his any other property that shall be realised in accordance with the procedure established by laws in order to perform all obligations under loan agreement, to pay interest, as well as covering government expenses incurred due to the non-fulfilment of the obligations of the borrower.
  19. If the actions referred to in par. 2 and 3 hereof are not sufficient and the non-fulfilment of obligations persists, the Ministry of Finance shall have the right to institute bankruptcy proceedings against the defaulter. The Ministry of Finance shall notify the borrower of its intention to institute bankruptcy proceedings against the enterprise and the borrower must acknowledge the receipt of such notification by signing it. The notification shall state the non-fulfilled obligations and shall contain a warning that in case the borrower fails to fulfil its obligations within the period indicated in the notification, the Ministry of Finance shall apply to court for the institution of bankruptcy proceedings.
  20. If the borrower, fulfilment of whose obligations is guaranteed by the government, fails to fulfil obligations under the loan agreement and therefore these obligations must be fulfilled by the government as the guarantor, the Ministry of Finance, as the executor of the government’s guarantee, shall take recourse against the borrower, the fulfilment of whose obligations is guaranteed by the government, and recover from defaulting borrower’s bank accounts all direct and indirect expenses incurred due to the fulfilment of such obligations.
  21. If the funds of the borrower, fulfilment of whose obligations is guaranteed by the government, are not sufficient to cover all direct and indirect expenses referred to in par. 5, a lien shall be held against the accounts and other property of the borrower, fulfilment of whose obligations is guaranteed by the government, and shall be realised in accordance with the procedure established by laws in order to cover government expenses incurred due to the non-fulfilment of the obligations of the borrower, fulfilment of whose obligations is guaranteed by the government.
  22. If the actions referred to in par. 6 hereof are not sufficient and the non-fulfilment of obligations persists, the Ministry of Finance shall have the right to institute bankruptcy proceedings against the borrower, the fulfilment of whose obligations is guaranteed by the government. The Ministry of Finance shall notify the borrower, fulfilment of whose obligations is guaranteed by the government, of its intention to institute bankruptcy proceedings against the enterprise, and the borrower must acknowledge the receipt of such notification by signing it. The notification shall state the non-fulfilled obligations and shall contain a warning that in the event of failure by the borrower, fulfilment of whose obligations is guaranteed by the government, to fulfil its obligations within the period indicated in the notification, the Ministry of Finance shall apply to court for the institution of bankruptcy proceedings.
  23. If the Government of the Republic of Lithuania shall decide that it is in the interest of the State not to institute bankruptcy proceedings, to calculate interest (penalty) on the amount due or if it decides to propose to the borrower or the borrower, fulfilment of whose obligations is guaranteed by the government, to reconsider the initial terms of the loan agreement, the Ministry of Finance must assess the financial consequences of such decision and the amounts so established shall be treated as budget expenditure of the current financial year (and if the consequences last for several years, of an accordingly longer period).
  24. If the loan (or a part thereof ) has been used not for its proper purpose, the total amount which has been used not for its proper purpose shall be repaid into special loan accounts opened by the Ministry of Finance. The borrower must pay to the loan risk account a margin of 5 percent of the loan (a part thereof) that has been used not for its proper purpose.
  25. If the borrower fails to use the received loan for its proper purpose for more than six months, it must pay into the loan risk account the penalty in the amount of interest on the loan for that period as provided in the loan agreement.
  26. Sanctions pursuant to pars. 9 and 10 hereof shall be imposed by the State Control institution in accordance with the procedure established by laws.
  27. All payments due under sanctions shall be paid into loan risk account opened by the Ministry of Finance. The funds of this account may be used for the performance of all liabilities arising from the relations regulated by this Law.
  28. Borrowers or borrowers, fulfilment of whose obligations is guaranteed by the government (except for commercial banks), who are either late in submitting or altogether fail to submit the documents required by the Ministry of Finance (reports on the use and repayment of loans in the manner prescribed by the Ministry of Finance, also annual accounts or other documents relating to economic activity) shall be held liable under the laws of the Republic of Lithuania. Article
  29. Accounting
  30. At the close of the budget year, the Government of the Republic of Lithuania must submit to the Seimas, together with the budget report, a report on the national debt.
  31. The State Control institution of the Republic of Lithuania shall evaluate the report on the national debt prepared by the Government of the Republic of Lithuania and shall submit to the Seimas, together with the findings on the budget report, the findings on the national debt. I promulgate this Law passed by the Seimas of the Republic of Lithuania. PRESIDENT OF THE REPUBLIC ALGIRDAS BRAZAUSKAS

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