Unofficial translation

Unofficial translation official translation LAW ON THE NATIONAL DEBT No. I-1508, 22 August

1. (As amended by 7 July 1999, No. VIII-1298 (new edition), by 23 December 1999 No. VIII-1500) Vilnius Article
2. Objective of the Law This Law regulates the relations connected with the national debt and the state’s right of claim to the borrowers and to the borrowers, fulfilment of whose obligations is guaranteed by the government, under loan agreements and agreements with guarantees granted by the government or under other debt instruments. Article
3. Definitions As used in this Law:
4. “National debt” means the total amount of domestic and foreign debt of the Republic of Lithuania.
5. “Domestic debt” means the sum total of the liabilities of the Republic of Lithuania in national currency under loan agreements, agreements with government guarantee or other debt instruments whereunder funds have been received but have not yet been repaid, material valuables or services have been received but have not yet been paid for, also the share of the sum total of the obligations to banks assumed under guarantee agreements or insurance contracts by the guarantee institution set up under this Law or by the insurance company, which is calculated by applying the rates approved by the Government of the Republic of Lithuania or the institution authorised by it, and of the liabilities determined by the laws of the Republic of Lithuania but as yet undischarged.
6. “Foreign debt” means the sum total of liabilities of the Republic of Lithuania in foreign currency under loan agreements, agreements with government guarantees or other debt instruments whereunder funds, have been received but have not yet been repaid, material valuables or services have been received but have not yet been paid for, also the share of the sum total of obligations to banks assumed under guarantee agreements or insurance contracts by the guarantee institution set up under this Law or by the insurance company, which is calculated by applying the rates approved by the Government of the Republic of Lithuania or the institution authorised by it, and of the liabilities determined by the laws of the Republic of Lithuania but as yet undischarged. .
7. “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.
8. “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.
9. “Foreign loan” means funds, valuables or services received in the name of the government under loan agreements or other debt instruments from domestic or foreign creditors and repayable in foreign currency.
10. “Domestic loan” means funds, valuables or services received in the name of the government under loan agreements or other debt instruments from domestic or foreign creditors and repayable in national currency.
11. “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 agreements or debt instruments the fulfilment of the terms whereof is guaranteed by the government.
12. “Government guarantee” means the obligation 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.
13. “Government guarantee for the obligations assumed under guarantee agreements or insurance contracts by the guarantee institution or insurance company” means the liability of the Republic of Lithuania to fulfil all obligations of the guarantee institution or insurance company, the fulfilment of whose obligations under the guarantee agreement or insurance contract is guaranteed by the government, in the event of full or partial default of the guarantee institution or insurance company in meeting its obligations under the guarantee agreements or insurance contracts.
14. “Government [of the Republic of Lithuania] securities” means debt securities issued by the Government of the Republic of Lithuania in the name of the Government of the Republic of Lithuania, which, unless the terms of the issue of securities provide otherwise, may be traded on the secondary market.
15. “Borrower” means a legal or natural person of the Republic of Lithuania or an enterprise without the rights of legal person who have received a loan under a loan agreement concluded with the government or under any other debt instrument and who have assumed the obligation to the government to meet the requirements of loan use and repayment.
16. “Borrower, fulfilment of whose obligations is guaranteed by the government” means a legal or natural person of the Republic of Lithuania or an enterprise without the rights of legal person who have received a loan under a loan agreement concluded with the domestic or foreign creditor or under any other debt instrument, fulfilment of the terms whereof is guaranteed by the government.
17. “Guarantee institution or insurance company, fulfilment of obligations whereof is guaranteed by the government” means a legal person set up by the Government of the Republic of Lithuania, which gives guarantees to banks as security for loans issued under guarantee or insurance agreements to legal persons, enterprises without the rights of legal persons, natural persons and fulfilment of obligations whereof is guaranteed by the government.
18. “National currency” means litas, the standard monetary unit of the Republic of Lithuania.
19. “Foreign currency” means the currency of any foreign state or the currency used by two and more foreign states, including the euro (single currency of the Economic and Monetary Union) and SDRs (IMF, Special Drawing Rights).
20. “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
21. Basic Principles of Government Borrowing and Provision of Guarantees
22. Decisions concerning: 1) national debt limits 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; 2) the recognition of government liabilities as domestic or foreign debt shall be adopted by the Seimas on the proposal of the Government of the Republic of Lithuania. The amount of the debt, the time limits of debt repayment and other basic terms and conditions must be specified in the law.
23. Domestic and foreign loans in the name of the Republic of Lithuania shall be taken and guarantees for domestic and foreign loans 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 and in accordance with the procedure set foth in Articles 5, 6 and 7 of this Law.
24. In the management of the national debt the Government of the Republic of Lithuania shall be represented by the Ministry of Finance which shall, on the decision of the Government of the Republic of Lithuania: 1) borrow funds 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; 5) conclude agency contracts with the public company Property Bank (“Turto bankas”) concerning the loans transferred by the Ministry of Finance for administration. The loans transferred to the public company Property Bank as well as the procedure of administration thereof shall be specified by the Government of the Republic of Lithuania. Agency contracts with the public company Property Bank shall be signed by the Minister of Finance or the officer of the Ministry or Finance authorised by him.
25. The Ministry of Finance must: 1) keep records and accounts of the national debt; 2) register all domestic and foreign loans, loans with government guarantees and other obligations; 3) keep the originals of all loan agreements and documents of 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; 6) carry out the analysis of the financial position of borrowers or borrowers, fulfilment of whose obligations is guaranteed by the government; 7) group loans and other liabilities, record the need for loan loss reserves to cover potential losses from extended loans and loans with government guarantee in accordance with the rates of special reserves for doubtful loans, fixed by the Government of the Republic of Lithuania; 8) at the close of the fiscal year agree the amounts outstanding with the creditors.
26. Expenses relating to the servicing of foreign and domestic loans and income received from the borrowers under contractual obligation must be included in the State Budget.
27. All possible state revenue sources, including new government liabilities, shall be used to fulfil the obligations arising out of the relationships regulated by this Law.
28. The national debt may be expressed by loan agreements, government guarantees, securities as well as other debt instruments.
29. The available or future state assets may not be pledged in order to secure the fulfilment of government liabilities.
30. Gold and foreign currency reserves of the Bank of Lithuania may not be pledged in order to secure the fulfilment of government 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 officer of the Ministry of Finance 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 fulfil other obligations provided for by the loan agreement.
34. Without a written authorisation of the Ministry of Finance or the public company Property Bank, when the Property Bank is administering the loans transferred to it by the Ministry of Finance, and without agreeing the conditions of performance of the below listed actions, borrowers or borrowers, fulfilment of whose obligations is guaranteed by the government, except for commercial banks, shall have no right, before full repayment of the loan, to: 1) reorganise an enterprise; 2) reduce the authorised capital; 3) sell or otherwise assign, lease or mortgage long-term assets; 4) warrant or guarantee by way of their property the fulfilment of other entities' obligations; 5) extend loans (except short-term trade credits), 6) invest the property acquired for the obtained loan in other economic facilities. Article
35. State Borrowing Purposes and Purposes for which Government Guarantees are Given The Government may take loans in the name of the Republic of Lithuania and give government guarantees for loans used for the following purposes: 1) to finance the State Budget deficit and to balance the State Treasury cash flows; 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) to cover liabilities of state funds and to balance the cash flows of the said funds; 5) for other purposes if there is a separate law of the Republic of Lithuania. Article
36. Foreign Loan
37. The decision to take a foreign loan exceeding LTL 40 million, except for loans for financing the State Budget deficit, balancing the State Treasury cash flows and for other purposes provided for in the Law on the State Budget for the relevant year, without exceeding the limits established in the laws of the Republic of Lithuania, 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.
38. The decision to take a foreign loan of LTL 40 million or less, also a foreign loan for financing State Budget deficit, balancing State Treasury cash flows and for other purposes provided for in the Law on the State Budget for the relevant year, without exceeding the limits established in the laws of the Republic of Lithuania, shall be taken by the Government of the Republic of Lithuania or the institution authorised by it.
39. 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 by the officer of the Ministry of Finance authorised by him. On the proposal of the Minister of Finance foreign loan agreements and other debt instruments may be signed by other officers of the state, issued authorisation on the decision of the Government of the Republic of Lithuania ..
40. Legal findings concerning a foreign loan or other debt instruments shall be signed by the Minister of Justice or the officer of the Ministry of Justice authorised by him.
41. 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 have been passed as well as those that are not ratified and in relation whereto no separate decision has been passed by the Seimas of the Republic of Lithuania shall have a binding effect.
42. A foreign loan shall be taken, disbursed and repaid through the fiscal agent of the State - the Bank of Lithuania or through another bank.
43. The procedure for extending and repaying a foreign loan as well as the functions and responsibilities of the institutions participating in the process shall be determined under a joint Resolution of the Government of the Republic of Lithuania and the Board of the Bank of Lithuania. Article
44. Domestic Loan
45. Domestic loan agreements and other debt instruments shall be signed by the Minister of Finance or by the officer of the Ministry of Finance authorised by him.
46. Dematerialised securities of the Government of the Republic of Lithuania issued in local currency shall be accounted in the securities accounts which shall be administered in accordance with the procedure established by laws, other legal acts and the Central Securities Depository of Lithuania .
47. The Ministry of Finance shall have the right to appoint the fiscal agent for performing operations of trading in securities issued by the Government of the Republic of Lithuania. With the consent of the Ministry of Finance< the fiscal agent may establish the procedure for performing the above operations.
48. The procedure for extending and repaying domestic loans as well as the functions and obligations of the institutions participating in the process shall be established by the Government of the Republic of Lithuania.
49. The procedure for issuing and trading in domestic loans in the form of securities of the Government of the Republic of Lithuania shall be established by the Government of the Republic of Lithuania . 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 taken 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 LTL 40 million or less shall be taken by the Government of the Republic of Lithuania pursuant to the Law on State Budget of the Republic of Lithuania of the relevant year or other laws.
53. The government guarantee shall be signed by the Minister of Finance, whereas legal findings concerning the given guarantee shall be signed, at the request of the creditor, by the Minister of Justice or the officer of the Ministry of Justice authorised by him..
54. The procedure for giving the government guarantee to foreign loans being received, the procedure for receiving and repaying foreign loans with the government guarantee as well as the functions and responsibilities of the institutions participating in the process shall be established by a joint Resolution of the Government of the Republic of Lithuania and the Board of the Bank of Lithuania.
55. The procedure for giving the government guarantee to domestic loans being received, the procedure for receiving and repaying domestic loans with the government guarantee as well as the functions and responsibilities of the institutions participating in the process shall be established by the Government the Republic of Lithuania Article
56. Establishment of Guarantee Institutions or Insurance Companies and Government Guarantee for the Obligations of Guarantee Institutions or Insurance Companies under the Guarantee Agreements or Insurance Contracts
57. The Government of the Republic of Lithuania shall have the right to establish guarantee institutions or insurance companies which would give to the bank guarantees for the repayment of loans made to legal persons, enterprises without the rights of legal person, natural persons, provided that resources are provided for in the State Budget of the relevant year or other state funds 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.
58. The decision to give the government guarantee for the obligations assumed by the guarantee institution or insurance company under the guarantee agreement or insurance contract shall be taken by the Government of the Republic of Lithuania. The total amount of the government guarantees given by the Government of the Republic of Lithuania in the relevant year for the said obligations assumed under guarantee agreements or insurance contracts by the guarantee institutions or insurance companies may not exceed the limit fixed in the State Budget of the year, whereas the amount of the government guarantee for the obligations under guarantee agreements or insurance contracts of each guarantee institution or insurance company may not exceed the amount which would be sufficient to cover allocations set aside by the Government of the Republic of Lithuania for insurance contributions or guarantee payment.
59. The guarantees agreements or insurance contracts of the guarantee institution or insurance company shall be signed by the guarantee 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. The guarantees given by the guarantee institutions set up by the Government of the Republic of Lithuania or the guarantees or insurance provided by the insurance companies under guarantee agreements or insurance contracts shall be comparable to the government guarantee.
60. Implementing the programmes carried out by the government, the guarantee institution or the insurance company shall, in the manner prescribed by the Government of the Republic of Lithuania, screen the applications of legal persons, enterprises without the rights of legal persons and natural persons requesting that banks which loan them money be guaranteed the repayment of loans, keep records of guarantees given and insurance contracts concluded, supervise the implementation of submitted business plans and apply sanctions in respect of business entities which default on the terms and conditions of the guarantees or insurance.
61. The institution authorised by the Government of the Republic of Lithuania shall monitor the activities of the guarantee institution and determine its accountability.
62. The activities of the insurance company shall be monitored 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, also submit to the Government of the Republic of Lithuania the annual financial accounts together with the auditors’ report.
63. If losses incurred by the guarantee institution or insurance company total 25% of the authorised capital, the Government of the Republic of Lithuania must suspend the provision of new guarantees and conclusion of insurance contracts. Article
64. Control of Financial Activities of the Borrowers or the Borrowers, Fulfillment of whose Obligations is Guaranteed by the Government
65. Borrowers and the borrowers, fulfilment of whose obligations is guaranteed by the government, except for the institutions maintained out of the State Budget, must furnish: 1) to the Ministry of Finance - the auditors’ report prior to the receipt of a loan; 2) to the Ministry of Finance or the public company Property Bank, if the public company Property Bank administers the transferred loans - the auditors’ report regarding the annual performance during the period of utilisation of the loan, also, on the initiative of the Ministry of Finance or public company Property Fund; the auditors’ report covering a different period.
66. Unless the laws provide otherwise, the audit may be carried out by the audit firm that has a license issued by the Ministry of Finance.
67. The auditing services shall be provided under contract between the audit firm and the borrower or the borrower, fulfilment of whose obligations is guaranteed by the government. The services shall be paid for with the funds of the borrower or the borrower fulfillment of whose obligations is guaranteed by the government.
68. The State Control institutions shall have the right to examine the economic and financial position of the borrowers and the borrowers, fulfilment of whose obligations is guaranteed by the government, also the obtaining of all foreign loans received in the name of the government or with the guarantee of the government and the distribution, use for the specific purpose and repayment thereof.
69. The borrower or borrower, fulfilment of whose obligations is guaranteed by the government must furnish to the Ministry of Finance or the public company Property Bank, when the public company administers loans transferred by the Ministry of Finance, also to the audit firm and the State Control institutions the documents required by them within the time period set by the said institutions, except for documents the procedure of presentation whereof is established by the Government of the Republic of Lithuania. Article
70. Sanctions
71. The Ministry of Finance shall recover from the borrower who fails to discharge when due his liabilities under the loan agreement or debt repayment agreement specified in paragraph 8 hereof default interest for each overdue day, the amount whereof shall be calculated by dividing by 365 the average annual interest rate of the preceding quarter payable on the securities of the Government of the Republic of Lithuania in LTL with maturities of up to 1 year. The default interest may be raised by increasing the average annual interest rate specified herein by up to 10 percentage points, dividing the result by 365 and confirming the operation by a loan or debt repayment agreement. Where the loans transferred by the Ministry of Finance are administered by the public company Property Bank, the Government of the Republic of Lithuania shall have the right to exempt the borrower from the payment of the calculated but unpaid default interest on overdue loans and default interest or to suspend the charging of default interest to the borrowers.
72. The Ministry of Finance shall recover without suit from the bank accounts of the borrower the outstanding loan (debt) or a part thereof, arrears of interest on the loan, default interest or other charges provided for in the loan or debt repayment agreement.
73. If the funds of the borrower are not sufficient to cover the outstanding amounts, the execution shall be levied against other assets of the borrower, i.e. the borrower's accounts or any other property shall be attached and realised in accordance with the procedure established by laws in order to discharge all liabilities under loan and debt repayment agreement, to pay interest as well as to cover all government expenses incurred due to the borrower’s default in discharging his liabilities.
74. If the borrower, fulfilment of whose obligation is guaranteed by the government defaults on his contractual obligations, by reason whereof the government as the guarantor has to fulfill the above obligations, the Ministry of Finance as the body which fulfils the guarantee shall take recourse against the borrower the fulfilment of whose obligations is guaranteed by the government, and recover without suit from the defaulting borrower’s accounts with banking institutions all direct and indirect expenses connected with the fulfilment of the above obligations.
75. If the funds of the borrower, fulfilment of whose obligations is guaranteed by the government, prove insufficient to cover all direct and indirect expenses specified in paragraph 4, the accounts or other assets of the borrower, fulfilment of whose obligations is guaranteed by the government, shall be attached and realised in the manner prescribed by law in order to compensate all the expenses incurred by the government by reason of the borrower’s defaulting on his obligations, the fulfilment whereof is guaranteed by the government.
76. The decisions of the Ministry of Finance to levy execution for the recovery of debts against the accounts with banking institutions and assets of the borrower or borrower, the fulfilment of whose obligations is guaranteed by the government, may be presented for execution within three years after their adoption.
77. If the actions referred to in paragraphs 2, 3, 4 and 5 hereof are not sufficient and the defaulting on the obligations persists, the Ministry of Finance shall have the right to file a petition in court for the institution of bankruptcy proceedings against the borrower or the borrower, fulfilment of whose obligations is guaranteed by the government. The Ministry of Finance shall notify in writing the borrower or the borrower, fulfilment of whose obligations is guaranteed by the government, of its intention to institute bankruptcy proceedings against the enterprise. The notification shall indicate the non-fulfilled obligations and shall give a warning that in the event of failure to fulfil the obligations within the period indicated in the notification, the Ministry of Finance shall apply to court for the institution of bankruptcy proceedings.
78. If the Government of the Republic of Lithuania decides that it is expedient from social/economic point of view not to institute bankruptcy proceedings and not to charge default interest on the amounts overdue, or if it decides to propose to the borrower to reconsider the initial terms of the loan agreement and to sign with the Ministry of Finance an agreement on the changing of the terms of the loan or the debt repayment agreement, and, upon the fulfilment of the obligations of the borrower, the fulfilment of whose obligations is guaranteed by the government, instructs the borrower to sign with the Ministry of Finance a loan repayment agreement and sets the terms of debt repayment, the Ministry of Finance must assess the financial consequences of such a decision and provide for the required amount in the State Budget of the coming year (if the consequences would be felt in the course of several years - in the State Budget of each coming year).
79. 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 the State Treasury account. The borrower must pay a fine amounting to 10% of the loan (or a part thereof) that has been used not for its proper purpose. If the government-guaranteed loan (or a part thereof) has been used not for its proper purpose, the borrower, the fulfilment of whose obligations is guaranteed by the government must pay a fine amounting to 10% of the loan.
80. If the borrower fails to use the received loan for its proper purpose for more than six months, it must pay a fine in the amount of interest on the loan for the above period as provided in the loan agreement, and repay the Ministry of Finance the total amount not used for its proper purpose.
81. Sanctions under paragraphs 9 and 10 hereof shall be imposed by the State Control institutions in accordance with the procedure established by laws.
82. In the event of failure by the borrower to repay all the amounts specified in paragraphs 9 and 10 hereof, the Ministry of Finance shall recover without suit the said amounts from the borrower’s accounts with banking institutions. Where the borrower’s funds prove insufficient to cover the amounts subject to recovery, execution shall be levied against other assets of the borrower.
83. All payments due under sanctions shall be paid into the State Treasury account. The funds in this account may be used for the discharge of all liabilities arising from the relations regulated by this Law and shall not be included in the State Budget at the close of the fiscal year.
84. Borrowers or borrowers, fulfilment of whose obligations is guaranteed by the government, who are late in submitting to the Ministry of Finance or the public company Property Bank, where the public company Property Bank administers the loans transferred by the Ministry of Finance, the required documents (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) or submit inaccurate information or perform unauthorised actions for the performance whereof the authorisation of the Ministry of Finance or the public company Property Bank is required under paragraph 13 of Article 3 of this Law shall be held liable under the laws of the Republic of Lithuania . Article
85. Accounting
86. At the close of the fiscal year, the Government of the Republic of Lithuania must submit to the Seimas, together with the budget report, a report on the national debt.
87. 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