B-169583, JUN. 25, 1970
Highlights
IS DENIED RELIEF SINCE SUCH GUARANTEED INVESTOR IS FREE. " WHICH HERE WAS WELL WITHIN MAXIMUM AMOUNT AVAILABLE. TO GADSBY AND HANNAH: FURTHER REFERENCE IS MADE TO YOUR LETTER OF APRIL 14. WAS MADE UNDER THIS CONTRACT. THE BASIS FOR YOUR REQUEST AS SET FORTH IN YOUR LETTER OF APRIL 14 IS AS FOLLOWS. YOU STATE THAT A COMPARISON OF LEIGH'S WORKSHEET WITH A CORRECTED WORKSHEET DISCLOSES THAT THE ERROR WAS ATTRIBUTABLE TO COMPUTATION FROM A DATE EARLIER THAN THE DATE ON WHICH THE GUARANTY CONTRACT BECAME EFFECTIVE. THE AID INSURANCE PREMIUM WAS DETERMINED ON THE BASIS OF AN INVESTMENT FIGURE WHICH IS $89. THE PERTINENT FACTS AND CIRCUMSTANCES AS DISCLOSED BY AID ARE SET FORTH BELOW. WE ARE ADVISED THAT WITHIN THIS MAXIMUM AMOUNT.
B-169583, JUN. 25, 1970
FOREIGN AID PROGRAM--LOAN PROGRAMS--EXCESS PREMIUM PAYMENT UNDER GUARANTEE CONTRACT WITH AID FOR INTERNATIONAL DEVELOPMENT ON LOAN MADE TO ITS FOREIGN AFFILIATE, CLAIMANT WHO REQUESTS REFUND OF PART OF GUARANTY PREMIUM AS CONTRACT OVERPAYMENT, ON BASIS OF ITS OWN ERROR IN COMPUTING INTEREST THEREBY RAISING INVESTMENT FIGURE COMMENSURATELY, IS DENIED RELIEF SINCE SUCH GUARANTEED INVESTOR IS FREE, AFTER INITIAL ELECTION OF MAXIMUM COVERAGE AMOUNT, TO ELECT ANNUALLY A "CURRENT AMOUNT," WHICH HERE WAS WELL WITHIN MAXIMUM AMOUNT AVAILABLE, AND WHICH FIXES GUARANTY CONTRACT RIGHTS FOR CONTRACT PERIOD. MOREOVER, ANY CONTROVERSIES UNDER CONTRACT OF GUARANTY MUST, UNDER ITS GENERAL TERMS AND CONDITIONS, BE SETTLED BY ARBITRATION.
TO GADSBY AND HANNAH:
FURTHER REFERENCE IS MADE TO YOUR LETTER OF APRIL 14, 1970, WITH ENCLOSURES, ON BEHALF OF THE LEIGH TEXTILE COMPANY, REQUESTING REFUND OF A GUARANTY PREMIUM PAID UNDER AID FOR INTERNATIONAL DEVELOPMENT (AID) CONTRACT OF GUARANTY NO. 5590. YOU CONTEND THAT AN OVERPAYMENT, IN THE AMOUNT OF $693.81, WAS MADE UNDER THIS CONTRACT.
THE BASIS FOR YOUR REQUEST AS SET FORTH IN YOUR LETTER OF APRIL 14 IS AS FOLLOWS. YOU STATE THAT LEIGH INVESTED $400,000 IN ITS FOREIGN AFFILIATE, ACQUIRING A PROMISSORY NOTE PAYABLE IN 10 YEARS WITH INTEREST AT 9-1/2 PERCENT PER ANNUM. THEREFORE, LEIGH INITIALLY ELECTED GUARANTY COVERAGE OF $438,000, REPRESENTING THE FACE AMOUNT OF THE NOTE PLUS THE FIRST YEAR'S INTEREST FOR A 1-YEAR CONTRACT PERIOD COMMENCING AUGUST 26, 1966. YOU CONTEND THAT FOR THE NEXT TWO CONTRACT PERIODS, LEIGH PROPERLY INCREASED THE AMOUNT OF ITS CURRENT COVERAGE BY THE AMOUNT OF INTEREST TO ACCURE DURING SUCH PERIODS. HOWEVER, IN MAKING APPLICATION FOR CURRENT COVERAGE FOR THE CONTRACT PERIOD COMMENCING AUGUST 26, 1969, YOU STATE THAT LEIGH INCORRECTLY COMPUTED THE AMOUNT OF INTEREST TO COME DUE. YOU STATE THAT A COMPARISON OF LEIGH'S WORKSHEET WITH A CORRECTED WORKSHEET DISCLOSES THAT THE ERROR WAS ATTRIBUTABLE TO COMPUTATION FROM A DATE EARLIER THAN THE DATE ON WHICH THE GUARANTY CONTRACT BECAME EFFECTIVE. A RESULT OF THE ERRONEOUS CALCULATION, THE AID INSURANCE PREMIUM WAS DETERMINED ON THE BASIS OF AN INVESTMENT FIGURE WHICH IS $89,524.75 IN EXCESS OF THE ACTUAL AMOUNT OF INVESTMENT TO WHICH THE CONTRACT OF GUARANTY WOULD BE APPLICABLE. ACCORDINGLY, YOU CONTEND THAT LEIGH MADE AN EXCESS PAYMENT OF $693.81 AND THAT AID HAS ADVISED THAT IT LACKS AUTHORITY TO REFUND THIS OVERPAYMENT.
THE PERTINENT FACTS AND CIRCUMSTANCES AS DISCLOSED BY AID ARE SET FORTH BELOW.
ON AUGUST 25, 1966, LEIGH OBTAINED AID GUARANTY COVERAGE OF A $400,000 LOAN TO A NICARAGUAN CORPORATION. PARAGRAPH 3 OF THE SPECIAL TERMS AND CONDITIONS OF THE CONTRACT INDICATES THAT LEIGH ELECTED A $1,000,000 MAXIMUM AMOUNT OF GUARANTY COVERAGE, $400,000 ATTRIBUTABLE TO PRINCIPAL AND $600,000 APPARENTLY ATTRIBUTABLE TO INTEREST AT 9-1/2 PERCENT PER YEAR FOR THE TERM OF THE LOAN.
WE ARE ADVISED THAT WITHIN THIS MAXIMUM AMOUNT, LEIGH, AS ANY OTHER GUARANTEED "INVESTOR," IS FREE TO ELECT AS OF EACH ANNIVERSARY DATE OF THE GUARANTY CONTRACT A "CURRENT AMOUNT" TO BE IN FORCE FOR THE ENSUING YEAR. ANY EXCESS OF THE MAXIMUM AMOUNT OVER THE CURRENT AMOUNT FOR A GIVEN CONTRACT PERIOD IS REFERRED TO AS THE STANDBY AMOUNT. THEREFORE, THE CURRENT AMOUNT AND STANDBY AMOUNT OF GUARANTY COVERAGE RESPECTING A GIVEN INVESTMENT CAN, AND USUALLY DOES, VARY FROM YEAR TO YEAR. THE GUARANTY PREMIUM FOR THE CURRENT AMOUNT IS SEVEN-EIGHTS OF 1 PERCENT PER YEAR AND FOR THE STANDBY AMOUNT IS ONE-TENTH OF 1 PERCENT PER YEAR.
AID ADVISES THAT EACH INVESTOR IS FREE TO ELECT WHATEVER CURRENT AMOUNT IT CHOOSES FOR A GIVEN CONTRACT PERIOD (SO LONG AS IT DOES NOT EXCEED THE MAXIMUM AMOUNT) WITHOUT LIMITATION OR SUPERVISION BY AID. THEREFORE, EACH GUARANTEED INVESTOR MUST, AND DOES, DETERMINE WHAT ITS INSURABLE INTEREST WILL BE FOR A GIVEN CONTRACT PERIOD AND TO WHAT EXTENT IT WISHES TO COVER SUCH INTEREST BY A CURRENT AMOUNT OF GUARANTY. AID STATES THAT UNDER PARAGRAPH 5.02 OF THE GENERAL TERMS AND CONDITIONS, A CURRENT AMOUNT, ONCE ELECTED, FIXES THE GUARANTY CONTRACT RIGHTS OF THE INVESTOR AND THE UNITED STATES FOR THE CONTRACT PERIOD FOR WHICH IT WAS CHOSEN. THEREAFTER, ELECTION OF DIFFERENT COVERAGE BECOMES EFFECTIVE ONLY AS OF THE NEXT CONTRACT PERIOD AND DOES NOT AFFECT THE FEE PAID TO OR RETAINED BY AID FOR A PRIOR CONTRACT PERIOD. WE ARE ADVISED THAT PRINCIPLES OF RISK MANAGEMENT AND ADMINISTRATIVE NECESSITY PREVENT AID FROM PERMITTING CHANGES OF COVERAGE OF ITS LARGE PORTFOLIO OF GUARANTIES IN THE MIDDLE OF CONTRACT PERIODS.
ALTHOUGH LEIGH ELECTED AND PAID THE GUARANTY PREMIUM FOR A CURRENT AMOUNT OF COVERAGE FOR THE CONTRACT PERIOD AUGUST 26, 1969, THROUGH AUGUST 25, 1970, IN A HIGHER AMOUNT THAN IT NOW CONSIDERS APPROPRIATE, AID ADVISES THAT THE AMOUNT ELECTED IS NEVERTHELESS THE COVERAGE NOW IN FORCE. WE ARE FURTHR ADVISED THAT IN ADDITION TO THE FACT THAT LEIGH WAS FREE TO CHOOSE THIS CURRENT AMOUNT (NOT NECESSARILY LIMITED TO OUTSTANDING PRINCIPAL OF AND ACCRUED INTEREST ON THE LOAN), THE ELECTION OF IT NEITHER RAISED NOR SHOULD HAVE RAISED ANY QUESTION IN AID. FOR EXAMPLE, THE $664,589.13 CURRENT AMOUNT ELECTED, THOUGH IN ERROR, WAS WELL WITHIN THE $1,000,000 MAXIMUM AMOUNT AVAILABLE AND THE INTEREST TO ACCRUE ON THE LOAN BY THE END OF THE RELEVANT CONTRACT PERIOD WAS NOT DETERMINABLE BY AID BECAUSE AID DID NOT KNOW THE DATE INTEREST COMMENCED TO RUN NOR WHAT, IF ANY, INTEREST PREMIUM OR PENALTY MAY HAVE BEEN PAYABLE IN THE RELEVANT CONTRACT PERIOD IN CONNECTION WITH LOAN PREPAYMENTS.
ON THE BASIS OF THE RECORD BEFORE US, WE SEE NO LEGAL BASIS FOR ALLOWING A REFUND DUE TO THE FACT THAT LEIGH MAY HAVE ELECTED A DIFFERENT CONTRACT AMOUNT THAN IT NOW DESIRES. AID HAS ADVISED OUR OFFICE THAT IT INTENDS TO CONTACT LEIGH TO EXPLAIN WHAT IT CONSIDERS TO BE SOME MISUNDERSTANDING REGARDING LEIGH'S COVERAGE UNDER THE CONTRACT. IF THE MATTER CANNOT BE SETTLED BETWEEN THE PARTIES, A CONTROVERSY WOULD EXIST UNDER THE CONTRACT OF GUARANTY WHICH, PURSUANT TO PARAGRAPH 10.01 OF THE GENERAL TERMS AND CONDITIONS, MUST BE SETTLED BY ARBITRATION. SEE 22 U.S.C. 2395(I).
IN VIEW OF THE FOREGOING, NO ACTION IN THE MATTER MAY BE TAKEN BY OUR OFFICE.