Commonwealth Numbered Acts

EXPORT FINANCE AND INSURANCE CORPORATION AMENDMENT ACT 1997 No. 65 of 1997 - SCHEDULE 1

Schedule 1-Amendment of the Export Finance and Insurance 
Corporation Act 1991  1 At the end of subsection 54(9)
Add:
; and (c) an expected loss by, or liability of, EFIC under or in relation to a
DIFF loan, as defined in section 66A, is to be ignored to the extent that the
Commonwealth would be liable to pay an amount to EFIC under that section in
relation to the loss or liability. 2 At the end of subsection 56(2)
Add:
; and (c) a likely liability of EFIC in relation to a DIFF loan, as defined in
section 66A, or a likely default of a kind referred to in paragraph (1)(b) in
relation to such a loan, is to be ignored to the extent that the Commonwealth
would be liable to pay an amount to EFIC under section 66A in relation to the
same matter. 3 At the end of section 66
Add:

(11) On the commencement of section 66A, this section ceases to apply to a
loan to which that section applies. This does not affect any liability
incurred under this section before the commencement of section 66A. 4 After
section 66
Insert: 66A DIFF loans-assumption of risk by the Commonwealth Purpose of
section

(1) The purpose of this section is to provide for the Commonwealth to assume
the risk associated with DIFF loans. A DIFF loan is a loan with the following
characteristics:

   (a)  the loan was made under this Act, the Australian Trade  Commission Act
        1985 or the Export Finance and Insurance Corporation  Act 1974 before
        the commencement of this section; and

   (b)  the borrower's liability in relation to the loan has not been fully
        discharged before the commencement of this section; and

   (c)  either:

        (i)    the loan funds included money made available by the
               Commonwealth as part of an overseas aid project (as defined in
               subsection 7(2)); or

        (ii)   the loan was made in conjunction with a grant of aid by the
               Commonwealth, or a Commonwealth instrumentality, as part of
               such an overseas aid project. Note: The abbreviation "DIFF"
               stands for "Development Import Finance Facility". Commonwealth
               assumption of risk on DIFF loans

(2) If, after the commencement of this section, there is a default in payment
of an amount due under a DIFF loan:

   (a)  the Commonwealth must pay to EFIC an amount equal to the default
        amount; and

   (b)  the Commonwealth must indemnify EFIC for:

        (i)    any other loss (including damages) suffered by EFIC because of
               the default; and

        (ii)   any costs incurred by EFIC in attempting to recover the default
               amount; and

   (c)  if EFIC recovers the whole or part of the default amount or a loss or
        cost referred to in paragraph (b), EFIC must pay to the Commonwealth
        an amount equal to the amount recovered. Note: The obligation in
        paragraph (b) applies whether or not the Commonwealth's liability has
        been replaced as mentioned in subsection (4). Commonwealth may instead
        direct EFIC to borrow money

(3) The Minister may, on behalf of the Commonwealth, direct EFIC to seek
approval under section 59 to borrow an amount equal to an amount payable by
the Commonwealth under subsection (2). Commonwealth liability if it directs
EFIC to borrow money

(4) If:

   (a)  the Minister gives EFIC a direction under subsection (3) to borrow an
        amount; and

   (b)  the Treasurer approves the borrowing under section 59; the
        Commonwealth's liability under subsection (2) is replaced by a
        liability to pay to EFIC the amount needed to discharge the borrowing
        by EFIC and to pay all costs (including interest) incurred by EFIC in
        connection with the borrowing. EFIC to make payment to Commonwealth

(5) EFIC must pay $40,000,000 from its reserves to the Commonwealth. EFIC may
also have to pay Commonwealth a proportion of DIFF loan risk premiums

(6) The Minister for Finance may direct EFIC to pay to the Commonwealth a
specified amount representing part of the risk premiums paid in relation to
the DIFF loans. The amount must not exceed what is necessary to give the
Commonwealth an appropriate proportion of the risk premiums. Commonwealth to
pay EFIC a fee for administering DIFF loans

(7) The Commonwealth is liable to pay to EFIC an administration fee in respect
of EFIC's costs in administering the DIFF loans after the commencement of this
section. The amount of the administration fee, and how and when it is to be
paid, are to be as directed by the Minister for Finance. Commonwealth and EFIC
may set off amounts owed

(8) Amounts that the Commonwealth and EFIC owe to each other under this
section may be set off. Directions under this section

(9) A direction under this section is to be in writing. 5 After subsection
69(2)
Insert:

(2A) A DIFF loan, as defined in section 66A, is to be disregarded for the
purposes of subsection (1).

[Minister's second reading speech made in-
House of Representatives on 26 February 1997
Senate on 20 March 1997]