AGENCY FOR INTERNATIONAL DEVELOPMENT GUARANTIES UNDER THE FOREIGN ASSISTANCE ACT OF 1961, AS AMENDED

Unrestricted guaranties issued by the Agency for International Development under section 221(b) or 224 of the Foreign Assistance Act of 1961, as amended (22 U.S.C. 2181-2184), are general obligations of the United States, and the full faith and credit of the United States is pledged to their redemption.

The pledge of the full faith and credit of the United States to an unrestricted guaranty, other than an informational media guaranty, issued by a foreign aid agency of the Government which preceded the Agency for International Development is evidenced by the provisions of the Foreign Assistance Act of 1961, as amended.

THE PRESIDENT.

MAY 9, 1963.

MY DEAR MR. PRESIDENT: I have the honor to comply with your request for my opinion upon the question submitted by the Administrator of the Agency for International Development (AID) relative to the investment guaranties issued by that Agency and its predecessors. The Administrator's question is whether the full faith and credit of the United States is pledged by those guaranties.

Title III of the Foreign Assistance Act of 1961, as amended 1 (hereinafter referred to as "the act"), is the most recent of a number of congressional enactments providing for the issuance of investment guaranties by the Government as part of its foreign aid program. Sections 221 (b) and 224 of Title III authorize the President, in certain cases, to issue guaranties to United States citizens and enterprises in respect of investments they make in countries and areas friendly to the United States.

175 Stat. 429–432, as amended by Public Law 87-565, 76 Stat. 256–257; 22 U.S.C. 2181-2184.

222 U.S.C. 2181 (b), 2184.

8 Title III, which is administered by AID pursuant to delegations of authority in Executive Order 10973 of November 3, 1961, 26 F.R. 10469, and State Department Delegation of Authority No. 104 of November 3, 1961, 26 F.R. 10608, imposes various restrictions on the guaranty program, including,

Two years ago, in an opinion requested by AID's immediate predecessor, the Development Loan Fund, I advised you that guaranties issued by the Fund under section 202 (b) of the Mutual Security Act of 1954, as amended, were backed by the full faith and credit of the United States. I made the following statement in that opinion:

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"A series of opinions of the Attorney General issued between 1953 and 1959 has established that a guaranty by a Government agency contracted pursuant to a congressional grant of authority for constitutional purposes is an obligation fully binding on the United States despite the absence of statutory language expressly pledging its 'faith' or 'credit' to the redemption of the guaranty and despite the possibility that a future appropriation might be necessary to carry out such redemption. Thus it must be held that unless sterilized by some other provision in its governing statute, the Fund is enabled by *** section 202(b) to beget general obligations of the United States ***." (Footnotes omitted.) Similarly it must be held here that guaranties issued by AID under sections 221 (b) and 224 of the act are backed without reservation by the United States unless the act elsewhere provides to the contrary.

I find nothing in the act to negate the full liability of the Government on an AID guaranty and, moreover, find affirmation of such liability in the legislative histories of the act and the Foreign Aid and Related Agencies Appropriation Act, 1963.7

Section 222 (d) of the act, as it originally became law in 1961, provided that

"(d) Any payments made to discharge liabilities under guaranties issued under [Title III and prior statutes] * * * shall be paid first out of funds specifically reserved for

among others, limitations on the total amount of guaranties which may be issued with respect to the various risks insured against and requirements as to reserves to be maintained in connection with guaranties. In asking the question under consideration here, the Administrator of AID has, of course, presupposed that any guaranties made by his agency which the United States might be called upon to honor under Title III will have met the standards and limitations prescribed by that and any other applicable statute.

4 68 Stat. 832, as amended, 71 Stat. 357, 72 Stat. 262, 73 Stat. 248, 74 Stat. 135. This legislation was repealed by sec. 642 (2) of the act, 75 Stat. 460.

5 42 Op. A.G. 21.

Id., pp. 3-4.

7 P.L. 87-872, 76 Stat. 1163.

8 75 Stat. 431, 22 U.S.C. 2182(d).

such payment ***, and thereafter shall be paid out of fees [charged under Title III and prior statutes] *** as long as such fees are available, and thereafter shall be paid out of funds, if any, realized from the sale of currencies or other assets acquired in connection with any such guaranties as long as such funds are available, and finally shall be paid out of funds realized from the sale of notes issued [to the Treasury under prior statutes] * * * *, as amended." (Italics added.)

It will be seen that section 222(d), read literally, restricted the ultimate liability of the United States to the total of the funds described in the section. AID so construed the section, and its contracts of guaranty expressly provided that the Government was not obligated to make payments beyond such amounts.9

In 1962 AID recommended that a new provision, designated as section 222(f), be added to the act as follows:

"(f) There is hereby authorized to be appropriated to the President for use beginning in the fiscal year 1963 to carry out the purposes of this title not to exceed $100,000,000 which shall remain available until expended." AID also recommended that section 222(d) be amended by inserting the following before the period at the end thereof: ", and out of funds made available pursuant to this title”. 10 These modifications, which would have increased the amount of reserves underlying AID guaranties by $100,000,000, were designed to raise the ceiling on the aggregate amount of the various kinds of guaranties authorized for issuance.11

The proposed amendments, which obviously continued the basis for construing section 222 (d) as setting forth a limit on the Government's liability, although at a level $100,000,000

• Testimony of Seymour M. Peyser, Assistant Administrator, AID, at hearings before a House Subcommittee on Appropriations, 87th Cong., 2d sess., on Foreign Operations Appropriations for 1963, part 3, pp. 861-862, and at hearings before the Senate Appropriations Committee, 87th Cong., 2d sess., on Foreign Assistance and Related Agencies Appropriations for 1963, p. 474. For an expression of the view that the full faith and credit of the United States was, nevertheless, invoked, see statements of Representative John J. Rhodes, of Arizona, in the cited House Subcommittee hearings, pp. 907-908. 10 S. 2996, 87th Cong., 2d sess.

11 Hearings before the Senate Foreign Relations Committee, 87th Cong., 2d sess., on the Foreign Assistance Act of 1962, pp. 13, 222–223; S. Rept. 1535, 87th Cong., 2d sess., p. 18; Hearings before the House Foreign Affairs Committee, 87th Cong., 2d sess., on the Foreign Assistance Act of 1962, part I, pp. 16-17, part II, pp. 356-357, 359-360, part III, p. 417; H. Rept. 1788, 87th Cong., 2d sess., p. 11.

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higher than before, were passed by the Senate. However, the House, without altering the amendment to section 222(d), substituted a new section 222(f) for the Senate provision, as follows: 12

"(f) There is hereby authorized to be appropriated to the President such amounts, to remain available until expended, as may be necessary from time to time to carry out the purposes of this title." This language, with one minor change, and the amendment to section 222(d) became law.1

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The House action on section 222(f) was predicated upon the discovery that the use of the $100,000,000 figure in the Senate version might actually prevent the total amount of the guaranties authorized by Title III of the act from reaching the level permitted elsewhere in the title.1 Thus, the final adoption of section 222(f) without a specific ceiling was not prompted by considerations relating to the extent to which the Government stands back of an AID guaranty. However, it is plain that the enactment of a continuing authorization for appropriations in whatever amounts might be needed, coupled with the amendment of section 222(d) expressly making those appropriations available for the payment of guaranties, served to eliminate from section 222(d) any obstacle it formerly presented to a call upon the Government's full faith and credit.15

This understanding of the effect of the two amendments to section 222 was quickly manifested in Congress. AID requested an appropriation of $180,000,000 under the authorization given in section 222(f). In recommending a reduction to $30,000,000, the amount ultimately appro

12 108 Cong. Rec. 12245 (daily ed., July 11, 1962).

13 P.L. 87-565, section 104 (b)(1), (2), 76 Stat. 257; 22 U.S.C. 2182 (d), (f).

14 See n. 12, supra.

15 The statutory scheme thus enacted closely parallels the one considered in 41 Op. A.G. 403. There the statute under examination was the Transportation Act of 1958, 72 Stat. 568, which empowered the Interstate Commerce Commission to make guaranties of loans to railroads and provided for payments under such guaranties to be made by the Secretary of the Treasury "from funds *** authorized to be appropriated in such amounts as may be necessary for the purpose of carrying out the provisions of" the statute. The Attorney General concluded in that opinion, at p. 406, that the existence of an appropriation to meet a guaranty obligation which may have to be paid is not a condition of the Interstate Commerce Commission's authority to incur such an obligation and that once incurred, the obligation is binding on the United States. See also 41 Op. A.G. 363, 370, and 41 id. 424, 431-433.