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BP 7.40 - Disputes over Defaults on External Debt, Expropriation, and Breach of Contract

These policies were prepared for use by World Bank staff and are not necessarily a complete treatment of the subject.
BP 7.40
July, 2001

This Bank Procedures statement was revised March 2012 to take into account the provisions of OP/BP 9.00, issued in February 2012.

Note: This BP 7.40 replaces BP 7.40 dated May 1996.  Questions may be addressed to the Chief Counsel, Operations Policy. 

Revised March 2012

1.  When a dispute over default, expropriation, or governmental breach of contract comes to the attention of a Bank1 staff member, the staff member informs the country director (CD) and the Legal Vice Presidency (LEG).  In consultation with LEG, the CD recommends a Bank position to the Regional vice president (RVP).  If, on this basis, the RVP decides not to make any new loans to the member country or with the guarantee of the country, the RVP informs the relevant managing director and the Vice President and General Counsel.

2.  If, at the time a loan is presented to the executive directors for approval, there are any substantial amounts in dispute between the borrowing or guaranteeing country and suppliers or lenders to, or investors in, that member country, the matter is mentioned in the Project/Program Appraisal Document2/President's Report.

3.  If the Bank decides to lend while a dispute over default or expropriation is pending, staff monitor the situation during project/program implementation to assess progress toward a settlement or decision.


  1. "Bank" includes IBRD and IDA;  and "loan" includes IDA credit and IDA grant.
  2. If the matter involves information of a sensitive nature, it may be disclosed in the Memorandum and Recommendation of the President.

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