Priority of Payment and Payment Mechanisms

     In its decision 17 adopted in March 1994, two months before the resolution of the first instalment of claims under the review of the Commission, the Governing Council established basic principles for the distribution of compensation payments to successful claimants. As it was anticipated that the value of approved awards would far exceed the resources available in the Compensation Fund at any given time (see the Secretary-General’s report S/22559 of 2 May 1991), the Governing Council devised a mechanism for the allocation of available funds to successful claimants that gave priority to the three urgent categories of claims and which, within each category, would give equal treatment to similarly situated claims. Only when each successful claimant in categories “A”, “B“ and “C“ had been paid an initial amount up to US$2,500, would payments commence for claims in other categories. Accordingly, the first phase of payment involved an initial payment of US$2,500 to each successful individual claimant in categories “A”, “B” and “C”. A total of more than US$3 billion was made available to approximately 1.5 successful individual claimants in these claims categories under the first phase of payments, and, for humanitarian reasons, all category “B” claims were paid in full by the end of 1996.

     In its decision 73 (1999), the Governing Council adopted the mechanism for the second phase of payments. It determined that priority of payment would continue to be provided to individual claimants in categories “A” and “C”, while meaningful compensation would also be provided to claimants in categories “D”, “E” and “F”. In accordance with this decision, payments of up to US$100,000 were subsequently made available to approved claims in all these categories in two rounds of payment comprising amounts of US$25,000 and US$75,000 respectively. A total of approximately US$5 billion was made available to almost 900,000 claimants in categories “A”, “C”, “D”, “E” and “F” under the second phase of payments. The payment of compensation in respect of claims in categories “A” and “C”, submitted during the regular filing period, was completed in this second phase, which came to an end in September 2000.

     In its decision 100 (June 2000, subsequently revised in March 2002), the Governing Council adopted the mechanism for the third phase of payments, which commenced in October 2000. In the third phase, each successful claimant in categories “D”, “E” and “F” received an initial amount of up to US$5 million.  Subsequent rounds of payments of up to US$10 million were made to successful claimants in the order in which they had been approved.  More than $9 billion was made available to approximately 8,000 claimants in categories “D”, “E” and “F” under the third phase.

     In its decision 197 (2003), the Governing Council established a temporary payment mechanism. This was done in light of the reduction in the Compensation Fund’s income, following the adoption of Security Council resolution 1483 (2003). Under this temporary payment mechanism, up to US$200 million from the Compensation Fund was made available for the payment of successful claims on a quarterly basis following each session of the Governing Council (from the forty-eighth to the fifty-first sessions, inclusive).  Successful claimants in all categories received an initial amount of US$100,000 or the unpaid principal amount of the award, if less, with the disbursement of subsequent rounds of payments of US$100,000 to successful claimants in all categories in the order in which they had been approved at the sessions described above, until the available funds for distribution had been exhausted.  This temporary mechanism was extended by the Governing Council in its decision 227 at its fifty-second session (June-July 2004).

     At its fifty-fifth session (September 2005), the Governing Council adopted decision 253 which lifted the ceiling of $200 million and provided for the balance in the Compensation Fund to be made available for quarterly payments with disbursement continuing in rounds of payments of US$100,00. Thereafter, the temporary payment mechanism was further revised, with payments increased to rounds  of US$2million under decision 256. Finally, in 2009 with only nine claims remaining to be paid, the Governing Council increased the quarterly rounds of payment to US$10 million until all available amounts in the Compensation Fund have been exhausted under decision 267.