International Law Prof Blog

Wednesday, October 22, 2014

My Name is Bond. Argentina Bond.

There seem to be a total of 461 judgments around the world against Argentina following its default on government bonds that Argentina issued in 2002. Among other things, there have been lawsuits in New York, Washington DC, France, Ghana, and Italy. Of particular note for U.S. lawyers in the litigation against Argentina is the U.S. case of NML Capital Ltd v. Republic of Argentina.

Argentina settled with most of the bondholders but a group of holdouts (known as the "vulture funds") refused to settle for anything less than the full value of the bonds (even though the vulture funds purchased the funds at less than full value). In addition to judicial actions, a public relations war has been waged to win over public opinion.

On August 7, 2014, the Republic of Argentina submitted a request to the International Court of Justice seeking leave to sue the United States, on the basis that U.S. court judgments against Argentina's sovereignty violated international law. To sue the United States in this case, however, Argentina needed to obtain the consent of the United States to be sued. On August 9, the United States refused to recognize jurisdiction before the International Court of Justice.

After its default, the Republic of Argentina enacted legistaion to pay exchange bondholders and deposited $161 million in a local Argentina bank to pay the exchange bondholders. But the holdouts moved for sanctions for Argentina's attempt to pay other bondholders. In September 2014, the federal district court judge in New York held Argentina in contempt. It should be noted that Argentina had waived its sovereign immunity. The court's ruling holding Argentina in contempt appears to be the first time that a sovereign country was found to be in contempt of a U.S. court.

On September 9, 2014, the United Nations General Assembly voted in favor of a legal framework to regulate restructuring of foreign debt. 124 countries voted in favor, but the United States, United Kingdom, Germany, Japan, and Canada opposed it.

On September 26, 2014, the U.N. Human Rights Council approved an Argentine-sponsored resolution that essentially condemned vulture funds as a violation of human rights. The arguments before the Human Rights Council were that when governments were forced to pay on its bonds it would then have no money for other things such as education or hospitals or roads. The text of the United Nations Human Rights Council Resolution can be viewed at A/HRC/27/L.26 (Sept. 23, 2014).

On October 8, 2014, the International Monetary Fund recommended that modifications should be able to be made to the "pari pasu" clause to exclude the duty to make ratable payments. And Argentina has also gotten support from the World Bank as well as banks in Brazil and China. But the litigation continues.

This brief timeline presents only some of the background to the Argentine financial crisis, a topic being explored in several panels at the Fall Meeting of the American Bar Association Section of International Law.

Pictured here is one of those panels, one entitled "Cross-Border Enforcement of Court Judgments and Arbitral Awards: Opportunities, Pitfalls, Flaws, and Remedies." Seated is Hagit M. Elul (Hughes Hubbard & Reed LLP, New York). Standing (from left to right) are Patrick Goudreau (DS Welch Bussieres, Montreal, Quebec, Canada), Malcolm McNeil (Arent Fox LLP, Los Angeles, California), and former ABA President Stephen N. Zack (Boies, Schiller & Flexner LLP). The panel at the ABA Section of International Law was presented in conjunction with the Association Internationale des Jeunes Avocats.

Hat tip to James Bond Fan Malcolm McNeil for the title of this Blog Post

Mark E. Wojcik (mew)