Ambito Financiero Relief from Switzerland: they assure that the reserves are not being attached

Ambito Financiero

Relief from Switzerland: they assure that the reserves are not being attached

Thursday, October 18, 2012

By Carlos Burgueño

In the midst of the torment from the actions of the vulture fund Elliott in Ghana and the detention of the Frigate Libertad, the Economy Ministry received calming news yesterday. The Swiss government backed Argentina’s position regarding the requests for attachment from the funds Elliott and Dart, that the money the Central Bank has deposited in the Bank of Basel cannot be attached.

The resolution was adopted by the Federal Council, the highest level of the Swiss government. Between both funds they have kept the dispute with Argentina going over US$1.3 billion in total, not having entered either one of the two swaps proposed by Argentina in 2005 and 2010, as the strategy of the funds is to litigate against Argentina in different courts so they will be paid 100% of the debt.

The two funds tried to attach reserves of the Central Bank deposited in the BIS (Bank of Basel), thereby definitively closing the case on a complaint made by both in 2009. Initially, they’d made a judicial demand while all of the levels of Swiss justice has rejected that complaint. However, the judges had asked in various rulings that the Swiss government take action to strengthen the impossibility of affecting Argentina’s reserves. Swiss jurisprudence always operated over the intangibility of deposits of any origin in the banks of their financial system, except in cases of suspected money laundering or funds that have come from trafficking of drugs, arms or persons, or any other act against humanity recognized by the United Nations.

They were the two vulture funds that had demanded in the courts for the cases against Argentina to not be closed, due to the lack of a decision from the Swiss government.

The complaints were rejected by the Federal Council, which alleged that those reserves have “immunity” and cannot be seized. In a statement, the council said that “it is not for the Swiss authorities to examine the management of assets at the BIS and, in particular, the relative criteria for deposits by central banks at the entity.” It added that “in the absence of a judicial decision or a resolution adopted by an international organization and recognized by Switzerland, the Federal Council doesn’t have to rule on the policy of deposits from the central bank of another state.”

It said that “the Federal Council finds it useless to establish a process of resolution of disputes, taking into account that there is no disagreement between this and the BIS nor a litigation of private law between the management companies of the funds and the BIS.”

The importance of the Swiss decision, also, is that any money deposited in the BIS will count on legal protection, with which this path remains open for any payment or deposit that Minister Hernan Lorenzino wants to make abroad.

Pagina/12

In Switzerland, hands off the reserves

Thursday, October 18, 2012

By Martín Granovsky

Beyond the responsibilities from which that the Frigate Libertad has docked in Ghana, the ship could be a metaphor for Argentine money, but not the reserves: they are money itself. The Federal Council of Switzerland, the top authority of that country, yesterday rejected the complain of two vulture funds to attach the Argentine reserves deposited in the BRI, which in Spanish is el Banco de Arreglos Internacionales.

Strictly speaking, it is not that the Swiss Confederation is due to settle a dispute in which the Argentina was a direct party. Obviously, if the Swiss authorities had considered the attachment legal, Argentina would have seen itself harmed. And, after the decision, the fact is that Argentina was not harmed because the Swiss didn’t find any motive coming from an international entity recognized for them to cut off immunity of the BRI. By agreement between Switzerland and the BRI signed in 1987, the latter is headquartered in Switzerland and, as such, has immunity.

“The Federal Council doesn’t have to speak on the placement policy of the central bank of another state,” said an official statement. The complaint rejected yesterday had been put forth by two vulture funds, NML of Paul Singer, linked to the Task Force that operates against Argentina and managed to detain the Frigate Libertad in Ghana, and EM.

The direct Swiss conclusion is that there was no abuse of immunity by the BRI. Since the haircut and the restructuring of the debt, the Argentine state believes that no bondholder of the 7% that didn’t accept the agreements have rights as creditors. That is not the same case as the Paris Club, which in every case it is a pending question for resolution after the default of 2001.

In 2010, the two vulture funds wanted to attach the reserves deposited in the BRI of Basel, Switzerland, by the Central Bank of the Argentine Republic. In the first instance, the court through the civil court of the canton of Baleville sided with the attachment.

As the country’s base country, it was the Swiss government itself that appealed the ruling. Switzerland has been in touch competition with other countries, like Singapore, as a destination not of reserves but for international deposits. On the one side, if justified motives could be found the restrictions could be made flexible and, as such, lift bank secrecy on accounts. But, on the other hand, it doesn’t want to lose the status of being a safe headquarters for the international financial world. Not even for the marginal actors for their holdings, but very active in lobbying in the Congress of the United States, like the vulture funds that traffick in debt of countries on the periphery.

When the attachment was lifted, NML and EM appealed. But it was not successful in the appeal to the Federal Court of Lausanne, equivalent to the Supreme Court of the Helvetic Confederation. Insistent, the attorneys for the vultures wanted by administrative recourse that the Foreign Ministry of Switzerland put pressure on the BRI. The Foreign Ministry didn’t accept the request. Faced with the request to revoke the measure, the Foreign Ministry continued rejecting it.

Then the vultures arrived at the Federal Administrative Court of Switzerland. They obtained the same result: a refusal. The court told them that the issue is incumbent on the Federal Council, which is to say the Swiss executive branch. The argument of the attorney appointed was that there as an abuse of immunity and the privileges that both elements constituted a violation of the base agreement between the BRI and Switzerland.

NML and EM appealed to Lausanne. The Supreme Court confirmed the decision and remitted the accusations to the Federal Council, which yesterday made the definitive resolution and publicly announced it. An exchange of documentation between the Federal Administrative Court and the Supreme Court arrived to a synthesis according to which the vulture funds in reality was putting forth a demand that had to do with diplomatic protection. If that was so, the jurisdiction to settle the protections would be those who handle foreign relations, as was the rationale. As in this case of international law, in the opinion of the Swiss judicial organs, it didn’t give it the right to substantiate a law suit, so it then excluded the path of the Federal Administrative Court. If international law doesn’t confer the right to substantiate a lawsuit, nothing is superior, says the text, on decisions related to “interior and exterior security of the country, its neutrality, diplomatic protection and other affairs that have to do with foreign relations.” The last point will have to be interpreted as issues of “a preponderant political character” to “defend the essential interests of the country both towards the interior as well as the exterior.” The same acceptance of an international organization, to grant the status of headquarters by agreement, falls to Swiss foreign policy.

NML Capital Ltd. is headquartered at 75 Fort Street, George Town, Cayman Islands. A tax haven. EM Limited is located at 45 Market Street, Office 3211, Carmana Bay, also in the Caymans. The two vulture funds acted jointed claiming debts that in their judgment were collectable by sentences from a court in New York in 2003 and 2006 for US$284 million dollars in favor of a fund and for US$724 million in favor of another and were represented by the law firm of Jean-Cédric Michel, headquartered at number 6, Rue François Bellot in Geneva, Switzerland.

Now the law firm will have to pay the costs.