Ambito Financiero: “How Griesa will apply the formula for payment” Ambito Financiero: “Government arrives in Hamburg today on the frigate”

Ambito Financiero: “How Griesa will apply the formula for payment”

Ambito Financiero: “Government arrives in Hamburg today on the frigate”

Ambito Financiero

“How Griesa will apply the formula for payment”

 

Thursday, October 31, 2012

 

By  Eugenio A. Bruno, Attorney

 

After the ratification by the Court of Appeals covering the case of Argentina’s bonds in default from Judge Thomas Griesa, who ordered Argentina to pay on bonds that didn’t enter the swap together with those that did, now two key aspects have appeared: how will Greisa’s order be practically applied, and what the government will do, after having said that it will not make payments to the “vulture funds”.

 

Griesa has to resolve how much money the holders of bonds that didn’t enter the swap (holdouts) will have the right to receive when Argentina makes payment in favor of the holders that did enter that operation (hold-ins).  Those that didn’t suffer haircuts already rejected the swaps (and haven’t received payments since the default) while the second group have been receiving payments since the swaps (2005 and 2010) but from bonds that suffered haircuts.

 

In this sense, Griesa could decide that the holdouts collect: (1) all of the payments under the old bonds (which is to say without haircuts); (ii) equal to the hold-ins (which is to say with the same haircuts), (iii) to account for their remittances (less than 100% of what they should collect, but without acknowledging haircuts) or other alternatives.

 

Since the previous decision from Griesa ratified by the Court of Appeals there exists a new situation, but according to the resolution that Griesa must now take, the repercussions will be significant both for the holdouts as well as the hold-ins.  

 

With that the position will appear that the Argentina government will take in the sense of if it will decide to pay out larger payments that are to be made in virtue of the sentences, or if it will not, paying the amount exclusively corresponding to the bonds from the swap (in whose case it would lack money).  Of course the decision is not decisive and there is still the appeal to the U.S. Supreme Court.  But that appeal could be denied (in such case the previous court’s decision would be final) or granted, but with the order that Griesa’s decision be complied with while it is being considered.

 

Thus, both the so-called ‘lock law’ as well as the terms and conditions of the swap bonds impede the government from paying the holdouts the hold-in sums at least that the larger sums are extended to the holders that entered the swaps, which would be very grave for the fiscal situation.  

 

In relation to the posture of the government, and keeping it the same (all would indicate it will), Argentina will have to seek other payment channels to avoid attachments on payments to the hold-ins, and in this sense the current terms and conditions are being applied with who is being called the payment agent, in this case the Bank of New York, and the form of payment.  Basically, the hold-ins have to collect as set forth in the bonds.  Any other mechanism will have to be done with their consent (by a 75% majority of capital of each series of bond issued).  These mechanisms could include a payment into accounts in Argentina for example.  Argentina could eventually pay directly in the country without said consent, which could mean entering into an event of a technical non-compliance or even payment.  Lastly, Argentina could decide not to pay until it has a firm ruling from the U.S. Supreme Court, which would be considered a non-compliance of payment event, or even consider a possibility of making payment on an eventual reserve account until said sentence, but which political aspects will need to be applied by the government.  Regarding the legal aspect, many of these points are interpretive, which could change, as has been seen many times in these years since the 2001 default, and for that it’s very difficult to venture on possible results.  

 

 

Ambito Financiero

“Government arrives in Hamburg today on the frigate”

 

It is seeking to have the issue taken up by the Maritime Tribunal

 

Thursday, October 31, 2012

 

By Carlos Burgueño

 

Argentina in the coming hours will take the most important step toward bringing the case of the Frigate Libertad before the international courts.  By recommendation of the internal Argentine diplomatic structures and the officials from the United Nations (UN), they will try to get the detention of the ship taken up by the Law of the Sea Tribunal in Hamburg.  It will be in this arena where Argentina will finally bring Ghana to have it release the frigate.  For this, Susana Ruiz Cerruti, legal counsel of the Foreign Ministry, will arrive in the coming hours to that German port, headquarters of this court; she was charged, between 2006 and 2010, of litigating against Uruguay in the International Court of The Hague in the Botnia case.  

 

The decision to go to the offices of the Law of the Sea in Hamburg was taken by Cristina de Kirchner on Tuesday, after receiving information from the UN about the impossibility of making progress in a solution to the conflict.

 

Argentina could turn to the tribunal in Hamburg, and oblige Ghana to speed up the internal timetables and sit down and negotiate in that Court.  After the two countries would commit to accept the outcome of the mediation.  If Ghana doesn’t accept sitting down to negotiate, Argentina doesn’t rule out breaking off relations.  The Hamburg court will attempt a long-term process, which could take up to a year.

 

What would be applied in Hamburg would be the eventual violation of the UN Convention on the Law of the Seas, considered the constitution of the sea.  This treaty was approved on April 30, 1982 in New York and signed by the states in December of that year in Montego Bay, Jamaica.

 

The treaty was certified both by Argentina and Ghana.  The application organ is the International Tribunal in Hamburg where Argentina could appeal to two particular tribunals: the Hall of Disputes or the Hall of Summary Procedures.  In the first, there are the votes of 21 members, and Argentina’s intention is to have it rule on the release of the ship, applying Article 292 of the convention, where it speaks of the “release of ships and their crews”.

 

According to that article, war ships and other ships of state destined to non-commercial ends are protected by sovereign immunity and, in consequence, are free of requisitions and attachments.  Argentina also is studying going to the Hall of Summary Procedures.  In this case, it will seek that this court determine that the detention of the frigate violates human rights and visible manner of navigation, with which it would merit summary judgment (of extreme speed) for its release.  Before any filing before the Hamburg court, the government will have to make its proposal to the United Nations, the procedure that Timerman will make today in the headquarters of the organization in New York.

 

From Argentina data is accumulating to support eventual judicial filings against Ghana to bolster the request for release of the ship.  Yesterday, Economy Minister Hernan Lorenzino asked for some of Judge Thomas Griesa’s rulings over the battles with Elliott.  It was being considered that two decisions could be useful, where requests to attach Argentina’s assets were rejected.

 

Argentina also has on the table the last decision from the Swiss courts, where the Central Bank’s funds deposited in the Bank of Basel were found to not be attachable.

 

The Libertad is stranded in the port since October 2, after Frimpong decided to side with the rights of Singer’s Elliot fund over a claim to collect some US$370 million.   According to the Argentine position, the detention of the frigate constitutes a violation of the Vienna Convention, where military ships are protected by diplomatic immunity, which was not taking into account, obviously, by Frimong.