Application of the Injunction to Third Parties

Application of the Injunction to Third Parties
A critical issue remanded to Judge Griesa by the Second Circuit was the extent to which the Injunctions apply to third
parties. “To avoid” payment by Argentina on the Exchange Bonds without payment to plaintiffs, rendering the Injunctions
“entirely for naught,” Judge Griesa explained that it is “necessary that the process for making payments on the Exchange
Bonds be covered by the Injunctions, and that the parties participating in that process be so covered.”  Although “the
indenture trustee, the registered owners, and the clearing system . . . are . . . probably not all agents of Argentina, . . . they
surely are ‘in active concert or participation’ with Argentina in processing the payments from Argentina to the exchange
bondholders” and thus, according to Judge Griesa, within the proper scope of an injunction under Federal Rule of Civil
Procedure 65(d).
In response to the Circuit Court’s concern that an injunction against certain intermediary banks would violate UCC
Article 4A, Judge Griesa observed that “[p]laintiffs are also not requesting that the financial institutions receiving funds
from the DTC be bound by the Injunctions” and carved “such intermediary banks” out of the Injunctions. With that
carve-out, Judge Griesa concluded that “plaintiffs have requested that a reasonable set of parties be bound by the
Injunctions, and this is in compliance with Rule 65(d).”
The most significant third party that plaintiffs sought to enjoin is The Bank of New York, which acts as the Paying Agent on
the Exchange Bonds, and is a fiduciary for the Exchange Bond holders. BNY objected to the application of the Injunctions
against it on the ground that its duties as indenture trustee “should be the beginning and the end of its responsibilities.”
Judge Griesa rejected BNY’s arguments, saying that they “miss the point”:
If Argentina complies with the rulings of the Court of Appeals, there will be no problem about funds destined for
exchange bondholders being deposited with BNY and going up the chain until they arrive in the hands of such
bondholders. But if Argentina attempts to make payments to the exchange bondholders, contrary to the ruling of
the Court of Appeals and thus contrary to law, this would not involve the normal and proper situation dealt with by
BNY under the indenture, and dealt with by others in the chain. Under these circumstances, these third parties
should properly be held responsible for making sure that their actions are not steps to carry out a law violation,
and they should avoid taking such steps.

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November 23, 2012
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Don’t Cry for Me Argentine Bondholders: Judge Griesa Gives
Plaintiffs TOTAL Victory
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Late on Wednesday, November 21, District Judge Griesa issued orders resolving the
issues remanded to him by the Second Circuit in the Circuit Court’s decision of
October 26. (Judge Griesa’s orders are all available on our Argentine Sovereign
Debt webpage (www.shearman.com/argentine-sovereign-debt/).) In what appears
to be a total victory for the plaintiffs in NML Capital., Ltd., v. Republic of Argentina,
Judge Griesa ruled: