Argentina to invoke immunity act
IFR 1976 23 March to 29 March 2013 | By Christopher Spink
Argentina remains convinced that US courts cannot ultimately compel it to pay bondholders that did not accept previous offers to exchange their instruments for new bonds with reduced economic value in 2005 and 2010.
The sovereign has until the end of this week to tell the Appeals Court for the Second Circuit of New York “any alternative payment formula and schedule” for repaying US$1.3bn of debt owed to NML, an associate of hedge fund Elliott Advisors.
A judgment in the District Court that Argentina must compensate NML has already been upheld but the Appeals Court has yet to decide whether a formula outlined by the lower court, whereby Argentina must pay all its debt to NML when next paying exchange bondholders, should be followed.
A lawyer close to Argentina said the sovereign “would not make a proposal to make the payment in full” but instead propose giving NML “equal treatment to those who participated in the 2005 and 2010 exchanges”. This could only be done by revising Argentina’s domestic “Lock Law” that prevented holdouts from those exchanges being paid.
“The Foreign Sovereign Immunities Act grants sovereigns immunity from execution of these payment decisions”
Argentina is also seeking a rehearing of the full Appeals Court “en banc” – in which all appeal court judges sit rather than just the three judges that decided to uphold the District Court ruling.
Immunity claim
However, the lawyer said the sovereign had separate hopes of securing a Supreme Court hearing focused on whether forcing Argentina to pay holdouts was in breach of the Foreign Sovereign Immunities Act.
This aspect has generally been ignored by lower courts so far. However, the US Government itself has supported Argentina’s case and is seen to be unwilling to allow assets of other sovereigns to be seized in the US, whatever the decision of some courts following other aspects of the law.
“The Foreign Sovereign Immunities Act grants sovereigns immunity from execution of these payment decisions,” said the lawyer. “This is an independent argument.”
In July 2011 the Appeals Court cited the Act when ruling that NML could not claim US$100m of Argentina’s central bank assets held at the New York Federal Reserve.
However, another lawyer said that by answering NML’s claims in lower courts Argentina might have waived its immunity under the Act.
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