Banks are worried about the ruling for the holdouts in the U.S.
Thursday, July 25, 2013
By Martin Kanenguiser
The case between Argentina and the holdouts in the courts of New York has become so worrying for the banks that some 20 executives agreed to cut their winter vacations short with the goal of meeting yesterday, to express their concern over the negative ruling that they fear.
Regarding that, they said that if the appellate court ruling upholds the payment of 100% for the plaintiffs, but over an extended period of time (versus the cash payment that Judge Thomas Griesa demanded), the government “should comply” to solve this conflictive judicial front.
At a roundtable discussion at which there were representatives from national and foreign banks in the country, they discussed all of the possible scenarios in this case that Argentina has already lost at two judicial levels and that the government, for the underlying pari passu question, appealed to the U.S. Supreme Court.
The representatives of financial entities, meeting by the initiative of the law firm of Cabanellas, Etchebarne, Kelly, talked with Marco Schnabl, the well-known attorney born in Argentina but for three decades has practiced in New York. The best possible scenario, they concluded, is that the appellate court upholds its ruling contrary to the government of October 26, but that it maintains the stay until the Supreme Court of that country decides if it accepts the case or not. “There are no legal bases to maintain the stay, but the appellate court doesn’t want to be responsible for issuing such a strong ruling if it is before the court says whether it will accept analyzing the case,” said an attorney.
Around the timing of the case, they admitted that it is difficult to know when the Court of Appeals will rule about the amount and manner of payment to the plaintiffs.
They also mentioned the complications for which the place of payment can be changed for the bondholders that entered the swaps of 2005 and 2010 if the Bank of New York cannot send the government’s payments from Buenos Aires.
Another point of complication, it was admitted, are the statements from the attorney that is defending the country, Jonathan Blackman – from the firm of Cleary, Gottlieb, Steen & Hamilton-, and Ambassador Cecilia Nahon in Washington, who said days ago that the government might not comply with the ruling if it is very negative.
Despite that all observers are hanging on the words of the government of the United States and the International Monetary Fund (IMF) in this case, Schabl explained to them that one must relativize the relevance of those opinions in legal terms. In particular, the expert stated that in three lawsuits related to compensation to the victims of the Holocaust, the federal courts requested Washington’s opinion, but then rule against its judgment.
On the period of time for the United States to be able to file its brief, attorney Marcelo Etchebarne, partner of the firm that organized the meeting, clarified that Washington “has until August 16, 10 days before the deadline that the plaintiffs have to file an amicus brief and does not have to send advance notice.” In turn, tomorrow is the deadline for filings from both parties.
On the ups and downs from the IMF in this case, attorneys and economists also said that they agreed in telling LA NACION that, while on the legal level its abstention is not relevant, on the political side it reflects the bad climate towards Argentina.
· Etchebarne: "It is not a very relevant change; it’s better to have it than to not have it, but more important is whether that brief added arguments or not.”
· Eugenio Bruno: "A request from the IMF without the support of the United States wouldn’t have had much effect in the case, because the Supreme Court is intereste in the effect on the interests of the federal government.”
· Daniel Marx: "An IMF brief would have had a marginal effect, but the fact that it is not doing it despite the announcements could create doubts about the reasons for the change.”
· Miguel Kiguel: "For the court, it is much more important that Treasury give its opinion rather than the IMF.”
· Andrés Azicri (Elypsis): "It’s a bad political signal, which reflects the internal pressure to abstain from helping on the Argentine case. From the legal standpoint it is neutral, as the court already proved in other cases to be impermeable to political pressure.”
· Rodrigo Álvarez: "What is being speculated as being good news ended up playing against it in the market. As it happens, what is in play is bigger than the two parties.”
The milestones of the case
The case that is unfolding for the government of Cristina Kirchner and the financial system
· In 2012, first Judge Thomas Griesa and then the Federal Appellate Court of New York ruled in favor of a group of holdouts in a case for US$1.333 billion
· Last November, the Court reintroduces the stay after Griesa ordered the government to pay in cash
· Last month, Argentina filed an appeal before the Supreme Court of the United States about the underlying question (violation of pari passu). It could be decided in October.
The country, without political support in Washington
The Department of the Treasury and the IMF insist that “it is not the time” to intervene
Thursday, July 25, 2013
by Silvia Pisani | LA NACION
WASHINGTON.- The decision to not advocate in Argentina’s favor by the International Monetary Fund (IMF) and the American government, confirmed yesterday once again by both actors, exposed the country to an uncomfortable political loneliness in its lawsuit with the “vulture funds.”
"We understand the concerns (…) put this is not the time to file” a brief in favor of Argentina, insisted the Treasury Department yesterday through a spokesman. He also revealed that any eventual future involvement – the theory that the government has expectations around – is still not decided. “The United States will continue considering if it participates, and when, in this litigation,” said the spokesman. “This includes a possible opportunity to express points of view if it is called on to do so,” he added.
The new scenario leaves Argentina in an evident spot of political loneliness when only 24 hours are left on the first deadline for filing “friendly” recourses (amicus curiae) before the Supreme Court, according to what sources familiar with the process said to LA NACION.
But while the chances of reaching that court are diminishing, the battle is not lost. “What is left to know is if the Court will decide to ask the opinion of the Fund and the United States government. In that case, they would speak, but, by responding to a request it will not have the political cost of doing it in a spontaneous way,” explained one of them.
Meanwhile, at the same time, a ruling is awaited rom the Court of Appeals in New York to about the ruling – for now suspended – by which Judge Thomas Griesa ordered Argentina to pay US$1.3 billion to the funds NML Capital and Aurelius Management, the main promoters of the lawsuit that has the country in checkmate.
"It’s a process where many issues are unprecedented,” said Jeremiah Pam to LA NACION of the Columbia University Law School. Among them, the uncomfortable position in which not only the Argentine government finds itself, but also the IMF, exposed to an abrupt turn from an initial announcement to file a recourse before the court, to finally not do so.
"It’s that it could not be exposed to a litigation between two of its members and lose the neutrality that it is obliged to have,” said to LA NACION a spokesman for the entity, who admitted also that an amicus curiae “would not be effective” without Washington’s endorsement. The IMF reiterated, however, that it “remains deeply concerned over the implications” that a ruling could have that has an impact on future debt restructurings.
All that was evaluated by the American representation before the organization, that, even so, abstained from joining the proposal.
“Lagarde should not let herself be influenced by the United States,” says an IMF director”
Thursday, July 25, 2013
Brazil’s director before the IMF, Paulo Nogueira Batista, expressed his “surprise” over the decision by Christine Lagarde to withdraw her recommendation to back Argentina’s position before the U.S. Supreme Court and thought that “she should not be influenced in her decisions by the single position of the U.S., as it is a multilateral organization.”
During a telephone interview with Telam, Nogueira Batista, that with its seat represents 10 member countries of the IMF, argued that “the IMF damages its reputation if it allows itself to be influenced by a single position, of the United States, as it is a multilateral organization.”
The Brazilian referred to the words that were heard yesterday from the IMF spokesman, who argued that “the general director of the IMF (Christine Lagarde) has withdrawn her recommendation that the Executive Board of the IMF send an amicus curiae in the case of Argentina, following the decision by authorities of the United States to not support the filing at this stage.”
For the Brazilian, “the Fund should have submitted the document, which Lagarde planned to file before the Supreme Court, for a formal discussion, an initiative that she herself admitted to at the last summit of ministers of the G-20 held in Moscow on the weekend.”
Thus, he showed his surprised over the rudder change of the United States, that “has been worked on in the organization’s headquarters, writing up a document to send to the Supreme Court.”
“Yesterday, there was an informal meeting,” the Fund director acknowledged, “that was proposed at the last minute, and then we found out about the change of position by the U.S. inside the IMF,” he revealed.
"The United States was not going to file a brief to the Supreme Court on its own initiative (according to what was known publicly last week) but encouraged a discussion here,” he added.
Overall, Nogueira Batista pulled out Lagarde’s words, who was precise in saying that “at this stage” she will not move forward with this issue, which in the judgment of the Brazilian means that there will subsequent instances, where the IMF and the United States will express their position.
The chance remains that the Supreme Court itself will ask the U.S. for its opinion, if it finds it necessary.
“The position of the government of the United States about the damage that the vulture funds are doing is public,” recalled Nogueira Batista, in an allusion to the filings that the government of Barack Obama made in the first and second judicial instances in New York.
Nogueira Batista recalled also the discussion that took place last May on the board, about a document prepared by Lagarde’s team, which told of the dangers that the world financial community faces if a ruling prevails like the one from Judge Thomas Griesa, in favor of the vulture funds, and the threat for future debt restructurings.
[Note: This Telam wire story was also published in Ambito Financiero.]
For the U.S. it is not the time to support the country in the lawsuit for the debt
So said to Clarin a spokesman at Treasury. It is in the fight with the vultures before the American Supreme Court.
Thursday, July 25, 2013
by Ana Baron
Washington Correspondent. The U.S. Treasury explained yesterday that its government decided to block the support of the IMF for Argentina for the Supreme Court to accept reviewing the case of the vulture funds, as it now believes it is not a good time to do so. Thus, Treasury left the door open for both the fund as well as the United States itself to involve themselves later on.
“The litigation still continues in the Court of Appeals. Also, Argentina has asked that the Supreme Court review the ruling of the lower court. And, at this stage, the high court still has not accepted the case to review its merits. We don’t think the IMF has to send a brief at this time,” said a Treasury spokesman to Clarin. “We understand that the Fund has serious concerns about the impact that the ruling could have,” argued the spokesman making it clear that if the Supreme Court accepts the case, the appropriate time for the IMF to get involved would be during the review of its merits.
The United States, however, could get involved before. “The U.S. continues to consider if it will intervene and when,” said the spokesman signaling that one of the times could be if the Supreme Court asks for its opinion about whether the court should accept the case. In fact, in April, the U.S. government gave its opinion before the Supreme Court about a related lawsuit: the vulture funds asked the court to have the Argentine government say where it has assets abroad.
The United States could also intervene if when the ruling of the Court of Appeals comes out, and if it is negative for the country, Argentina again turns to the Supreme Court. The saga will continue.
There isn’t an explanation, however, about why the United States first supported and encourages the amicus curiae of the IMF, and then decided it was not a good time to do so. “The U.S. was not going to file a brief on its own initiative before the Supreme Court, but encouraged a discussion here,” said Brazilian director to the IMF, Paulo Nogueria Batista, to Telam, expressing his disagreement with the manner that the United States obliged Christine Lagarde, IMF director, to withdraw her recommendation to send a brief without consulting the other countries.
Yesterday, two rumors circulated in Washington. One, the more political, is that the United States was permeable to the pressure of the vultures and decided not to intervene in the case if the court doesn’t ask it to.
The other, with more legal grounds, is that the Solicitor General (the U.S. representative before the Supreme Court) blocked Treasury officials inclined to intervene by saying, among other things, why it is better to not voluntarily present arguments that the Supreme Court would not accept and in that manner it would lose credibility.