New stumble in the U.S. over the debt
The Court will not take up Argentina’s appeal “for now”; another chance remains
Tuesday, October 08, 2013
By Silvia Pisani
WASHINGTON. – Just because it was expected doesn’t mean it wasn’t a setback. The United States Supreme Court decided yesterday "for now" not to take the Argentine appeal against the two rulings that favored the so-called vulture funds.
"It is bad news for the Argentina," said local attorneys consulted by LA NACION. "The good thing is that, at the moment, remains the stay on the rulings is being maintained," they agreed. This way there are no immediate operational consequences, and no one expects them for the next few months, except that the Argentine government gave signals of wanting to evade justice, local lawyers added.
There were no major reactions in Buenos Aires. Only Finance Secretary Adrián Cosentino issued a statement in which he ratified the decision to "continue exercising the right to defense" in the American courts.
That means that the law firm representing the country, Cleary, Gottlieb, Steen & Hamilton, must wait for another procedural chance to open to file a second petition for review to the High Court.
That will possibly take place in the first months of next year. It will be the last and final chance. "It is unclear what will happen when that comes. But I think that it is very difficult to see the Court accepting it," said Henry Weisburg, of Sherman & Sterling, one of the firms that have been following the case, to LA NACION. "The chances are really low," he added. "It wouldn't surprise me too much if this new petition is also rejected,” said Richard Samp of the Washington Legal Foundation, in agreement.
In line with what LA NACION had reported, the decision yesterday confirmed the decision by Justice Sonia Sotomayor to voluntarily “recuse herself” from the case. That complicates the situation of the Argentine defense, since it reduces the number of justices from nine to eight, from which four are needed to have the case taken up.
In local circles, the view yesterday implies one less recourse left for Argentina in its defense against the claim filed by the hedge funds NML Management and Aurelius Capital, together with a group of private investors. If the alternatives by way of appeal continue to run out, the possible options that remain for the country would be only three. The most reasonable - say local sources - would be to attempt a negotiation with the litigating funds, an option that, at times, seems to be gaining momentum in government circles.
In fact, in a statement quoted by the British newspaper Financial Times, a representative of Elliot said: "We are ready to engage in a discussion, and we believe that we can reach a solution. But we need a partner on the other side of the table."
Another of the options that the government is analyzing is the one of opening a track separate and distinct from payment of debt. In this way, it would seek to comply with the bondholders who did agreed to swap their bonds, without the resources for these payments being subject to attachment by the US courts for them to be given to the “vultures.” them the "vultures". But the recourse has not only been shown to be difficult to comply with, but it could also pose a “certain threat” to dynamite the stay that now reigns over the adverse rulings.
"There are two reasons for the stay to be lifted. One is if the Court of Appeals of New York sees that Argentina is entering into maneuvers to evade its orders,” Weisburg said. The attempt to procure a different payment mechanism would be one of those possibilities.
The other would be that the case is taking too long a time. But, in either of the two alternatives, what there should be is an express request by the plaintiffs for that stay to be lifted. "I don't see any risk of that request being put into course in the near future. I don’t see, for now, danger for the stay remaining in place, unless Argentina starts maneuvering that open up the possibility that the plaintiffs ask for it," Samp agreed.
Along with the appeal before the Supreme Court, the eventual negotiation with the plaintiffs and the risky search for alternative payment mechanisms, the other path remaining is to default. But its consequences would be enormous.
Holdouts: the U.S. Supreme Court rejects the case, but the stay remains in place
Tuesday, October 08, 2013
The United States Supreme Court yesterday denied the possibility of listening to Argentina in this instance of the lawsuit against the vulture fund NML Capital, and further restricted the country’s chances, although the stay which is preserving the renegotiated debt payments remains in place and the government will not have to pay out, for the moment, the US$1.5 billion which the U.S. court is ordering it to pay.
In three short lines and without providing further explanations, the Court reported yesterday morning: "The petition for certiorari (appeal) is denied, with the abstention of Justice Sonia Sotomayor.”
However, the Court did not lift the stay that, for the moment, means the country will not have to pay out in a single payment, and before continuing with renegotiated debt commitments, the US$1.5 billion sentence, including principal and interest. If not, the U.S. courts will attach the renegotiated debt payments.
Finance Secretary Adrián Cosentino said in a statement that the Court's decision "does not modify the status of the “stay” set by the panel of the Second District of New York.”
The Court refused to interfere in the first part of the process, in which the country rejected the interpretation of "pari passu" or equal treatment argued by the holdouts and upheld by the courts.
Later on, it will have to return to the case, when the second Argentine appeal will be filed, which was on the order to pay 100% of the sentence (and not, for example, a haircut similar to the one in the swaps) and the mode of payment (all cash). So ruled Judge Thomas Griesa and the Court of Appeals upheld it on August 23. Argentina appealed the sentence "en banc" to the plenary of thirteen judges, and then will do the same before the Supreme Court.
According to official sources, the stay will remain in place during the whole process, until the Supreme Court definitively decides if it will take the case or refuse to. That, officials understand, is unfolding from the ruling of the Court of Appeals in August. And it would give a margin of months for the government to continue with payments on normalized debt without interference.
The most optimistic officials think it will take a year until the court is finished definitively settling the issue, in a ruling that experts are beginning to assume will be against the country. "As we have stated on several occasions, Argentina will continue exerting its defense within the framework of the legal process with all available judicial recourses", Cosentino said, who yesterday traveled to Washington to participate in the annual meeting of the IMF and met with lawyers from Cleary Gottlieb, representing the country.
For the vulture funds, however, the stay is in force until the Court of Appeals lifts it. Up to last night they had not said if they will ask the Court of Appeals to lift the stay. "Argentina has asked the Supreme Court to 'hold' its petition for appeal until the second request can be taken up. In turn, the Court denied the request in its entirety,” said American Task Force Argentina (ATFA), the holdouts lobby group.
So far, the administration of Barack Obama has not asked the Supreme Court to take the case. It had participated, as an amicus curiae of Argentina, in the previous round, in which the country lost.
Last week, Judge Griesa ruled against the intention of Argentina to transfer payment jurisdiction from U.S. jurisdiction to Buenos Aires, something that the government plans to do if the battle is definitively lost in the Supreme Court.
One less possibility for the country
Justice Sotomayor recuses herself in yesterday’s decision
Tuesday, October 08, 2013
WASHINGTON (From our correspondent).- One of the most interesting facts in the ruling yesterday was the decision by Justice Sonia Sotomayor to "recuse herself" from participating, a gesture which was included in the brief reference to our country made by the Court when it announced that "for the moment" it is not taking the Argentine case.
The conjecture is that this attitude will be repeated in a new appeal by Argentina, which adds a new difficulty for the government in obtaining the four votes needed for the case to be accepted by the Court. If before it had nine chances to harvest them, now it only has eight.
"It is not that it is absolutely crucial, but it's a complication in an already difficult scenario," said Craig Levy, academic from the University of Chicago who is following the issue, to LA NACION.
It is a reduction of possibilities. It is not that the decision to take the case or not is adopted by a majority of nine. Only four votes are needed. But now they seem very difficult to get.
An additional complication that reduces a scenario composed of five justices appointed under Republican rule: Antonin Scalia and Anthony Kennedy (named by Ronald Reagan), Clarence Thomas and Ruth Bader Ginsburg (by George Bush) and Samuel Alito, George W. Bush.
Then there is Stephen Breyer (named by Bill Clinton) and Sonia Sotomayor and Elena Kagan (named by the current administration Barack Obama).
Without minimizing the impact of Sotomayor’s disqualification, for Weisburg, the main difficulty that Argentina faces in the Supreme Court is the very nature of the case. "It is not a case involving the violation of a federal law. And that is what is absolutely definitive for a justice to decide if the case should be taken or not," he said.
Every year the Supreme Court receives no less than 4000 appeal petitions. But only a handful are accepted.
"For every party involved they are seen as very important cases, where fundamental rights are in play. No one denies how important this is for Argentina. But that does not mean that the Court should take it, because that is not the nature that defines their decisions," the lawyer from Sherman & Sterling added.
Doubts about the continuation of the stay
Tuesday, October 08, 2013
by Martín Kanenguiser | LA NACION
The Economy Ministry quickly clarified yesterday that the decision of the U.S. Supreme Court issued yesterday does not put at risk the stay on the execution of the decision that orders the country to pay US$1.333 billion to the holdouts.
In a statement, Finance Secretary Adrián Cosentino said that the attitude of the Court "does not modify the status of the “stay”, set by the panel of the Second District of New York,” and recalled that the appeals court "also has pending in analysis the appeal to the plenary of judges (en banc).” On the team of Minister Hernán Lorenzino - who plans to travel tonight to Washington to take part tomorrow in a meeting of Ministers of the IADB and, starting on Thursday, the annual meeting of the IMF and the World Bank--said that yesterday's decision was predictable. If the Court of Appeals rejects the petition for plenary review of the ruling from last October, which is expected given previous rulings, Argentina would have another 90 days to appeal once again to the U.S. Supreme Court, which would carry the status of the case, in principle, to April 2014, without modifications.
In this regard, attorneys Marco Schnabl, Eugenio Bruno and Marcelo Etchebarne told LA NACION that, although a priori the stay is remaining in place, surely the Bank of New York (the country’s paying agent) will ask the U.S. courts if the restructured bondholders can be paid in December in New York without problems.
"The Court showed that it is not necessarily interested in the case; meanwhile, the only thing that still stands is the stay on the rulings from the appeals court, until the appeals run out before the Supreme Court. Anyway, it wouldn’t surprise me if Bank of New York asks about this issue and they answer yes," Schnabl argued from New York.
While for Schnabl, from the law firm of Skadden, Arps, Slate, Meagher & Flom LLP, the ruling yesterday was totally predictable, Eugenio Bruno, of the Garrido firm, said that "the refusal was stronger than expected.” In this regard, he said that he hoped that the Court "would not rule on the case, waiting for the upcoming appeal by the government to come together on the payment of 100 per cent and attachments on the Bank of New York.”
Therefore, he felt that "now one has to elucidate if the stay on the appeals court’s ruling of August 23 of this year is in force or if it ceased to have effect.”
Also Marcelo Etchebarne, of the firm of Cabanellas, Etchebarne, Kelly & Dell Oro Maini, said that the tone of the Supreme Court "was worse than expected, because they could have said nothing." He then warned: "I'm not so sure that the stay is in effect.” In line with Schnabl, he said that the BoNY will surely ask before it makes the next payments in New York.
Etchebarne estimated that in three weeks, the Court of Appeals decision will be known said that the decision from the Appeals court will be known and that in June 2014 the process will end, surely with the confirmation of an adverse ruling. The only exception, he said, is if the Argentina gets closer to the United States with a rapid agreement about American companies that won two cases in the ICSID (and have not collected) to get that the Obama administration to ask the Supreme Court to weigh in on this issue. In that case, he added, there is more chance of the Supreme Court analyzing the case, a chance that for Schnabl, is negligible.