No Argentine settlement yet. Some light reading while you wait?

No Argentine settlement yet. Some light reading while you wait?

posted by Mark Weidemaier

Despite rumblings of an inter-creditor settlement in which exchange bondholders would pay NML to go away (details here; registration required), no end is yet in sight in theNML v. Argentina saga. On Friday, the Second Circuit denied NML's request to lift the stay. That means there's little to do on the legal front right now except wait for the (puzzlingly delayed) decision on the petitions for en banc review. Assuming the petitions are denied, that will start the clock for the next round of certiorari petitions.

In the interim, Anna Gelpern and I haveposted an article with the catchy title,Injunctions in Sovereign DebtLitigation. The subject is... er, perhaps you can figure it out. It represents our very best effort to explain our reservations about the NML injunction - and injunctions against foreign sovereigns in general - while using the word passu as little as humanly possible. Here's the abstract:

Injunctions against foreign sovereigns have come under criticism on comity and enforcement grounds. We argue that these objections are overstated. Comity considerations are important but not dispositive. Enforcement objections assign too much significance to the court's inability to impose meaningful contempt sanctions, overlooking the fact that, when a foreign sovereign is involved, both money judgments and injunctions are enforced through what amounts to a court-imposed embargo. This embargo discourages third parties from dealing with the sovereign and, if sufficiently costly, can induce the sovereign to comply. Nevertheless, we are skeptical about injunctions in sovereign debt litigation. They are prone to dramatic spillover effects precisely because they cannot reach their primary target, the sovereign government. Recent decisions in NML v. Argentina illustrate the way in which a court's inability to compel compliance by the sovereign may lead it to impose dramatic and unwarranted costs on third parties, turning traditional equitable analysis on its head.

Piggy bank photo courtesy of Shutterstock.