The U.S. Supreme Court orders the country to pay US$185 million to British Gas
The company sued over the pesification and freezing of rates
Thursday, March 6, 2014
Por Silvia Pisani | LA NACION
WASHINGTON.- Argentina yesterday lost one of the three cases on the overdue debt which have been filed before the U.S. Supreme Court, and was ordered to pay US$185 million to British Gas. As soon as the decision was known, which was reached by a 7-2 decision among the justices, local legal and diplomatic circles agreed in categorizing what happened as a "very bad sign" for the country, which is facing decisions that, should they be unfavorable, could carry it to "a new default.”
Eyes were on two peculiarities of the ruling yesterday. First, what would the Argentine reaction be, whether it will abide by the ruling or not. At the close of this edition, there was no concrete signal from the government in Buenos Aires. On condition of anonymity, one of the experts following the case did not hesitate to qualify it as little more than "suicide" if there were any gesture that intimated an intention to defy the ruling. "Argentina is trying to get a favorable position from the Supreme Court in the case of the debt in default in the hands of the holdouts. The worst thing that it could do is defy a ruling simply because it finds it indigestible,” the source said.
In diplomatic circles, the reaction was similar. "If Argentina is trying to normalize its relationship with creditors and the financial world, it would not be advisable to ignore a ruling that orders it to pay a creditor,” LA NACION heard.
Another peculiarity that was noted in the ruling was the fact that the verdict included a decision by the justices to "ignore" a document from the U.S. government which advised that course. The decision to appeal to the Supreme Court was not Argentina’s, but from British Gas. The company knocked on the door of the Court once a Court of Appeals in this city ruled against the company. When British Gas decided to bring the case before the Court, the United States Government produced an amicus curiae brief which came out against granting review and in favor of upholding the ruling that benefited the country.
However, as explained to LA NACION, the Court not only ignored the government's position but it ruled against the country.
"It is a fact that should be taken into account," said one of lawyers consulted, recalling the "expectation" that the government of Cristina Kirchner has around an eventual brief from the administration of Barack Obama in support of her position in the battle with the so-called "vulture funds".
The decision is the consequence of the favorable decision that British Gas obtained before the Court of the UNCITAR, which resolves trade disputes and which operates within the framework of the United Nations, a sort of parallel entity to the ICSID, at the World Bank. The case was a complaint arising from the freezing of rates after the pesification conducted after the 2001 crisis.
British Gas obtained a favorable judgment in 2007. Argentina petitioned for a review and appeals court ruled in its favor. It was then British Gas who appealed to the Supreme Court.
Argentine petition before the court
Argentina asked the U.S. Supreme Court to reverse the judgment from an appellate court ordering Banco Nacion to disclose Argentine accounts that could be attached, including those of President Cristina Kirchner. It was filed yesterday by lawyers from the firm of Cleary, Gottlieb, Steen & Hamilton.
The U.S. Supreme Court rules against Argentina
It is because it violated a treaty by freezing service rates in 2002. It will have to pay US$185 million.
Thursday, March 6, 2014
by Ana Baron
New York. Correspondent – The Argentine government suffered a setback yesterday. The U.S. Supreme Court announced that Argentina will have to pay the company British Gas US$185,285,485.85 for having broken the contract between both parties by freezing service rates in 2002.
What impact could this ruling have on the case of the vulture funds?, asked Clarin. “They are two totally different cases,” explained a source that requested anonymity. “But it doesn’t help the Argentine appeal before the Supreme Court that they have so much untidiness from its government on the table for discussion.”
In any case, in the Supreme Court what always prevails are the legal arguments. The case of British Gas v. Argentina began in 2002 when BG held 45.11% of Metrogas. After the freezing of rates, British Gas accused the Argentine government of having violated the contract they had and, consequently, the investment treaty signed between Argentina and Britain in 1991. BG then filed before the Trade Law Commission, a body of arbitration of the United Nations (UNCITRAL according to its acronym in English), asking for compensation for the damage caused. On July 27, 2007, UNCITRAL determined that BG “had not received fair and equal treatment and therefore Argentina had to pay US$185 million plus interest.”
Argentina argued that to be able to collect, British Gas should have first gone before the Argentine courts. Then British Gas appeared before a District Court in Washington DC to insist that there was nothing to force it to comply with Argentina’s demands. The Court took its side. But months later the Court of Appeals sided with Argentina.
So the case went to the U.S. Supreme Court on July 27, 2012. The decision, announced yesterday, was in favor of BG and written by Democrat Stephen Breyer. Republicans Antonin Scalia, Clarence Thomas and Samuel Alito, and the Democrats Ruth Bader Ginsburg and Elena Kagan, supported it. Democrat Sonia Sotomayor dissented on one point of the ruling, while the Chief Justice of the court, the Republican John Roberts, filed an opinion in opposition, supported by another Republican, Anthony Kennedy.
In the case of the vulture funds, Argentina asked the Supreme Court to reverse the ruling that ordered it to pay back all the bondholders who refused to participate in exchanges of 2005 and 2010 at the same time that it pays bondholders that did enter.
Unlike what happened in the case of BG, in which the Court of Appeals reversed the judgment of the District Court, in the case of vultures two New York courts agreed to uphold the ruling against Argentina. According to all the experts consulted by Clarin, that greatly reduces the chances that the Supreme Court will accept hearing the case of the vultures.