In spite of backing Argentina, Washington presented a brief criticizing the Government

Clarin
Warning that the country does not have clear backing from the US

Sunday, February 24, 2013

By Ana Baron

In spite of backing Argentina, Washington presented a brief criticizing the Government
The support which United States gave Argentina in its conflict with the vulture funds was totally ignored by the New York Court of Appeals, where next Wednesday sees a key hearing. In fact, some analysts consider that Washington was not emphatic enough, either from the political or legal point of view.

In the two amicus curiae presented to the Court of Appeals, the government of Barack Obama harshly criticized Argentina for failing to comply with its international obligations, and presented a detailed list of all its transgressions. The debt with the Paris Club is mentioned, as are the unpaid ruling issued by ICSID and the problem with the country’s statistics. None of this is particularly favorable towards ensuring the judges are well disposed to a country when it acts in good faith.

The US made it clear in its brief that it is more concerned with the impact that this case might have on its own interests rather than Argentina’s transgressions. Although the Justice Department, the State Department and the Treasury sent jointly two amicus curiae in favor of Argentina, the Federal Reserve was notably absent. “Perhaps they are waiting to intervene before the Supreme Court at a later date, but it is striking as the Fed’s support in these cases is key,” said Anna Gelpern to Clarin, a former official from the Treasury who used to work in the legal firm defending Argentina (Cleary, Gottlieb, Steen & Hamilton) and is now teaching at the American University.

In the first amicus curiae presented on April 2, 2012, the US asked the Court of Appeals to overturn the ruling in which judge Thomas Griesa ordered Argentina to pay the vulture funds 100% of what they are owed, and also pay the exchange bondholders. It argued that Griesa’s interpretation of the pari passu clause was incorrect and would negatively affect future debt restructuring initiatives. It also says that this violates the Sovereign Immunity Act.

What is true is that on October 26, 2012, a panel of three judges from the Appeals Court ignored the arguments made by the US when they unanimously ratified Griesa’s ruling. After this failure, Washington presented its second and last amicus curiae on December 28, requesting the Appeal Court plenary session to deal with the underlying issue. Assuming that after next Wednesday, the underlying issue will not be modified, Washington requested what is known as an en banc hearing.

The problem with this second amicus curiae is that it does not really add anything new as regards the first one. “The US amicus curiae may not be very helpful for Argentina as it mostly repeats the opinions presented unsuccessfully in its first presentation and before the panel of the Court of Appeals”, says Mark Weisburg, an attorney from Shearman & Sterling. He also warned that it is extremely rare for the Court of Appeals plenary to grant hearings.

Furthermore, in a foot note to one of the pages in the second brief presented on December 28, the US says that although it “has not taken any position regarding whether the Lock Law violates the pari passu clause, it seems that if there were a ruling in this sense, it would not damage future debt restructuring initiatives.” Hence, for some analysts, the US is “erasing with its elbow what it is writing”. On the one hand the Obama administration is concerned that the case will set a negative precedent for future voluntary restructuring initiatives. But on the other, it is implying that this will be a one-off case. Thus, the U.S. seems to have left the door open to the Appeal Court’s making this case a one-off affair which would not set a precedent for other countries where the Lock Law does not exist.