The Global Lawyer: Why SCOTUS Won't Grant Cert on Argentina Bonds
The Litigation Daily
July 21, 2013
The International Monetary Fund made headlines and moved bond markets last week by signaling that it may file its first-ever amicus brief, urging the Supreme Court to grant cert in the Argentine bonds case, Republic of Argentina v. NML Capital.
The IMF's concern is that the U.S. Court of Appeals for the Second Circuit, by ruling that Argentina must fully repay investors that refused to restructure their holdings of defaulted Argentine debt, may impair sovereign restructuring in the future. (See The Global Lawyer: Argentina and the Morality of Vultures vs. Deadbeats.) That concern — plus uncertainty over the value of billions in outstanding bonds — is the reason that armies of emerging market bankers and their lawyers packed three overflow rooms in Foley Square for Second Circuit arguments in February. Heck, I was even accosted on the courthouse steps by a TV crew from Tokyo.
Does any of this enter the equation for the Supreme Court? Not to judge from Argentina's cert petition of June 24. In a nutshell, Argentina's lawyers at Cleary, Gottlieb, Steen & Hamilton argue that the Second Circuit's injunctions on a sovereign's worldwide property are inconsistent with Supreme Court and other circuit precedent on sovereign immunity and equity. Similarly, in its earlier NML cert petition, filed in January, Argentina posits a circuit split on sovereign immunity and the scope of post-judgment asset discovery.
In response to the new petition, NML's counsel at Dechert and Gibson, Dunn & Crutcher will doubtless argue that the circuit splits are illusory. At least one leading observer is skeptical that Argentina has identified any cert-worthy circuit split, because the order under review — an injunction that "impose[s] a condition of equal treatment on a foreign state's use of immune assets" — is unique. This analysis might be right on its own terms. But as they argue whether a given circuit split is "narrow" or deep, both parties and commentators are confined to an intellectual framework that dates to a more parochial time, when justices "rode circuit" by horseback.
Forget circuit splits — the Supreme Court ought to be thinking about transatlantic rifts. The Second Circuit created a cataclysmic one when it analyzed the pari passu (or equal treatment) provisions of Argentina's bonds and accepted an interpretation that had been rejected by the English courts. Transatlantic rifts often matter more than circuit splits, because London often matters more than Chicago, at least in finance. And as the Lehman bankruptcy casereminds us, such divergences are increasingly common.
The role of the Supreme Court should not be just to manage the closed system of U.S. justice, but to create a climate of legal certainty for businesses that operate globally, not to mention sovereigns that operate globally. In the Argentine bonds dispute, the Court can't directly close the transatlantic rift, because the pari passu question was a matter of New York state law. But an understanding of the uncertainty created by the pari passu holding should inform its decision to reevaluate the case on grounds of sovereign immunity.
Will the Court suddenly start attending to transatlantic rifts? Probably not. But there is one other measure of importance that might impress the justices: big money. "The odds of certiorari are of course always long," says Supreme Court veteran Neal Katyal of Hogan Lovells. "But one factor that sometimes can help is a huge dollar figure on the line. In cases such as Exxon v. Baker and General Dynamics v. U.S., the huge amount of money at stake may very well have contributed to certiorari."
Both the Exxon Valdez case and the F-16 case cited by Katyal involved $5 billion, and that might be taken as the informal current threshold for a case worth taking simply for its monetary value. This threshold is easily cleared here, if the case is viewed in proper perspective. The face value of the restructured bonds that are in danger of default if Argentina's holdout creditors are made whole is $24 billion. But even if one believes that Argentina will somehow avoid a new default, the potential follow-on claims by the holdouts exceed $10 billion with interest. Busy bankers don't spend all afternoon reading tea leaves in Foley Square for nothing.
In sum, there remains a slim chance the Supreme Court will review a ruling that jeopardizes sovereign restructuring, unsettles emerging market finance in London and New York, and has direct implications for over $34 billion in outstanding bonds. But the odds would be a whole lot better if there were diverging holdings in by the federal appeals courts in Cleveland or St. Louis.
The IMF's concern is that the U.S. Court of Appeals for the Second Circuit, by ruling that Argentina must fully repay investors that refused to restructure their holdings of defaulted Argentine debt, may impair sovereign restructuring in the future. (See The Global Lawyer: Argentina and the Morality of Vultures vs. Deadbeats.) That concern — plus uncertainty over the value of billions in outstanding bonds — is the reason that armies of emerging market bankers and their lawyers packed three overflow rooms in Foley Square for Second Circuit arguments in February. Heck, I was even accosted on the courthouse steps by a TV crew from Tokyo.
Does any of this enter the equation for the Supreme Court? Not to judge from Argentina's cert petition of June 24. In a nutshell, Argentina's lawyers at Cleary, Gottlieb, Steen & Hamilton argue that the Second Circuit's injunctions on a sovereign's worldwide property are inconsistent with Supreme Court and other circuit precedent on sovereign immunity and equity. Similarly, in its earlier NML cert petition, filed in January, Argentina posits a circuit split on sovereign immunity and the scope of post-judgment asset discovery.
In response to the new petition, NML's counsel at Dechert and Gibson, Dunn & Crutcher will doubtless argue that the circuit splits are illusory. At least one leading observer is skeptical that Argentina has identified any cert-worthy circuit split, because the order under review — an injunction that "impose[s] a condition of equal treatment on a foreign state's use of immune assets" — is unique. This analysis might be right on its own terms. But as they argue whether a given circuit split is "narrow" or deep, both parties and commentators are confined to an intellectual framework that dates to a more parochial time, when justices "rode circuit" by horseback.
Forget circuit splits — the Supreme Court ought to be thinking about transatlantic rifts. The Second Circuit created a cataclysmic one when it analyzed the pari passu (or equal treatment) provisions of Argentina's bonds and accepted an interpretation that had been rejected by the English courts. Transatlantic rifts often matter more than circuit splits, because London often matters more than Chicago, at least in finance. And as the Lehman bankruptcy casereminds us, such divergences are increasingly common.
The role of the Supreme Court should not be just to manage the closed system of U.S. justice, but to create a climate of legal certainty for businesses that operate globally, not to mention sovereigns that operate globally. In the Argentine bonds dispute, the Court can't directly close the transatlantic rift, because the pari passu question was a matter of New York state law. But an understanding of the uncertainty created by the pari passu holding should inform its decision to reevaluate the case on grounds of sovereign immunity.
Will the Court suddenly start attending to transatlantic rifts? Probably not. But there is one other measure of importance that might impress the justices: big money. "The odds of certiorari are of course always long," says Supreme Court veteran Neal Katyal of Hogan Lovells. "But one factor that sometimes can help is a huge dollar figure on the line. In cases such as Exxon v. Baker and General Dynamics v. U.S., the huge amount of money at stake may very well have contributed to certiorari."
Both the Exxon Valdez case and the F-16 case cited by Katyal involved $5 billion, and that might be taken as the informal current threshold for a case worth taking simply for its monetary value. This threshold is easily cleared here, if the case is viewed in proper perspective. The face value of the restructured bonds that are in danger of default if Argentina's holdout creditors are made whole is $24 billion. But even if one believes that Argentina will somehow avoid a new default, the potential follow-on claims by the holdouts exceed $10 billion with interest. Busy bankers don't spend all afternoon reading tea leaves in Foley Square for nothing.
In sum, there remains a slim chance the Supreme Court will review a ruling that jeopardizes sovereign restructuring, unsettles emerging market finance in London and New York, and has direct implications for over $34 billion in outstanding bonds. But the odds would be a whole lot better if there were diverging holdings in by the federal appeals courts in Cleveland or St. Louis.
Read more: http://www.americanlawyer.com/digestTAL.jsp?id=1202611815714&The_Global_Lawyer_Why_SCOTUS_Wont_Grant_Cert_on_Argentina_Bonds#ixzz2ZtBleWp3
Keine Kommentare:
Kommentar veröffentlichen