Don't even think about it, Argentina. (And tell us if you do.)

Don't even think about it, Argentina. (And tell us if you do.)

posted by Mark Weidemaier

No news as yet about whether the Supreme Court has reached a decision on Argentina's pending petition for certiorari. In the interim, however, the district judge decided to enter this order. Recall that the injunction against Argentina includes a "no workaround" part that forbids the country to take steps to evade the injunction. Remember, too, that immediately after the Second Circuit's recent opinion affirming the injunction, Argentine officials (including President Kirchner) announced plans to defy the injunction by letting exchange bondholders swap into bonds that would be paid in Argentina. Thinking about violating a court's order doesn't normally count as a violation, and so far Argentina claims not to have taken any steps towards implementing the swap. Still, it seems thedistrict judge isn't too pleased. The latest order (linked above) repeats that the "no workaround" injunction remains in effect during Argentina's appeals. More astonishingly, the order (see par. 4 on pp. 6-7) gives Argentina 5 days to turn over to the plaintiffs any communications it may have had, with pretty much anyone in the world (except, as I read the order, its lawyers), relating to any plan that might be "deemed by a reasonable person" to evidence the intent to violate the injunction. The order even specifies that Argentina must turn over any communications with the United States government.

It will be interesting to see how Argentina responds. If there is already a paper trailrelated to a future debt swap, those communications will likely now have to be turned over. Or Argentina could ignore this order, too. If it picks the latter route, no one will be the wiser, yet. (The order is directed only to Argentina; it doesn't require third parties to produce information.) But the communications, if they exist, will be discovered eventually. If that were to happen while Argentina was seeking relief from the Supreme Court... well, it wouldn't look good.

Edit: Bonus coverage of the order over at FT Alphaville. 

October 4, 2013 at 6:34 AM in Sovereign Debt