Argentina May Get Supreme Court Review For Its First Debt Case, But Not The Second

Jan 6 2014, 12:59pm CST | by

Argentina May Get Supreme Court Review For Its First Debt Case, But Not The Second
Photo Credit: Forbes Business

Originally posted at WLF’s Legal Pulse blog

On the day that it returns from its holiday break on January 10, the chances are good that the U.S. Supreme Court will agree to review a dispute between Argentina and a creditor that is owed substantial sums on defaulted bondsRepublic of Argentina v. NML Capital, Ltd., Case No. 12-842.  That dispute is not the one that has been making big headlines for the past year, however.  The high-profile case—in which the federal appeals court in New York (the U.S. Court of Appeals for the Second Circuit) last August upheld an order barring Argentina from treating “holdout” bondholders such as NML less favorably than other bondholders—has not yet reached the Supreme Court.  Moreover, major differences exist between the two cases such that even if the Court decides this week to review the first case, there is no reason to view that decision as an indication that the Court is likely to grant review in the second, higher profile case.  Indeed, there is good reason to conclude that the Court will not agree to hear the second case, which would preserve the bondholder’s victory.

The petition for review that the High Court will consider on January 10 arises from NML’s efforts to collect on court judgments against Argentina totaling $1.6 billion.  NML obtained the judgments after Argentina defaulted on bonds held by NML, which the nation has refused to voluntarily pay.  When judgment creditors are faced with a recalcitrant debtor, the law permits them to subpoena records for the purpose of attempting to pinpoint the location of the debtor’s assets; if they locate “nonexempt” assets, they are entitled to seize the assets in satisfaction of their court judgments.  NML has been attempting to engage in just such document discovery.  In particular, in 2010 it served document subpoenas on two banks located in New York in an effort to learn more about how Argentina moves assets through New York and around the world.  Over Argentina’s objection, the lower federal courts upheld the subpoenas.  Early in 2013, Argentina filed a petition asking the Supreme Court to review those decisions; Argentina asserted that the subpoenas violated its rights under the Foreign Sovereign Immunities Act (FSIA).

Although the Supreme Court grants no more than a tiny fraction of the thousands of petitions for review it receives each year, there is reason to conclude that the Court is giving serious consideration to granting Argentina’s petition.  First, the Court issued an order last April directing the Solicitor General to file a brief expressing the views of the United States about the case.  The Court issues no more than a handful of such orders each year; an order directing the Solicitor General to file a brief is generally viewed as an indication that the Court is actively mulling the petition in question.  The Solicitor General’s brief, filed earlier this month, recommended that the Court grant Argentina’s petition.  As studies have shown, such a recommendation substantially increases the chances of the Court’s granting a petition.

Nonetheless, a certiorari grant in the pending Argentina petition should not be viewed as a signal that the Court will also grant the yet-to-be-filed “pari passu” petition from the Second Circuit decision.  Argentina argues in both cases that the lower court orders violated the FSIA, but the similarity between the two cases ends there.  In particular, the reasons why the Court may be leaning in the direction of granting Argentina’s pending petition are largely inapplicable to the impending second petition.

The principal factor supporting Supreme Court review is the resolution of conflicting interpretations of law by two or more federal appeals courts.  In the case pending before the High Court, the Second Circuit has adopted an interpretation of the FSIA that directly conflicts with an interpretation of the FSIA adopted by the Seventh Circuit.  A 2011 Seventh Circuit decision held that the FSIA severely limits the scope of post-judgment discovery directed at a foreign sovereign’s assets.  Noting that the FSIA permits attachment of only a very limited category of assets belonging to a foreign sovereign, the Seventh Circuit held that any post-judgment discovery must be limited to assets that are both located within the United States and subject to attachment under the FSIA.  In contrast, the Second Circuit has held for many years that the FSIA imposes no such limitations on discovery.  In particular, it held in this case that the FSIA did not bar NML from engaging in discovery from non-party banks regarding Argentine assets located throughout the world.  While recognizing that U.S. courts cannot order attachment of Argentine assets located outside the U.S., the Second Circuit held that NML could use information gleaned from its document discovery to ask foreign courts to attach those assets.  Given that two federal appeals courts have adopted directly conflicting interpretations of the FSIA as applied to document discovery, it would not be surprising if the Court—in accord with the recommendation of the Solicitor General—grants the pending certiorari petition.

In contrast, the pari passu case does not involve any FSIA issue over which the federal appeals courts disagree.  Argentina argues that district court injunctions—which bar Argentina from making payments to holders of 2005 Exchange Bonds unless it makes equivalent payments to holdout bondholders—violate the FSIA because they amount to an attachment of Argentina’s assets.  The Second Circuit brushed that argument aside in its August 2013 decision upholding the district court injunctions, explaining, “The injunctions allow Argentina to pay its [bond] debts with whatever resources it likes.”  Importantly, no other federal appeals court has issued a conflicting interpretation of what constitutes an “attachment” for purposes of the FSIA.  There is little reason to believe that the Supreme Court will agree to review the Second Circuit’s pari passu decision in the absence of such a conflict.

Moreover, the FSIA provision that caused the Solicitor General to question the Second Circuit’s document discovery decision is not applicable to the pari passu case.  The Solicitor General asserted that because a FSIA provision bars attachment of foreign sovereign assets located outside the U.S., that provision should also be interpreted as barring discovery regarding non-U.S. assets—because such discovery could only be seen as a precursor to an effort to attach assets over which U.S. courts lack any jurisdiction.  The Solicitor General’s assertion has no relevance to the pari passu case; the sole purpose of the injunctions issued in that case is to assure that holdout bondholders like NML receive “equal treatment,” not to permit the later attachment of any Argentine assets.

Argentina is scheduled to file its Supreme Court certiorari petition in the pari passu case sometime between February and April 2014.  The probability that the Court will agree to hear the case is extremely low given the absence of any decisions that conflict with the Second Circuit’s interpretation of the FSIA provisions at issue in that case.  That probability is reduced further still by Argentina’s repeated statements that it will not comply with an adverse decision; the Supreme Court is highly unlikely to devote its limited resources to hearing a petition from a party that does not consent to be bound by the Court’s decision on the merits.  For all the reasons outlined above, a decision by the Court this month to grant review in Argentina’s document discovery dispute should not be interpreted as a signal that the Court is likely to grant review in the pari passu case as well.

Source: Forbes Business

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Christopher H. Skinner, Senior Associate, Squire Sanders to Speak at Knowledge Group's Iranian Sanctions for 2014 and Beyond Live Webcast
New York, NY, April 24, 2014 --(PR.com)-- The Knowledge Group/The Knowledge Congress Live Webcast Series, the leading producer of regulatory focused webcasts, has announced today that Christopher H. Skinner, Senior...
 
 
Is The Future Of Television Social?
Today at the Brand Innovators’ Future of Television conference in New York, social media expert Ted Rubin will be sharing his perspective on the symbiotic relationship between TV and social media. In advance of his...
 
 
How To Screw Up On Social Media
Election 2012: Billionaires Speak Out On Social Media It’s not just the small companies and amateurs that make mistakes on social media. The fresh example of the NYPD and its attempt to get people to put pictures of...
 
 
London Live's Disastrous Ratings: 2,400 Watch Breakfast Show In City Of 9million
Last month, I wrote for Forbes.com about the imminent arrival in London of a media first – a local TV channel devoted solely to the UK’s capital city. I’d already been behind the scenes at the channel before its March...
 
 
 

Latest from the Network

Christopher H. Skinner, Senior Associate, Squire Sanders to Speak at Knowledge Group's Iranian Sanctions for 2014 and Beyond Live Webcast
New York, NY, April 24, 2014 --(PR.com)-- The Knowledge Group/The Knowledge Congress Live Webcast Series, the leading producer of regulatory focused webcasts, has announced today that Christopher H. Skinner, Senior...
Read more on Business Balla
 
Is The Future Of Television Social?
Today at the Brand Innovators’ Future of Television conference in New York, social media expert Ted Rubin will be sharing his perspective on the symbiotic relationship between TV and social media. In advance of his...
Read more on Business Balla
 
How To Screw Up On Social Media
Election 2012: Billionaires Speak Out On Social Media It’s not just the small companies and amateurs that make mistakes on social media. The fresh example of the NYPD and its attempt to get people to put pictures of...
Read more on Business Balla
 
London Live's Disastrous Ratings: 2,400 Watch Breakfast Show In City Of 9million
Last month, I wrote for Forbes.com about the imminent arrival in London of a media first – a local TV channel devoted solely to the UK’s capital city. I’d already been behind the scenes at the channel before its March...
Read more on Business Balla
 
Report: A Year After Bangladesh Disaster, Retailers Fail To Address Biggest Factory Risks
When Sarah Labowitz arrived in Bangladesh’s capital city of Dhaka this past February, it certainly didn’t look like nine months had passed since the factory collapse that claimed 1,129 lives. Outside the ruin of the...
Read more on Business Balla
 
How A Car-Crazy Entrepreneur Turned A Lifetime Passion Into A Lifetime Career
Elo has loved cars since he was a child and uses his mechanical and design skills to create unique vehicles. His customisations are second to none and clients from across the world seek him out to revitalise their...
Read more on Auto Balla
 
ITF Seniors World Championships at Polo Club Boca Raton
Boca Raton, FL, April 24, 2014 --(PR.com)-- Polo Club Boca Raton Hosts Opening Ceremonies of the ITF Seniors World Championships Margaret Court Cup (Women Age 45) and Dubler Cup (Men Age 45) Competition: April 21-26...
Read more on Sport Balla
 
Code for India Announces First Ever Simultaneous Hackathon Event in Bangalore and Mountain View
Mountain View, CA, April 24, 2014 --(PR.com)-- Engineers in US and India Team Come Together to Create Apps Making India More Resilient to Natural Disasters Code for India, the non-profit organization that inspires...
Read more on Business Balla
 
Tori Spelling: Sex life was 'very good'
Tori Spelling thought she had a "very, very good" sex life with Dean McDermott. The 'True Tori' star - who has children Liam, seven, Stella, five, Hattie, two, and Finn, 20 months, with her husband - was left stunned...
Read more on Celebrity Balla
 
 
Auto Balla Sexy Balla Sport Balla TV Balla Politics Balla Movie Balla Apple Balla Business Balla Ad Balla Celebrity Balla