Thursday, August 13, 2015

Griesa approves bid by ‘vulture’ funds to seize Argentine assets

Economy Ministry celebrates that judge left out state-run entities such as YPF, Enarsa

NEW YORK — United States District Judge Thomas Griesa sanctioned Argentina yesterday for failing to provide documents and information about assets it holds in the US, but said that diplomatic and military assets were out of the legal reach of plaintiffs.

Griesa argued yesterday that because the country failed to produce documents in response to a 2013 order, any other property held in the United States would be deemed commercial, which would make it easier for holdout creditors to seize.

The Economy Ministry, however, celebrated that state-run entities such as YPF, Enarsa and the Central Bank were excluded from the ruling.

This is hardly the first time holdout funds have sought to seize Argentine property. Most notably, the “vultures” launched a long legal battle in Ghana to seize the navy training frigate ARA Libertad in 2012.

Griesa’s ruling yesterday amounts to a setback in the country’s effort to stop so-called “vulture” funds from pursuing full repayment plus punitive interests on the country’s 2001-defaulted bonds, which a minority of holders refused to restructure in 2005 and 2010 as they did not accept Argentina’s proposed haircut.

Rather than concentrate on the setback though, the Economy Ministry chose to highlight that the judge did not give in to the plaitiffs’ demands to declare other state-run entities such as the Central Bank and energy companies ENARSA and YPF as state “alter egos,” which would have made their assets liable to be embargoed as well.

“The latest vulture attempt at extorsion has failed,” the Economy Ministry said. “Their broad request for sanctions was not accepted.”

Argentina must also produce a log in 10 days of any documents it deemed protected by attorney-client privilege or else that privilege would be waived, Griesa said. “There’s no doubt at all that the plaintiffs are entitled to sanctions based on that discovery order,” he added.

The ruling could make it easier for hedge funds including Elliott Management’s NML Capital to collect on unpaid judgments they have amassed in litigation spilling out of Argentina’s US$100 billion default in 2002.

So far, sovereign immunity has protected Argentine assets around the world from the hands of holdout debt holders.

Both Argentina and a large majority of nations supporting the country’s stance at international forums such as the UN General Assembly have argued that sovereign immunity from jurisdiction and execution regarding sovereign debt restructurings is a right of states before foreign domestic courts and exceptions should be restrictively interpreted.

Yesterday’s hearing in New York followed a federal appellate court ruling in December rejecting Argentina’s bid to reverse Griesa’s 2013 order requiring documents be produced about its assets. NML subsequently renewed its request, but Argentina has largely declined to produce any documents.

Jonathan Blackman, Argentina’s lawyer, warned Griesa that a writ saying all of its US property was commercial could conflict with years of prior rulings.

He cited a ruling in March by a judge in Los Angeles finding that NML could not seek to go after Argentina’s rights to launch two satellites because they were not for a commercial purpose.

“This is an effort to jump over all the issues litigated case by case for years,” Blackman said.

NML Capital’s lawyer Robert Cohen argued that “we have no choice but to keep looking for assets, we are not going to give up,” adding that Argentina has so far refused to pay his client despite Judge Griesa’s order.

Griesa said Argentina cannot continue to pay its restructured debt until it reaches a settlement with all the non-restructured bondholders suing the country in his court.

— Herald with Reuters, online media