Almost simultaneously with the hearing, the Economy Ministry will be deciding what steps to take in order to ensure the servicing restructured debt worth almost US$200 million at the state-run Banco Nación, circumventing Judge Griesa’s blockade in US jurisdiction. This would be the first operation completed after Congress passed the Sovereign Debt Payment law, which offers bondholders the possibility of changing the payment venue, ignoring the Bank of New York Mellon as fiduciary agent. When said bill was announced, Judge Griesa harshly criticized the measure, saying he was “horrified” by Argentina’s behaviour.

Monday, September 29, 2014

Griesa to decide whether to hold country in contempt

Legal precedent against sovereign states exists, but was proven to be unenforceable

US District Judge Thomas Griesa will decide today whether he will declare that Argentina is in contempt of court.

Holdout hedge funds led by Elliott and Aurelius have called on Griesa to issue a contempt-of-court order against Argentina for failing to comply with his ruling to pay them US$1.33 billion dollars plus interest.

US law firm Cleary & Gottlieb will need to defend Argentina from these accusations to prevent the judge from ordering a US$50,000 per day fine the vulture funds have demanded. Judge Griesa has already stopped short of accepting this request from the vulture funds twice in the past, but this will be the first time in which he has called for a hearing to decide on the issue.

There is legal precedent for a sovereign state to be declared in contempt of court in the US in a case involving the Democratic Republic of Congo. But even so, a court does not appear able to seize assets in order to fulfill a fine without the help of the State Department.

Indeed, Congo’s legal strategy in its case against Hemisphere Associates hinged on the futility of “a court ordering a contempt sanction it cannot enforce.”

In that case, the vulture funds argued that enforcing a sanction was a separate issue and they won out in court.

BOND SERVICING

Almost simultaneously with the hearing, the Economy Ministry will be deciding what steps to take in order to ensure the servicing restructured debt worth almost US$200 million at the state-run Banco Nación, circumventing Judge Griesa’s blockade in US jurisdiction.

This would be the first operation completed after Congress passed the Sovereign Debt Payment law, which offers bondholders the possibility of changing the payment venue, ignoring the Bank of New York Mellon as fiduciary agent. When said bill was announced, Judge Griesa harshly criticized the measure, saying he was “horrified” by Argentina’s behaviour.

Kirchnerite Senator Aníbal Fernández, meanwhile, affirmed yesterday that it was the behaviour of vulture funds that made him “nauseous,” and called their profiting scheme a “swindle of international proportions.”

On Friday, Griesa enabled Citibank to process a one-off payment on US dollar-denominated bonds issued under Argentine law, although he stopped short from issuing a permanent ruling on the matter, a decision that was harshly criticized by Economy Minister Axel Kicillof, who said Griesa “didn’t dare” to resolve the matter definitively.

"During the hearing, even the judge himself recognized the arguments presented by Citibank and Argentina about these bonds not being affected by his pari passu order", but still "he ended postponing a definite decision for another 30 days," said an official statement.

Another possible angle on the conflict was suggested yesterday by daily Tiempo Argentino, which highlighted that Houston-based Noble Energy, one of the companies exploring the Malvinas Islands for oil, is partly owned by Paul Singer’s hedge fund Elliott Management, the main plaintiff in the vulture funds case.

The newspaper also claimed that Oz Management, another Singer-owned corporation, also has a stake in the company.

Herald staff with DyN