December 11, 2017

Experts tell Herald

Saturday, January 11, 2014

‘It may not have larger impact’

By Mariano Beldyk
For The Herald
The US Supreme Court decision to hear a case related to Argentina’s ongoing legal battle over its historic 2001 debt default amounts to a partial short-term triumph for Argentina but may not be of great significance for the larger case of whether the country has to pay holdout creditors who refused to accept any of the country’s debt swaps, according to local experts.

For some legal experts, yesterday’s decision was hardly surprising.

Eugenio Bruno, a debt law expert with Garrido Law Firm, anticipated a few days ago that there was a 90 percent chance that the top court in the United States would agree to hear Argentina’s appeal.

“There may be a chance now that the US high tribunal will finally reverse the first and second instance ruling against Argentina on this case but it’s difficult to predict whom the Court will favour with its ruling. Odds are even for both parties,” Bruno told the Herald yesterday. “I suppose, a 50-50 possibility.”

Bruno highlighted that both parties will take strong points of view to the Court.

“The arguments are convincing enough for both sides. Argentina claims that unveiling that kind of information goes against the state’s sovereignty while the plaintiffs emphasize the fact that it’s only about seeking information that would allow them, in a next step, to evaluate what could be seized in case the Argentine government still refuses to pay.”

The case stems from a lawsuit by billionaire hedge fund manager Paul Singer’s NML that is demanding Bank of America and Argentina’s state-run Banco Nación to hand over a list of Argentine assets that could eventually be seized if the country loses its long legal battle against the so-called vulture funds.

For economist Gustavo Ber, yesterday’s Supreme Court decision is a hopeful sign.

“Although they are different lawsuits and judicial processes (assets and repayment litigation), I strongly believe it’s a positive precedent for Argentina’s position,” Ber told the Herald. “And that is also reflected in how the government bonds are performing abroad, beyond the expectations over future economic decisions that this administration may take over the following months that are also having an impact.”

On the other hand, Jorge Colina, head of the research unit at the IDESA consultancy opted to be more cautious when analyzing the possible future effects of the larger case against holdouts who are demanding full repayment of the debt.

“However positive the US Supreme Court’s resolution may sound, I don’t think it will have an impact on the larger case of repayment because Argentina has nearly 50 ongoing cases in the World Bank’s ICSID tribunal. It’s the country with the largest number of cases against its interest in international courts,” Colina told the Herald. “Evidence has shown that Argentina is a serial defaulter.”

For Colina, the problem is largely one of history. Countries largely agree they should not hand over this type of sensitive information, but Argentina’s history puts it in a tricky position. “Many countries are reluctant to provide sensitive information about their assets to foreign counterparts,” he said. “The problem with Argentina is its own history, and how this generates doubts about whether or not this is a strategy to postpone its obligations.”

To repay or not to repay

Based in New York, Argentine economist and scholar Arturo Porzecansky who worked long-time in ABN Amro Bank as a finance specialist, pointed out to the Herald that the bigger discussion about whether to pay the holdouts — or “vulture” funds — has not been appealed yet after Argentina got an unfavourable ruling last year.

Yesterday’s decision, Porzecansky said, did not truly provide a precedent to forecast whether the US justices will also agree to take the case on holdouts once the Argentine state’s legal representatives make the next move.

“The Argentine government explained that hedge funds’ claim to examine documents looking for public assets is a violation of the Foreign Sovereign Immunities Act (FSIA) and the US government backed this position,” Porzecansky told the Herald. “Then again, Supreme Court is somehow compelled to intervene because it is a federal law. But in the pari-passu clause litigation (the repayment case), the high tribunal has nothing to do with it because it involves a New York state law.”

Not everyone agrees with this view though.

“Anything can happen as there is no record of any kind of litigation of this nature,” Ber said. “Many lawyers who are following the case closely are convinced that the Supreme Court will give Argentina the opportunity to express its arguments. At the very least, to listen to what the government has to say about an unprecedented dispute”.


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