November 28, 2014
Anarchy in the courtroom
Tuesday’s Nevada court ruling did rather more than move the “fatherland versus vultures” battle beyond the narrow confines of judge Thomas Griesa’s Manhattan offices — the unhealthy overcentralization of a case with global implications on an improbably aged magistrate is now replaced with a potential judicial anarchy. Until this week there had been relatively few factors to juggle in this race against time, thus making the fortnight following default surprisingly stable. It was then largely a question of awaiting the outcome of much-vaunted reports that banks (first Argentine, then international) would buy out vulture fund creditors in the interests of financial stability and, failing that, seeing whether the cross-default clauses accelerating the payment of all other creditors would bite before expiry of the RUFO (Rights Upon Future Offers) clause at the end of this year opened up new options. But then came the double whammy of Tuesday’s Nevada ruling opening up a Pandora’s box followed the next day by at least one of the hedge funds breaking off negotiations with the international banks and thus virtually dooming them (with predictable consequences for the “blue” dollar).
The problems with Nevada judge Cam Ferenbach’s ruling do not lie so much in its content, which authorize hedge funds to verify suspicions that the numerous Silver State interests of the Kirchnerite tycoon Lázaro Báez are money-laundering on behalf of the Argentine government with a view to impounding them against unpaid debts — not too many people in Argentina would argue that it is outrageous to suspect Báez of any such thing. What Ferenbach’s ruling does is to confirm the latent fear that neither expiry of the RUFO clause nor even a Griesa stay and/or a private-sector deal with the vulture funds could offer a full guarantee within the United States court system because some judge (whether Griesa or a like-minded colleague) could always discover some new aspect or mechanism, as Ferenbach has just done. Huge debts would thus be added to the current balance by merely signing off on a sentence — with full scope for reinterpretation and new turns of the screw.
If President Cristina Fernández de Kirchner had any lingering impulse to pay her way out of the impasse (who wants a default, after all?), it was surely killed by the Nevada ruling (even without the personal offence involved). With hedge fund billionaire Paul Singer thus doing his bit to politicize this issue and the potential for judicial anarchy spelled out, who can doubt that this conflict will take increasingly political lines?