Tuesday, January 17, 2012

US Supreme Court to hear Argentine debt default case

The US Supreme Court asked Barack Obama's administration for its views of a ruling that unfroze US$105 million of Argentina's central bank deposits in a setback for two US investment funds that sought to seize the money to satisfy their claims from the country's debt default a decade ago.

At issue in the case was a ruling by a federal appeals court in New York that US law shielded the property of a foreign central bank used for traditional central banking activities, regardless of whether the bank was independent from its parent state.

The appeals court ruled the freeze must be lifted because of limits under a US law, the Foreign Sovereign Immunities Act of 1976, on the ability of Argentina's creditors to freeze or seize assets. It said the central bank and Argentina did not waive its immunity.

The disputed deposits had been frozen since 2006 and held at the US Federal Reserve Bank in New York. The case was part of the long-running litigation in New York over Argentina's US$100 billion default.

The two funds, EM Ltd and NML Capital Ltd, appealed to the Supreme Court. Argentina and its central bank opposed the appeal. They said the appeals court was correct and it had adopted the position advocated by the US government.

The Supreme Court in a brief order asked Solicitor General Donald Verrilli to file a brief expressing the US government's views in the case. The filing of the brief could take months. The court then will decide whether to hear the appeal.