After losing a lower court decision requiring the government of Argentina to pay “holdout” bond holders money owed to them, the Argentine government is now indicating it might not abide by the US legal decision if it goes against them.
Argentina would be a “fugitive from justice”
“Argentina has put itself in the position of a fugitive from justice who eludes law enforcement authorities while seeking to press an appeal,” said a group of former US federal judges in an amicus brief. The group, which is unaffiliated with the case, includes former U.S. federal judges, including Michael Mukasey, who served as Attorney General, and Michael Chertoff, as Secretary of Homeland Security under former President George W. Bush.
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The action came as a group of holdout hedge funds opposed the government of Argentina’s move to have the case heard by the US Supreme Court. Argentina had lost a lower court ruling ordering the government to pay bondholders $1.33 billion. The group of judges suggested in their brief suggested Argentina is attempting to “undermine the authority of judicial proceedings” by saying it won’t comply with adverse rulings. ValueWalk had reported in February that Argentina was expected to appeal the decision.
Sticking their tongue out at US legal system
Argentina sticking their tongue out at US court rulings comes as the story has generated snickers throughout the hedge fund community. As previously reported in ValueWalk, NML Capital Ltd, a unit of Elliott Management Corp., and other bond investors are on a crusade to repossess Argentina’s assets.
Singer seized and then released an Argentine navel vessel at one point, while a separate group of investors attempted to repossess the president of Argentina’s plane while it was refueling. NML capital is suing Argentina in California to seize two satellites the country is planning to launch into space. Elliott is operated by activist hedge fund manager Paul Singer. According to court documents, Argentina purchased two contracts for satellite launches in 2015 and 2016 from Space Exploration Technologies Corp. NML is arguing the contracts are commercial property and thus not protected by sovereign immunity laws in a bid to claim a $1.7 billion settlement the hedge fund was previously awarded by a US court.
For its part, Argentina claims the hedge fund bondholders purchased the debt at a deep discount after its default, then attempted to profit by thwarting the country’s efforts to restructure through debt swaps. In trying to persuade the US Supreme court to hear the case, Argentina claims the lower court violated the Foreign Sovereign Immunities Act by allowing for the arrest in the U.S. of property belonging to a foreign state.
The bond holders say Argentina should be obligated to maintain its legal commitment to bond holders. In Wednesday’s court filing, lawyers for the bondholders called the case “undeserving of review,” and attacked the Foreign Sovereign Immunities Act defense, saying the U.S. Second Circuit Court of Appeals, “does not exercise dominion over any sovereign property, but merely holds Argentina to its commitment to treat its debts to [the bondholder group] equally with its other obligations.”