Elliott Management vs The Republic Of Argentina

Plaintiffs in these forty-nine actions hold bonds issued by defendant, the Republic of Argentina. In October 2015, the court issued injunctions in these actions. Due to a pending appeal, the court does not presently have jurisdiction over the injunctions.

The Republic now moves for a Rule 62.1 Indicative Ruling that this court would vacate the injunctions if the Court of Appeals were to remand for that purpose. The motion under Rule 62.1 allows the court to state that it would grant a motion to vacate if it had the power to do so. Some plaintiffs support the Republic’s motion to vacate; others do not. The court must therefore decide whether it would vacate the injunctions on remand.

Elliott Management vs The Republic Of Argentina – Background

The court has often recounted the history of this prolonged litigation. A brief summary will suffice.

1. The Default

In 1994, the Republic began issuing bonds pursuant to a Fiscal Agency Agreement (“FAA”), which contains the famed pari passu clause:

The Securities will constitute . . . direct, unconditional, unsecured and unsubordinated obligations of the Republic and shall at all times rank pari passu and without any preference among themselves. The payment obligations of the Republic under the Securities shall at all times rank at least equally with all its other present and future unsecured and unsubordinated External Indebtedness…

After the Republic suffered an economic crisis in 2001, it defaulted on its debts, including the FAA bonds. In an attempt to cure this default, the Republic twice invited bondholders to exchange their FAA bonds for new bonds worth only 25–29% of the FAA bonds’ value. In all, roughly 93% of the Republic’s creditors ultimately accepted these exchange offers, and the Republic began making payments to the “exchange bondholders.”

To buttress the first exchange offer, the Republic enacted Law 26,017— the “Lock Law”—which prohibited “any type of in-court, out-of-court or private settlement” with FAA bondholders who could have participated in the exchange offer but chose not to. Then, in 2009, the Republic enacted Law 26,547, which barred the Republic from giving FAA bondholders who had filed lawsuits “more favorable treatment than what [was] offered to those who have not done so.” Finally, in 2013, the Republic passed Law 26,886, which again forbade bondholders who had filed lawsuits from getting any settlement worth more than the prior exchange offers.

For many years, the Republic never paid anything on the FAA bonds. Plaintiffs who held beneficial interests in those bonds began filing actions against the Republic in this court. Many obtained money judgments for the outstanding principal and interest. The Republic refused to pay, and the plaintiffs tried—usually in vain—to attach Argentine assets to satisfy their money judgments. See, e.g., EM Ltd. v. Republic of Argentina, 865 F. Supp. 2d 415, 417 (S.D.N.Y. 2012) (observing that the Republic has “usually prevail[ed] in defeating the plaintiffs’ attempts to recover” through attachment).

2. The Original Injunctions

In 2010, a group of plaintiffs in thirteen actions began seeking a different kind of relief.1 They first filed motions for partial summary judgment, asking the court to declare that the Republic had violated the pari passu clause by paying the exchange bondholders while refusing to pay the plaintiffs. The court granted the motions. See Order, NML Capital Ltd. v. Republic of Argentina, No. 08-cv-6978 (S.D.N.Y. Dec. 7, 2011).

The plaintiffs then moved for specific performance, seeking a remedy for the Republic’s violation of the pari passu clause. Although the pari passu clause does not itself require a particular remedy, the court exercised its inherent equitable discretion under Rule 65(d) to craft appropriate relief. It fashioned injunctions to address the Republic’s steadfast refusal to pay plaintiffs anything. The result was that whenever the Republic paid on the exchange bonds, it needed to make a “ratable payment” to plaintiffs. See Order § 2(a), NML Capital Ltd. v. Republic of Argentina, No. 08-cv-6978 (S.D.N.Y. Feb. 23, 2012).

In issuing the injunctions, the court made findings that, at that time, supported such equitable relief. For example, the court explained that plaintiffs had no adequate remedy at law due to the Republic’s passage of Law 26,017 (which prohibited settlement with plaintiffs who declined the exchange offers) and Law 26,547 (which prevented plaintiffs from receiving settlements more favorable than the exchange offers). Id. § 1(b). Moreover, the court found that both the equities and the public interest supported the injunctions because of the Republic’s “repeated failures” to pay plaintiffs and its “unprecedented, systematic scheme” to pay other debts without paying plaintiffs. Id. § 1(c) & (d); see also Am. & Suppl. Order, NML Capital, Ltd. v. Republic of Argentina, No. 08-cv-6978 (S.D.N.Y. Oct. 3, 2014) (holding the Republic in contempt after it attempted to evade the injunctions by passing Law 26,984—the “Sovereign Payment Law”).


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