Recent Developments in the Bondholders Litigation against the Republic of
Argentina (May 7, 2007)
Since the 2001 decision of the Republic of Argentina to
suspend the payment of interest and principal on its sovereign debt and to
declare a general moratorium on any future payments of its sovereign debt,
many bondholders have filed civil lawsuits against the Republic of Argentina
to recover principal and interest. All of the lawsuits are being heard before
Judge Thomas Griesa in the United States District
Court for the Southern District of New York. Both individual and class
actions have been filed.
Judge Griesa has routinely
granted summary judgment on behalf of bondholders who have proven their
ownership of certain bonds through account statements and who have met other
requirements to establish their claims. To streamline the procedure for
summary judgment motions, in February 2007 Judge Griesa
released a memorandum that recognizes inter alia that "the Republic
needs not object to proof the Republic considers insufficient, but which the
Court has previously accepted as adequate. In such a situation, the
Republic's non-objection does not act as a waiver of the issue and the
Republic preserves such issue for all purposes, including appeal." The
Republic has appealed to the U.S. Court of Appeals of the Second Circuit some
of the orders granting bondholders' motions for summary judgments challenging
the adequacy of the proof submitted by some plaintiffs. The year of 2007 is a
critical year for bondholders because the statute of limitations may expire
on claims for missed annual payments that are made five years after the
default under the terms of a 'prescription' that applies to some Argentine
bonds issued under the European Medium Term Note Programme.
The New York State statute of limitations might forbid claims made after six
years. NY CPLR para 213.
Bondholders with judgments are seeking ways to
successfully attach and seize assets, with each plaintiff relying on his own
proprietary methods for targeting Argentina's assets.
Recently, the Second Circuit ruled that neither money
owned by Argentina's Central Bank (and held by the Federal Reserve Bank of
New York) nor the funds for repayment of Republic's obligations to
International Monetary Fund can be seized to satisfy a judgment issued in
favor of a bondholder against Argentina (EM
Ltd. v. Argentina, NML Capital Ltd. v. Argentina; NML Capital Ltd. v.
Argentina; NML Capital Ltd. v. Argentina, Banco
Central De La Republica Argentina, 06-0403,
06-0405, 06-0406, 2nd Cir.). The attorneys for the bondholders have filed a
petition for writ of certiorari to the U.S. Supreme Court.
ABA (c) 2007