Argentina Asks U.S. Supreme Court to Review Default Case

Argentina urged the U.S. Supreme Court to review a lower-court ruling against it in a case over the nation’s defaulted debt.

The South American nation claims a federal appeals court in New York was wrong when it ruled in October that investors in restructured Argentine debt can’t be paid unless holders of the nation’s defaulted bonds, led by billionaire Paul Singer’s Elliott Management Corp. and its NML Capital Ltd. unit, are also paid.

Argentina filed a petition June 24 asking the Supreme Court to take the case, arguing that the lower-court ruling “represents an unprecedented intrusion into the activities of a foreign state within its own territory that raises significant foreign relations concerns for the United States.”

Argentina argues the appeals court failed to properly apply the Foreign Sovereign Immunities Act, which limits suits against foreign governments. With part of the case still pending in the appeals court, it’s unlikely the Supreme Court will grant Argentina’s petition before the lower court rules, a decision that could come at any time.

“I don’t think it has any impact on the eagerly awaited Second Circuit decision,” said Henry Weisburg, an international litigator at Shearman & Sterling LLP, referring to the appeals court in New York.

Argentina’s Petition

Weisburg said he doesn’t think Argentina’s petition will have any effect on how the appeals court will rule in the case or, if it decides against Argentina, whether it will delay the effect of its ruling while the Supreme Court decides whether to hear the appeal. Weisburg said he thinks the Supreme Court is unlikely to take the case.

Argentina has said that forcing it to pay the defaulted bondholders immediately would expose it to $43 billion in additional claims it can’t pay and trigger a new default.

Peter Truell, a spokesman for New York-based Elliott Management, declined to comment on Argentina’s Supreme Court petition.

In the October ruling, the appeals court directed the judge overseeing the case to clarify how he planned to calculate the required payments to defaulted bondholders and how his orders barring payments to restructured debt-holders would apply to third parties, including banks.

In response, U.S. District Judge Thomas Griesa said that Argentina must pay defaulted bondholders the entire amount they’re owed whenever the nation makes a required payment to holders of the restructured debt. Griesa also said the order barring third parties from helping Argentina avoid payment covers Bank of New York Mellon Corp., indenture trustee for the restructured bonds, and others.

A three-judge panel of the appeals court heard arguments on those rulings in February. The panel didn’t say when it will rule.

The lower court case is NML Capital Ltd. v. Republic of Argentina, 08-cv-06978, U.S. District Court, Southern District of New York (Manhattan). The appeal is NML Capital Ltd. v. Republic of Argentina, 12-00105, U.S. Court of Appeals for the Second Circuit (New York).

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