Stiglitz Plans to Back Argentina in U.S. High Court Case

Nobel laureate Joseph Stiglitz plans to file a brief in support of Argentina’s bid for U.S. Supreme Court review of a lower-court order to pay holders of defaulted bonds in full, according to his lawyer.

The Columbia University professor and former World Bank chief economist will submit a brief to the high court in support of Argentina’s Feb. 18 request, Deepak Gupta, an attorney for Stiglitz at Gupta Beck PLLC, said today. France, Mexico and Brazil are also planning to back an effort to get the case reviewed.

Argentina asked the Supreme Court last month to take the case, saying the order blocking payments on restructured bonds until the untendered debt is paid threatens to force a new default. It also argued that in upholding the order, the intermediate appellate court didn’t properly apply the Foreign Sovereign Immunities Act, which limits suits against foreign governments.

Argentina defaulted on $95 billion of bonds in 2001. While about 93 percent of creditors accepted losses of 70 cents on the dollar in the country’s 2005 and 2010 debt restructurings, holdout investors including hedge fund Elliott Management Corp. sued for full repayment and won.

Financial Future

The legal fight has put U.S. courts in the unusual position of shaping another country’s financial future. Lower court rulings have already led Standard & Poor’s, Fitch Ratings and Moody’s Investors Service to cut Argentina’s bond ratings.

Attorneys for Brazil sent a letter notifying lawyers for both sides that they plan to submit a so-called friend of the court brief in support of Argentina’s request. A press official at Brazil’s Finance Ministry declined to immediately comment.

Mexico’s finance minister Luis Videgaray said yesterday that the Latin American nation will also file in support of Argentina because the ruling could threaten future sovereign debt restructurings. France also will urge the Supreme Court to review the case, according to a French government official.

Such amicus briefs are due March 24 and require notification of the attorneys in the case 10 days before their due date. Holders of defaulted bonds have until May 7 to reply.

Stiglitz wrote in a Sept. 4 opinion piece on Project Syndicate that the appeals court’s decision upholding the order “threatens to upend global sovereign-debt markets. It may even lead to the U.S. no longer being viewed as a good place to issue sovereign debt.”

Earlier Brief

In July, France filed a brief in support of Argentina’s first petition to the Supreme Court, which was rejected in October as the appeals court was still deciding parts of the case. In its brief, France said the decision would have a “destabilizing effect” on a country’s ability to engage in orderly and negotiated debt restructurings as a means to prevent default.

Under the Supreme Court’s normal scheduling practices, it won’t act on the appeal until at least the end of May. The justices would hear arguments and rule during the nine-month term that starts in October.

Concern that Argentina will opt to default instead of paying the holdouts has made the country’s credit default swaps the costliest in the world. Argentina’s five-year swaps fell 11 basis points to 1,899 at 12 p.m. in New York according to prices compiled by CMA.

The Supreme Court case is Argentina v. NML Capital, 13-990. The lower court case 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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