The government intensifies efforts to add allies in the lawsuit against the vultures
It wants to go to the highest court in the U.S. with independent filings that support the position of not paying more than the swap. There is doubt over what Barack Obama will do.
Friday, November 15, 2013
by ESTEBAN RAFELE Buenos Aires
The government is concentrating its efforts on adding the largest amount of court filings that support the country’s position in the lawsuit against NML Capital and other holdouts and which will have to be decided by the U.S. Supreme Court next year. According to official sources, the intention is to present all the important amicus curiae briefs (friends of the case) that it can to try to reverse the sentence in the highest court that orders the country to pay US$1.5 billion and which seems irreversible.
Most of the judicial strategy passes through, more than ever, the desire to show that “systemic risk” and “harm to third parties” that, in the view of the government, would come of the ruling of lower New York court Judge Thomas Griesa, upheld by the Court of Appeals of that district. The judgment orders the country to pay principal and interest claimed by the vulture funds in cash and all at once, and extends the obligation to the Bank of New York and other entities charged with moving normalized debt payments.
To show this “systemic risk”, the official intention is to present the biggest quantity possible of friendly independent briefs that validate the government’s position.
The contacts by officials of the Economy Ministry with representatives of investment funds and diplomatic communications are proliferating. On the one hand, the government is seeking to ensure that it will count on the Exchange Bondholder Group (EBG) which already filed amicus curiae in previous instances. Here they are seeking to strengthen the group of bondholders with restructured debt that is led by Gramercy. The bondholders that entered the exchange see their property rights under threat, as the banks that participate in the operation will have to retain money to pay the judgment if the country doesn’t pay.
At the same time, according to one of the officials that is participating in the efforts, the Executive is seeking to add more countries and organizations as friends, to give strength to the warning about financial systemic risk that would come from leaving the sentence as is. According to the government, the ruling that orders the payment to the vulture funds in cash of 100% of their claim puts future restructurings in danger, at a time when various European countries are in crisis.
These arguments are part of the first appeal to the Supreme Court, which the court rejected. For the official sources, at that time there was a discussion of the concept of pari passu or equal treatment, or the rights of the holdouts to collect and not be “discriminated against” when there are other bondholders collecting. Now the amount is being discussed. With the debate over pari passu settled, for the government “equal treatment” would be to pay the exchange offer and not 100% of the claim. Otherwise, they insist, any sovereign restructuring would lose all sense.
This view is shared. France already filed an amicus brief in the first appeal to the Supreme Court. The director general of the IMF, Christine Lagarde, pushed a motion for the entity to do the same, but it didn’t happen because the United States decided not to support it.
Much of the success of this strategy is in whether the administration of Barack Obama joins the initiative. The efforts are constant, but no official is in the mood to give a verdict. In the final round, the Supreme Court could ask for the U.S. government’s opinion, but Argentina doesn’t want it to come to that. “It has to be shown to the Court that everyone wants this settled,” an official source summed up.
However, the Court of Appeals already rejected the country’s arguments, by upholding Griesa’s opinion without changes. At that time, the judges said that neither Argentina nor the third parties (the bondholders with restructured debt) had proven systemic risk nor an effect on property rights.
That sentence now awaits an en banc review, or a plenary of 13 judges in Appeals. The government assumes that this instance will uphold the ruling, but it allows the government to gain another three months to present a second appeal to the Supreme Court. These are 90 days in which, in addition to cautiously counting on the ruling being stayed so that swap obligations can be paid, the government can seek allies.