NEW YORK -- The U.S. Federal Second Circuit Court of Appeals ruled that cash held in New York by Argentina’s central bank cannot be seized by holders of the country’s defaulted bonds, reversing a decision of U.S. District Judge Thomas Griesa questioning the sovereign immunity of Argentina’s central bank.
In September 2013, Judge Griesa had denied Banco Central de la Republica Argentina (BCRA)'s sovereign immunity defense to a request made by holdout creditors seeking a declaratory judgment that BCRA is Argentina’s alter ego, and liable for the Republic’s debts.
The appeals court rebuffed both arguments presented in the district court by the claimants.
The court did not find enough grounds to consider BCRA an "alter ego" of Argentina, nor did it consider that BCRA’s use of its account in the Federal Reserve of New York was for commercial purposes in a way that would trigger an exception to sovereign immunity of the Foreign Sovereign Immunities Act (FSIA).
The appeals court seemingly expressed regret for having to side with Argentina, mainly because Argentina has refused to comply with court orders to pay judgments against it.
"We do not condone or excuse Argentina’s continuing failure to pay the judgments duly entered against it by the District Court. Our decision that BCRA may invoke its own sovereign immunity in this lawsuit is not intended to allow the Republic to avoid its bargained‐for obligations, or to continue shirking the debts it has the ability to pay, although we suspect that this will be a predictable and unfortunate outcome of our decision," the Court of Appeals wrote.
Argentina defaulted on a record $95 billion of foreign debt in 2001. After going unpaid for years, holders of 93% of the bonds agreed to take new exchange bonds by 2010 at roughly 30 cents on the dollar.
Some bondholders refused to accept the terms and later won judgments against Argentina ordering immediate repayment with interest, which the nation has refused.
The decision “sets an international precedent and guarantees in a decisive manner that the central bank’s reserves cannot be embargoed,” Alejandro Vanoli, president of the central bank, said in an e-mailed statement (below).
EM v BCRArgentina - US Court of Appeals - Ruling Argentina Central Bank Has Sovereign Immunity - 31 August... by Latin American Herald Tribune
Argentina Central Bank Statement on US Court of Appeal Judgment - 31 August 2015 by Latin American Herald Tribune