Argentina must pay $1.3 billion to hedge funds that refused to restructure country’s debt after its default in 2001, according to a decision Wednesday night of a New York court after a lawsuit was launched by creditors.
The decision raises the likelihood of a new default of Argentina and, if confirmed by a higher court, may overturn the immunity of sovereign states over creditors, accepted in international law for almost a century.
The decision was confirmed earlier, in October, by a Federal Court of Appeal, which referred the case to the judge in the first court to clarify certain aspects, including Argentina’s debt to the group of hedge funds led by Elliott Associates, “an aggressive hedge fund that has made suing countries its hallmark,” writes the Financial Times.
Argentina refused to follow similar decisions in the past, calling the hedge funds “vultures”, but the new decision goes further, as the judge extended the responsibility to others. Thus, “Argentine agents and others who collaborate actively with the parties or their agents” are responsible to comply with the decision.
These parts include U.S. Bank of New York Mellon, manager of the Argentine restructured bonds, acting as intermediary for payments of the country to creditors. Thus, the judge ordered that, when BNY Mellon will make payments to creditors that restructured Argentina’s debt, investors that refused the restructuring should also get the amounts to which they are entitled.
Despite the vehement protests of the bank, the creditors that have accepted the restructuring and an opinion submitted by the Federal Reserve of New York in favor of Argentina, the court confirmed that the decision has jurisdiction in the payment system in the United States. Some experts believe that the decision could have a widespread impact on future restructuring of state debt.
The decision, as amended Wednesday, will return to the Federal Court of Appeal, which shall decide on the amount calculated at first court and on third parties affected by the judgment. The case could eventually reach the U.S. Supreme Court.
Reply