This ruling, handed down today by the Second Circuit, may spell the end of one phase of the NML litigation. For some time, the plaintiffs have been trying to find a way to seize assets held by Argentina's central bank. Their latest effort sought an order declaring that Banco Central is an alter ego of Argentina, at least insofar as U.S. law is concerned. The effect of such an order would be to eliminate the bank's claim to be treated as a separate legal entity, making it liable for the government's debts. I understand that Banco Central has already moved most if not all of its assets out of the U.S., and earlier Second Circuit rulings already protect funds held at the Federal Reserve Bank of New York. But the plaintiffs could have taken the order to another country where Banco Central has assets and (conceivably) parlayed it into an order allowing them to attach bank funds.
This was always a long shot for the plaintiffs. Even if they had gotten their requested relief, officials in other jurisdictions would not be obliged to let them seize bank funds. After today's ruling, though, the plaintiffs face additional practical and legal barriers. Their complaint alleged that Argentina effectively controlled Banco Central by determining who served as an officer of the bank, by borrowing from the bank, and by coordinating with the bank in implementing an inflationary monetary policy. The Second Circuit held that these allegations, even if true, didn't establish that the bank was the government's alter ego. The slippery slope here is fairly obvious. It is common, after all, for there to be a degree of coordination between governments and central bankers. I doubt the Second Circuit was eager to create a precedent that might imply that central bank assets in the United States are at risk. Technically, today's ruling doesn't prevent the plaintiffs from raising the alter ego theory in other jurisdictions (perhaps where the standard for alter ego liability is different). But given today's ruling I would imagine the fight will shift to other fronts.