Pari Passu: So Passe! (Extractive Edition)
Felix Salmon stays with the Argentina pari passu saga, about which I wrote here. The holdout creditors have now filed their briefs (Felix has the links), and are doubling down on the text. Much of their argument hangs on a creditor-friendly formulation of the second half of Argentina's pari passu clause, which goes to the status of payments, rather than the underlying obligation. The creditors make a point of dissociating the payment half of the clause from the Latin mumbo jumbo before it ("equal treatment", not "pari passu"!), which is kind of silly, since all the parts and flavors go by pari passu. But rhetorically, equality is much more appealing.
If the Second Circuit follows the creditors into the text, they have succeeded in framing the implications of the case narrowly, and have blunted the policy arguments of Argentina and its reluctant amici, notably the U.S. Government. This is so even though the creditors' reading of the text is more twisted than not, their description of the jurisprudence is strained, and the passage on the interaction between collective action clauses and pari passu is plain odd.The creditors' real problem and the elephant in the room is not pari passu or equal treatment, it's sovereign immunity. Pari passu is the eye of a needle. There is just no way of fixing the immunity problem through pari passu without mangling a bunch of law ... all for the sake of the rule of law?
If the decision becomes about Judge Griesa, I part with Felix and get worried about the creditors' prospects. The venerable judge gets to exercise discretion, but the Second Circuit has had no trouble reversing him on Argentina in the past. His recent opinions on the subject range from scant to ranty. And he himself expressed serious misgivings about granting the pro rata payment remedy under the pari passu clause just before signing the order.
All that said, champagne corks must have gone a-poppin' at Elliott at the news of the YPF nationalization. First, as Felix observes, this action makes Argentina look like the irredeemable law-breaker of Judge Griesa's purplest paragraphs. The response--two wrongs don't make a right, or don't twist New York law to make Argentina abide by it--sounds lame. Second and much, much more interesting, we now have the prospect of state-owned oil tankers setting sail, begging to be seized by judgment creditors. Now who needs pari passu when you can have an oil rig?