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Un-Denouement

posted by Anna Gelpern

With about 30 seconds of wi-fi, here are my two cents on top of Mark's and Stephen's. This feels weirdly like a pox-on-all-your-houses decision.

Everyone expected it to go against Argentina, and badly, and so it did. But via Footnote 6, it seems to have restarted the clock on the Supreme Court process (about which I know much less than Mark). Add another en banc petition, you could be looking at another six-month window for Argentina, maybe more. Contrast Judge Griesa's Thanksgiving orders -- this panel does not come across as tormented about irreparable harm from the plaintiffs going unpaid for another year or more.

On the other hand, the opinion is making it really hard for Argentina and the various intermediaries around the world to use the time to get around the injunction. The court must see itself as calling the institutions' bluff: if Argentina decides to pay and you are caught in the middle, come and talk to us then. Of course this is precisely what they are desperate to avoid. This is just how secondary boycotts work.

There is the ratcheting up of the Argentina-is-unique talk, which strikes me as an attempt by the court to backtrack on (or clarify) the super-broad language in its October opinion. Fair enough, but the upshot is still that it will take more litigation to decide just how different Argentina is. I doubt Grenada is altogether relieved, no matter how many people tell them that it is nothing personal against Grenada but instead all about Argentina.

Then there is the fascinating discussion of the fact that banks block payments to bad guys all the time in America. PRECISELY--a point highlighted in the Clearing House briefs. This is burdensome and expensive, but we as a society have decided it is worth it. Why? All the examples the court lists involve blocking flows to countries sanctioned for terrorism and the like. If not paying debts that cannot be restructured in bankruptcy merits the same response as terrorism and the drug trade, so be it. But does it?

And of course the court gets CACs wrong, again. Recall the term Collective Action Clauses in this case refers to supermajority amendment clauses embedded in most new sovereign bond contracts, though not the old, and not the loans. Surely a debtor that fails to get the requisite majority of its bondholders to vote for a restructuring should not get to restructure its bonds. And absent bankruptcy or aggregation, a debtor that restructures only part of its debt should not automatically get to restructure the rest. But it is a huge leap to say that the holdout debt therefore gets to block payments to those who agreed to restructure. This case is not about the level of exchange participation, but a minority remedy that targets the entire exchange.

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