More Argentine discovery shenanigans

Much has been going on, although little has actually happened, in the litigation against Argentina. For instance, the court has allowed the plaintiffs to file an amended complaint seeking an injunction blocking payments on the recently-issued BONAR 2024s (USD-denominated, Argentine law bonds). That may prove important, for it's a step toward blocking Argentina from issuing any foreign currency debt, anywhere within the great orange blob known as "places-that-are-not-New-York." But no injunction yet; Argentina has not yet filed an answer to the complaint. 

Plaintiffs have also continued efforts to find executable Argentine assets. I'm interested in the role that sovereign immunity plays in the debt markets, and a development yesterday captured my attention. Readers may recall that, in a 2014 case involving Argentina, the U.S. Supreme Court considered the extent to which a creditor holding a money judgment can use U.S. discovery rules to force disclosure of a sovereign's assets around the globe. The Court ruled against Argentina, thereby opening the door to potentially expansive discovery into the nature and location of the sovereign's assets worldwide. After losing in the Supreme Court, Argentina persisted in refusing to turn over much of the discovery requested by plaintiffs. Yesterday, the district judge sanctioned Argentina by ordering that "any property of the Republic of Argentina in the United States except diplomatic or military property is deemed to be used for commercial activity." (No paper order is available on the court's docket yet.)

U.S. law permits creditors of a foreign state to seize only assets that are "used for a commercial activity" in the country. The district court's order deems all Argentine assets (other than military or diplomatic assets) to satisfy this criterion. In one sense, this is a complete end-run around the statute. By restricting enforcement to commercial assets, the law minimizes the ability of private creditors to create diplomatic headaches for the U.S. government. On the other hand, the sanctions order is analogous to a so-called adverse inference, where the court treats certain facts as established because the sovereign's discovery misconduct has made the facts impossible to prove. There is some authority for adverse inferences as a sanction for a sovereign's litigation misconduct. Right or wrong, however, the result of yesterday's order is an even wider embargo on Argentina's ability to conduct transactions in the U.S.

Comments

[John]

I'm amazed at how long this litigation has taken.