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Pari Passu Closing Ceremonies Quote Parade

posted by Anna Gelpern

Supplementing Mark's post, here are the many magic words, in order of their appearance in the Order ... reliving the saga like it was yesterday.

In 1994, the Republic began issuing bonds pursuant to a Fiscal Agency Agreement (“FAA”), which contains the famed pari passu clause...

Hey, it's not "equal treatment clause" anymore!

After the Republic suffered an economic crisis in 2001, it defaulted on its debts, including the FAA bonds. In an attempt to cure this default, the Republic twice invited bondholders to exchange their FAA bonds for new bonds worth only 25–29% of the FAA bonds’ value. In all, roughly 93% of the Republic’s creditors ultimately accepted these exchange offers, and the Republic began making payments to the “exchange bondholders.”

Is 93% a little or a lot?

The Republic refused to pay, and the plaintiffs tried— usually in vain—to attach Argentine assets to satisfy their money judgments. See, e.g., EM Ltd. v. Republic of Argentina, 865 F. Supp. 2d 415, 417 (S.D.N.Y. 2012) (observing that the Republic has “usually prevail[ed] in defeating the plaintiffs’ attempts to recover” through attachment).

Remember who helped Argentina for YEARS?

The plaintiffs then moved for specific performance, seeking a remedy for the Republic’s violation of the pari passu clause. Although the pari passu clause does not itself require a particular remedy, the court exercised its inherent equitable discretion under Rule 65(d) to craft appropriate relief.

... which fixed the problem right away. Or something like that.

After the Supreme Court denied certiorari in June 2014, Republic of Argentina v. NML Capital, Ltd., 134 S. Ct. 2819 (2014), the injunctions went into effect.

... which fixed the problem right away?

In an attempt to encourage settlement, the court appointed a Special Master ... Despite his untiring efforts to bring about a settlement, the Republic chose to default on the exchange bonds rather than pay anything to plaintiffs.

Maybe another injunction would help?

In early 2015, “me too” plaintiffs in thirty-six actions filed motions for partial summary judgment. As their name suggests, these plaintiffs...

... were not called Tom, Dick, or Harry ... hmmm ....

The result was that “me too” plaintiffs in fifty-one actions obtained judgments that the Republic violated the pari passu clause. Plaintiffs in forty-nine of those actions then filed motions for specific performance, seeking equitable relief akin to the injunctions obtained in the original thirteen actions. ... The court granted those motions on October 30, 2015.

Who likes to be called "Me too"?

In November 2015, the Republic’s voters elected Mauricio Macri as their president, ending the twelve-year reign of ... President Cristina Kirchner....

... and letting bygones be bygones ...

President Macri’s government has consistently declared its desire to resolve the disputes ... [go Sujata! cited by #Griesa]  (“I want to be clear: We want to reach a settlement. We want to find a fair agreement.”).

...BOOM, just like THAT! (Maybe it's the personal attention?)

The Republic’s Proposal contemplates two settlement categories. The first, known as the “Standard Offer,” is open to all FAA bondholders, and provides for a cash payment equal to the original principal of the bond plus 50% of that principal, classified as interest. The second, known as the “Pari Passu Offer,” ...

...must be the fairest of them all!

In his statement issued February 5, 2016, the Special Master called the Republic’s Proposal a “historic breakthrough.” He noted that settlement would allow the Republic to return to the global financial markets to raise much-needed capital.

But no sailing around in tall ships, please.

The U.S. government has also signaled its support.

Not for the first time. But nvmnd.

Courts have “wide discretion” to vacate injunctions.

But it has to feel right.

The ultimate question, then, is “whether an ongoing exercise of the court’s equitable authority is supported by the prior showing of illegality, judged against the claim that changed circumstances have rendered prospective relief inappropriate.” ... A court should also consider “whether the requested modification effectuates or thwarts the purpose behind the injunction.”

Because the injunction has been so effective at getting everyone paid until now, we would not want to let it go just like that.

Here, the Republic and a number of plaintiffs ask the court to exercise its discretion to vacate the injunctions. They argue that the injunctions’ continued effect is no longer equitable. The court agrees. The injunctions, once appropriate to address the Republic’s recalcitrance, can no longer be justified. Significantly changed circumstances have rendered the injunctions inequitable and detrimental to the public interest.

It has always been about the public interest.

Most importantly, the Republic has shown a good-faith willingness to negotiate with the holdouts.

Holdouts now, not FAA bondholders, eh?

Under prior Argentine administrations,... the Republic’s leadership engaged in rhetoric, calling plaintiffs “vultures” or “financial terrorists,” while showing open contempt for this court’s rulings. [go @RobinWigg! cited by #Griesa] 

... and so the court called the old guys "uniquely recalcitrant" and "contumacious," and then the old guys said #Griesa started it, and then they called him awful names, and then someone threw something, and then  ...

All that has changed. President Macri pledged during his campaign that he would seek to resolve these long-running lawsuits—and he has honored that promise. ... Gone will be the Lock Law—the legislation that led the court to fashion these injunctions in the first place—as well as other antagonistic legislation, such as the Sovereign Payment Law. 

Repeal and replace!

Although the court takes no position on the reasonableness of the Republic’s Proposal, the court does recognize the Republic’s earnest efforts to negotiate and its striking change in attitude toward settlement since President Macri assumed office.

It is quite important to be earnest.

Even the objecting plaintiffs have recognized that the Republic’s willingness to negotiate a settlement impacts the balance of equities. ... And those plaintiffs have acknowledged, from the beginning to the end, that the injunctions would promote settlement and that plaintiffs would support that kind of resolution.

Sorry, they changed their minds.

The Republic’s willingness to impose ... condition[s] on itself is compelling evidence of its sincerity and good faith, and stands in stark contrast to the contumacious policies of prior administrations. And the court’s retention of jurisdiction should allay any concern that the Republic will return to its old ways.

CON-TU-MA-CIOUS! CON-TU-MA-CIOUS! (I'm watching you, Argentina!)

Vacating the injunctions would serve the public interest by ceasing the collateral effects they have on third parties. The most notable third parties affected by the injunctions are the exchange bondholders. But there are others, too: the financial intermediaries that the Republic engages to help it pay the exchange bondholders; the FAA bondholders who favor settlement but who are not parties to every single case; and the Argentine people generally.

Wait, there is more.

The court has repeatedly voiced its concern about the exchange bondholders’ plight. Hr’g Tr. 11, NML Capital, Ltd. v. Republic of Argentina, No. 08-cv-6978 (S.D.N.Y. Aug. 21, 2014) (bemoaning the injunctions’ collateral damage to “very innocent third parties”) ...

The bemoaning really helped.

When some plaintiffs first sought injunctive relief, they reassured the court that there was “no evidence” that the injunctions would “stop or interfere or impair in any way those exchange offers.” ...  Yet that is precisely what has happened. Of course, the Republic’s decision to default on the exchange bonds was its own, and plaintiffs bear no blame for seeking these injunctions four years ago.

But boy o boy, it sure did not pan out like they said it would.

But the court may still now recognize that it is in the public interest for the Republic to resume paying its restructured debt. If the court vacates the injunctions, the Republic may once again pay the exchange bondholders—something that has not happened for nearly two years.

Better late etc. etc. etc.

Vacating the injunctions in all cases further benefits third parties by allowing any FAA bondholder to resolve claims against the Republic. For example, plaintiff EM Limited agreed to settle with the Republic for nearly $1 billion after signing a simple, one-page, handwritten Agreement in Principle. [signed, XXOO, Dart] ... If another plaintiff, armed with an injunction in a different action, could scupper that deal ... The court never intended this result. ...  Accordingly, if the court lifts the injunctions, it will do so in all cases.

Me too! Me too!

 The Court of Appeals has also recognized this court’s discretion to consider “the health of the nation” when considering appropriate remedies. ... Allowing the Republic to reenter the capital markets will undoubtedly help stimulate its economy and thus benefit its people. It might even encourage other indebted nations to choose compromise over intransigence.

No way. Argentina is unique. Unique, I said. Not precedent.

Some plaintiffs ... believe the court cannot alter the injunctions if doing so would mean the Republic could pay the exchange bondholders without (1) ratably paying plaintiffs or (2) settling with plaintiffs for the full amount of their claims. ... It is important to recall that the plaintiffs had no absolute legal right to the injunctions. ... For years, the court has repeatedly recognized that the only viable way to end this litigation is through settlement—surely for less than the full claim, as the notion of “settlement” implies.


Some plaintiffs may choose to reject the Republic’s Proposal. That is their right. But that does not diminish the court’s discretion to vacate injunctions that would prevent resolution of a meaningful portion of this litigation. The court cannot countenance an equitable remedy that would allow some plaintiffs to hold other plaintiffs hostage. If that were truly the injunctions’ effect, it would surely constitute a form of “unforeseen obstacle[]” the court had not previously contemplated.

 And there you have it, folks. It cannot really be over, can it? Nah.


Superb post; funny and insightful as always. My question is: What does this mean for the next pari passu litigation? (E.g., Russia v. Ukraine?).

Okay, I have a few other questions as well (if you are willing to humor me):

Does pari passu still mean ratable payments (plus a big fat injunction) in NY?

And is Judge Griesa still going to have to decide on what pari passu means under English/German law in front of a NY federal court judge?

"Me too": And wouldn't it be amusing if he gave an injunction to holders of the English and German law bonds? "Oh you mean *that* equal treatment clause!"

Well, Hello, "MeeToo"! Great questions as always.

(1) For Ukraine, this does not mean a whole huge lot because (a) Ukraine enacted a law on the recommendation of certain Duke law students (do you know them, by chance?) to preempt the operation of pari passu as a remedy. Search for "Budget Code" here: http://sites.dfkingltd.com/ukraine/Home/?page=Documents&id=zh1LFefASk2lR3UiB8tmNg
(b) the jury is still out on the interpretation of pari passu under English law (which governs Ukrainian debt), but note that even the most ratable payments-inclined Law Lord would not touch the injunction question with a ten-foot pole: http://ftalphaville.ft.com/files/2015/12/PP-Declaration-of-Lord-Nicholas-Phillips-in-favour-of-Plaintiff-copy.pdf, and (c) in light of the above, I would expect the military/political conflict to settle before the legal one does.

(2) Heck, yeah, it still means ratable payments in NY! As for my big fat injunction ... I am reading a certain tinge of regret between the lines in the Order. It will remain a possibility, but this retrospective evaluation might make it a more distant one for all concerned (courts, countries, plaintiffs). That said, it is not like these plaintiffs will just fold. There will be lots to post about before we move on to Venezuela.

(3) The vibe I am getting (and yes, it is all vibe, no insight) is that we are in the "run for the hills" stage of this adjudication. I cannot imagine that he wants to decide the English and German meanings, and he has enough scope not to until it becomes moot. But I do not know from procedure.

That said, there is plenty there for "Pari Passu: The Lost Covenant," "Pari Passu: The Clause Awakens," "Pari Passu and the Cursed Indenture," and many more sequels in the years to come. Because none of us can imagine life without Pari Passu anymore.

Anna, Mark: Griesa's yesterday order only rules on 2015 injunctions or includes 2012's as well? I understand that judge at the moment lacks of jurisdiction for "me too" injunctions and that he asks for "permission" of the Second Circuit. but with yesterday decision, first (big fat) injunctions issued are included or we should expect further ruling on them?
I hope I made myself clear.


Two things here:
1) Griesa shows that the meaning of pari passu depends on how a judge feels about the debtor at any one point: it´s ratable payments if he does not like the debtor, it´s not ratable payments if he does like the debtor; NML is being treated unfairly versus EM since NML won´t get 100% relief through Argentina´s offer while EM does, and Griesa now says that NML won´t be able to claim ratable pari passu remedy this time around (because Griesa happens to like Macri while he despised Cristina); if anything, this case will show that the whole sovereign pari passu concept is a joke and, frankly, that those who have spent years researching this thing have more or less wasted their time (for the record, I do believe that pari passu should stand for equality of payments, and the ancient historical record very clearly seems to indicate so; after all, what type of equality if not payments equality would creditors be interested in).
2) For pari passu geeks, the Ukrainian case (as Gelpern indicates) promises to be fascinating given that the country did pass the law that allows it to stop treating holdouts as if ranking pari passu (even though the old contracts contained a pari passu clause); this is an odd, though widely in use, version of pari passu that may be first tested in UK courts through the Ukraine-Russia trials; if UK judged side with Ukraine, this will be the end of the holdout pari passu legal remedy, at least for the many countries that have used this odd version of the clause (by the way, typically ignored by the literature and even top practitioners apparently).

Thank you very much for your post. Your post and articles are very valuable for us, researchers from Europe ;-).
I just have a little question concerning the condition to lift the injunction. If I understood well, Griesa wants Argentina to pay first before lifting the injuction. But Argentina suggests the injunction needs to be lifted so that they can borrow money to pay the holdouts. It's the snake that bites its own tail : do you think it can freeze the situation and prevent the deal?
Thank you for answer!

your answer*

Thank you, Caroline! Argentina can borrow contingent on settling the lawsuit. If you know the injunction will be lifted, payment sequence is easy to design. Bigger problem- if there are holdouts left and they try to seize or block using theories other than pari passu. The courts may be reluctant to grant new remedies, but you never know.

The new administration and litigants deserve a lot of praise for reaching a settlement.

That said, any remaining me-too or other holders of defaulted debt are still entitled to being paid at par. These claims can never be extinguished, except by payment or restructuring, unless the Republic of Argentina ceases to exist (see U.S. Confederacy).

The pari passu clause, as interpreted by Greisa, applies to ALL EXTERNAL INDEBTEDNESS including that issued under English law; Greisa's injunction on this being paid in violation is correct.

Consistency would mean that any remaining holdouts should be able to enforce this precedent and prevent exchange bondholders from being paid until they receive payment pro-rata. Macri and Prat-Guy should do the fair thing and pay out at par plus all PDI plus legal expenses (yep, they should get more than Elliott) and thus end the saga.

I don't understand the need for such sarcasm, BTW. The Kirchners' actions were perfidious, and the initial exchange, quite simply, was flawed (as Gelpern has noted): they could have made the exchange bonds immune to pari passu predations by NOT making it external debt, or by setting a 99% threshold for participation in the first place.

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