U.N. Court Frees Elliott-Impounded Argentina Ship

Dec 17 2012 | 11:13am ET

A United Nations court has ordered Ghana to release an Argentine naval vessel, dealing a blow to Elliott Associates' bid to collect on the defaulted Argentine bonds it owns.

The International Tribunal for the Law of the Sea sided with Argentina and told Ghana to release the ARA Libertad. The ship has been stuck in Tema, Ghana, for more than two months after a Ghanian court impounded it; Elliott's NML Capital convinced a judge that it had the right to seize the vessel unless Argentina paid it, as ordered by U.S. courts.

Argentina argued that military vessels are not subject to seizure, and the Hamburg, Germany-based U.N. court agreed. The court also ordered both sides to pay their own costs, ruling that "Argentina should not [pay any] bail, bond or security" to get its boat back.

NML was, predictably, unhappy, calling it "completely inappropriate" for the U.N. court to have intervened.

"Nothing changes the fact that Argentina has the capacity to honor its contractual obligations, but refuses to do so," the hedge fund said in a statement. For its part, Argentina said it would "keep defending itself from the financial pirates."

The Libertad is due to return to Buenos Aires by Jan. 9.

NML and Aurelius Capital Management are among a small number of bondholders who refused to accept a restructuring of debt on which Argentina defaulted a decade ago. The U.N. court ruling is the latest reversal for the holdouts after a string of legal victories. Most recently, a federal appeals court stayed a lower-court ruling that it had just upheld that could have forced Argentina to default on its new bonds.

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