Argentina Appeals Default Case To Supreme Court

Feb 19 2014 | 11:33am ET

Argentina has thrown itself on the mercy of the U.S. Supreme Court, asking the justices the consider the "well-being" of its citizens.

The country wants the high court to throw out lower-court rulings that would either force it to pay hedge-fund holdouts from its 2002 default—or to default on its restructured debt. The appeal comes at a sensitive time for Argentina, which is struggling with a financial crisis and recent currency devaluation.

The hedge funds, led by Elliott Management and Aurelius Capital Management, are owed about $1.33 billion on the defaulted debt. The trial court ruled that Argentina cannot continue to pay its restructured debt without also paying the holdouts, a decision that was upheld by the U.S. Second Circuit Court of Appeals last year.

But those decisions "threaten the well-being of Argentina and its citizens, as well as of the countless holders of performing Argentine debt, many of whom are U.S. institutional investors and individuals," Argentina argued. The country said that the rulings violate its sovereign immunity, even though it issued the defaulted bonds in New York under the state's laws. Given that, Argentina suggested that the Supreme Court may wish to defer to New York's highest court, the Court of Appeals.

Such a move would further delay the case.

The lower-court decisions "are deeply offensive to Argentina's sovereignty, flout the Foreign Sovereign Immunities Act and have upended expectations in the sovereign debt markets," Argentina argued. The country also argued that the lower courts have misinterpreted the pari passu clause in the defaulted debt.

Elliott dismissed those arguments, noting that "if Argentina were willing to talk to its creditors, this dispute could be resolved quickly." Aurelius was even more cutting: "They are welcome to read our winning briefs from two levels of litigation below and the associated opinions and quote all they want."

If the court agrees to hear the case, a decision would likely come between October and next June. The Supreme Court has already taken a case involving subpoenas in the dispute, but last year declined to hear the main case, as it was still being litigated in the Second Circuit.

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