Bloomberg News

Argentina Sovereign-Immunity Argument Rejected by Court

August 20, 2012

A federal appeals court in New York rejected Argentina’s argument that its sovereign immunity was affected by a lower-court ruling compelling compliance with subpoenas sought by NML Capital Ltd. for collection of five money judgments.

The U.S. Court of Appeals today upheld a September 2011 ruling by U.S. District Judge Thomas Griesa in Manhattan, ordering non-parties Bank of America Corp. (BAC:US) and state-owned Banco de la Nacion Argentina to comply with the subpoenas, rejecting Argentina’s argument that its sovereign immunity was affected.

The judgment stems from Argentina’s 2001 default on $80 billion owed to foreign creditors. Beginning in 2003, NML filed 11 actions in federal court in New York seeking to collect on its defaulted Argentine bonds. NML has won five money judgments in its favor totaling about $1.6 billion. Griesa has also granted summary judgment to NML in six other actions in which NML claims total more than $900 million, the appeals court said today.

NML, an Elliott Management Corp. affiliate, has sought “discovery” or evidence about Argentina’s property and served subpoenas on Bank of America and BNA, seeking to gain an understanding of how Argentina moves its assets. After Griesa granted the request, Argentina appealed, saying that by compelling disclosure about Argentinian assets abroad, the order violates the Foreign Sovereign Immunities Act.

‘Not Infringed’

“Because the discovery order involves discovery, not attachment of sovereign property, and because it is directed at third-party banks, not at Argentina itself, Argentina’s sovereign immunity is not infringed,” the appeals court held. “The district court therefore did not abuse its discretion in ordering BOA and BNA to comply with NML’s subpoenas.”

Jonathan Blackman, a lawyer representing Argentina, didn’t return a telephone call seeking comment about the ruling.

Peter Truell, a spokesman for Elliott Management, declined to comment on the decision.

In today’s ruling, the appeals court said that Griesa’s discovery order doesn’t infringe on any immunity from the district court’s jurisdiction that Argentina otherwise might enjoy.

“Whatever hurdles NML faces before ultimately attaching Argentina’s property abroad (and we have no doubt there will be some), it need not satisfy the stringent requirements for attachment in order to simply receive information about Argentina’s assets,” the appeals court said.

The case is NML Capital Ltd. v. Republic of Argentina, 11- CV-4065, U.S. Court of Appeals for the Second Circuit (Manhattan).

To contact the reporter on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net

To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net


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