In the long-running legal battle between Argentina and its “holdout” bondholders, each side has been seeking to line up high-profile allies in pending Supreme Court proceedings. Last week, a few foreign governments filed amicus curiae briefs in the Court in support of Argentina. Today, the bondholders lined up what may prove to be a more important set of allies: 21 States filed an amicus curiae brief urging the Court to rule against Argentina.
The States are not simply disinterested observers of these court proceedings, which will determine the power of U.S. courts to issue injunctions designed to force foreign countries to honor their commitments to repay bond debt. Through their public pension funds, States have invested billions of dollars in foreign sovereign debt. It’s not surprising, therefore, that they oppose Argentina’s contention that the Foreign Sovereign Immunities Act (FSIA) largely bars U.S. courts from taking steps to enforce judgments entered against issuers of defaulted sovereign debt. The States’ willingness to come forward so publicly should serve as an important reminder to the High Court that American taxpayers and pensioners will be badly harmed if foreign governments are permitted to walk away from their contractual commitments.
The dispute between Argentina and its holdout bondholders actually encompasses two separate Supreme Court proceedings. The States’ brief (one of several filed today in support of the bondholders) was filed in the proceeding that addresses whether Argentina can be required to answer questions regarding the location of its commercial assets. Bondholders want that information to assist in their efforts to seize non-exempt Argentine assets in satisfaction of court judgments they previously obtained. The FSIA provides that a sovereign’s commercial assets (but not its governmental assets) may be seized by judgment creditors. U.S. courts have the power to order seizure of commercial assets located within the United States, while judgment creditors must seek the assistance of courts in a foreign country if they wish to seize the sovereign’s commercial assets located in that country. The question before the Supreme Court: may a sovereign debtor be required by a U.S. court to answer questions regarding the location of its commercial assets in foreign countries, or would such a requirement affront the nation’s sovereign dignity?
The States’ amicus curiae brief strongly urges the Court to grant bondholders access to that information. They argue that even though Argentina waived its sovereign immunity and agreed to be subject to suit in New York courts when it borrowed money from the States and other bondholders, those concessions would be meaningless if bondholders were denied the tools necessary to enforce their repayment rights. They note that unless bondholders are granted the ability to discover the location of a sovereign nation’s commercial assets, they will have no way of knowing where to turn to initiate enforcement proceedings.
Those arguments may persuade the Supreme Court. More importantly, the Supreme Court filing by 21 States (represented by a bipartisan group of Attorneys General) reinforces the breadth of the opposition to Argentina’s position. Their presence also serves as a reminder to the Court that allowing foreign governments to walk away from their debts would harm millions of Americans.
Also published on Washington Legal Foundation’s Forbes.com contributor page