Argentina Sovereign Debt: Inside the Judicial Labyrinth and How We May Leave it, But Not Yet

Abstract

This paper discusses the default of the Republic of Argentina that took place in 2001, but with a view of the current and significant judicial events that are taking place as a consequence of such default. In particular, this paper analyzes and discusses the judicial cases brought by several investors against the Republic of Argentina before the New York federal courts based by the default of Argentina on its bonds as immediately after the default some bondholders of Argentine debt filed lawsuits in the New York courts, as it was the jurisdiction agreed in the terms and conditions of the bonds. However, during more than ten years the plaintiffs under the different lawsuits filed against Argentina have obtained favourable judgments but have been unable to collect upon their judgments. Plaintiffs have tried various judicial strategies to collect on the judgments but due to the United States Foreign Immunities Sovereign Act, which protects assets owned by sovereigns, they have been unable to do so.

Part A tells the story of the default and the unsuccessful efforts to collect on the judgments. Part B describes the most recent judicial decisions against Argentina and in favour of the plaintiffs of the case under this analysis, which may turn the luck of those efforts. Part C discusses the term "pari passu", which is the origin of this new litigation. Part D discusses certain particular terms and conditions proper and particular of the bonds issued by Argentina as part of its restructurings in 2005 and 2010, that prevents the country from offering better terms to the so called holdout bondholders (investors not participating in the those restructurings), and finally Part E analysis the different judicial outcomes of the court decisions.

Keywords: Argentina, Sovereign Debt, Pari Passu, Litigation, Debt Restructuring

JEL Classification: K021