Rogue Trends in Sovereign Debt: Argentina, Vulture Funds, and Pari Passu Under New York Law

39 Pages Posted: 2 Mar 2014 Last revised: 5 Apr 2015

See all articles by Tim Samples

Tim Samples

University of Georgia - Terry College of Business

Date Written: October 8, 2014

Abstract

Coined the "trial of the century" in sovereign debt litigation, NML v. Argentina involves a radical departure from the traditional unenforceability of sovereign debt contracts in favor of the opposite extreme: enforcement through potent injunctive remedies applicable to third parties. Problems with the NML precedent could extend far beyond Argentina’s immediate situation. NML is the latest landmark in a trend that creates serious uncertainties for sovereign debt markets — a major concern for sovereigns, their creditors, and financial institutions around the world.

This article contends that NML creates "bad law" by overcompensating for unenforceability problems with an ambitious reading of the pari passu clause and supercharged injunctive remedies. As a practical matter, the milk is spilled; "rogue" precedent now exists. But until broader solutions for problems in sovereign debt are available, there are compelling grounds for other courts to apply the NML precedent as narrowly as possible. In addition to extraordinary factual circumstances of NML, the Second Circuit provided a starting point for distinguishing NML from future cases.

Keywords: Sovereign Debt, Argentina, Pari Passu, Latin America, New York Law, Litigation, Finance

Suggested Citation

Samples, Tim, Rogue Trends in Sovereign Debt: Argentina, Vulture Funds, and Pari Passu Under New York Law (October 8, 2014). Northwestern Journal of International Law & Business, Vol. 35, pp. 49-86, 2014. Available at SSRN: https://ssrn.com/abstract=2403342 or http://dx.doi.org/10.2139/ssrn.2403342

Tim Samples (Contact Author)

University of Georgia - Terry College of Business ( email )

A425 Moore-Rooker Hall
Athens, GA GA 30602-6269
United States

HOME PAGE: http://www.terry.uga.edu/directory/profile/tsamples/

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