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 U.S. District Judge Thomas Griesa, who has overseen the nation's
long-running debt battle with hedge funds, railed at Argentina's
lawyers at a hearing in New York a day after the publication of
another so-called legal notice insisting the government has met its
payment requirements and was therefore not in default.
Holding a newspaper copy of the notice, Griesa said if the false
statements did not stop, a contempt of court order will become
necessary.
Later on Friday, however, Argentina's economy ministry issued a
statement accusing Griesa of "clear partiality in favor of the
vulture funds."
"Judge Griesa continues contradicting himself and the facts by
saying that Argentina did not pay," the statement said.
Meanwhile, a spokeswoman for the U.S. State Department said the
United States would not permit the International Justice Court in
The Hague to hear Argentina's claims that U.S. court decisions had
violated its sovereignty.
"We do not view the ICJ as an appropriate venue for addressing
Argentina’s debt issues, and we continue to urge Argentina to engage
with its creditors to resolve remaining issues with bondholders,"
the spokeswoman said in an email.
Argentina petitioned the International Court of Justice on Thursday,
but the lawsuit could only move forward if the United States
submitted voluntarily to the court's jurisdiction.
CONTEMPT WARNING
At the hearing, Griesa said he was not going to go further than a
warning for now. He repeated that the two sides must continue
negotiating with the aid of mediator Daniel Pollack.
Griesa did not specify whether he might seek to sanction Argentina
or its lawyers, though he said he was "glad" to hear Jonathan
Blackman, Argentina's lead lawyer, say his firm Cleary Gottlieb
Steen & Hamilton did not aid in preparing the government's latest
legal notices.
In rare circumstances, U.S. judges have held foreign governments in
contempt and imposed monetary penalties. But such sanctions can be
difficult to enforce, and federal appeals courts have split on
whether foreign governments can be held in contempt at all.
Federal law largely protects the assets of foreign governments held
in the United States, said Michael Ramsey, a professor of
international law at the University of San Diego.
"You can't put Argentina in jail, so I'm not sure what he'd have in
mind besides monetary sanctions," Ramsey said. "Argentina has
refused to pay a valid judgment and I don't see why it wouldn’t also
refuse to pay a valid contempt order."
Blackman also complained of being attacked and lampooned by the
lobby group American Task Force Argentina, which is partly funded by
holdout investors.
Shortly after the hearing, Economy Minister Axel Kicillof said on
public television in Argentina, "We will continue to work tirelessly
to defend the rights of Argentina," and added that "Judge Griesa did
not resolve anything" in court.
"He created this confusing and extraordinary situation," said
Kicillof, who also played down concerns the case would cripple
investment in Argentina.
[to top of second column] |
NO SETTLEMENT IN SIGHT
Argentina missed a coupon payment after a grace period ended on July
30, pushing it into default on restructured debt from a previous
default in 2002 on roughly $100 billion in sovereign bonds.
The government settled with nearly 93 percent of its bondholders in
two restructurings but two deep-pocketed distressed debt investors
held out and did not participate in the exchanges in 2005 and 2010.
They are by far not the only holdouts, but have been the most
prominent in their fight for full repayment on debt they bought at
pennies on the dollar in a case that essentially comes down to a
contract dispute.
In 2012, Griesa ruled in favor of the holdout investors, led by NML
Capital Ltd, an affiliate of the $24.8 billion hedge fund Elliott
Management Corp, and Aurelius Capital Management, who won a $1.33
billion judgement.
Argentina insists it is not in default because it deposited a $539
million coupon payment on exchanged bonds before a June 30 deadline.
Griesa has called the deposit with trustee Bank of New York Mellon
illegal and reiterated on Friday that "there has been no payment."
Payments to exchange bondholders have not been made because of
Greisa's order, which stipulated the nation must concurrently pay
the holdouts their award plus accrued interest.
Argentina has published legal notices in recent weeks disparaging
Griesa and Pollack, who succeeded in getting the two sides to meet
face-to-face for the first time in nearly 13 years but could not get
them to an agreement by July 30.
Pollack issued a statement after the hearing saying it was his
intention to "convene and conduct further negotiations until a
solution is reached, however long that may take."
Argentina insists it cannot meet the demands of the court order, nor
make a deal with the holdouts that is better than the terms offered
in its two restructurings based upon a clause in its agreement known
as the Rights Upon Future Offers (RUFO).
The RUFO clause expires on Dec. 31, 2014.
Reuters IFR has reported that private banks are trying to reach an
agreement with the holdouts that would pay them 80 cents on the
dollar for their Argentine bonds in hopes of getting the frozen
coupon payment sitting at BNY Mellon released as soon as possible.
(Additional reporting by Andrew Longstreth and IFR's Joan Magee and
Davide Scigliuzzo in New York, Richard Lough and Hugh Bronstein in
Buenos Aires; Writing by Daniel Bases; Editing by W Simon, Andrew
Hay, Andre Grenon and Lisa Shumaker)
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