On Monday, a three-judge panel of the 2nd U.S. Circuit Court of Appeals in New York said in an opinion that the Argentina government cannot prevent the order of a lower court compelling two banks from disclosing to bondholders, the details of Argentina’s assets outside the United States. The instant case stems from $ 100 billion defaulted by Argentina in 2002. The results of the case could set precedents on the ability of countries to fend off creditors in sovereign debt crises.
The written opinion of the appellate court observed, “Because the district court ordered only discovery, not the attachment of sovereign property, and because that discovery is directed at third-party banks, Argentina’s sovereign immunity is not affected.”
Following its huge default in 2002, Argentina has been involved in multiple litigations with hedge funds and other creditors in U.S., and has been prevented from returning to global credit markets.
In the instant case, Argentina had challenged subpoenas served upon the Bank of America and Banco de la Nacion Argentina, seeking documents related to accounts and assets of Argentina in those two banks. Argentina argued the assets were protected by the Foreign Sovereign Immunities Act of 1976 and the subpoenas were invalid.
The appellate court also observed, “Argentina maintains that its property abroad is categorically immune from attachment, and that the district court cannot order discovery into those assets” but held that a U.S. judge’s order to learn of the assets does not tantamount to attachment, and hence the subpoenas did not attract the Foreign Sovereign Immunities Act.