Conflict disclosure of the day, Forbes edition

By Felix Salmon
December 1, 2010
Hal Scott has an op-ed in Forbes, taking the Obama administration to task for supporting the Argentine government in its court fight against holdout creditor

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Hal Scott has an op-ed in Forbes, taking the Obama administration to task for supporting the Argentine government in its court fight against holdout creditors. As the prospect of sovereign default spreads from emerging markets to the euro zone, Scott wants the US to do everything it can to encourage other governments to never default. “Default,” he writes, “should only be a last, disgraceful resort.”

What I’m most interested in here is the way that Scott is identified:

Hal S. Scott, a professor of international finance at Harvard Law School, has filed an amicus brief in the Argentine litigation.

This is true, but it needs to be parsed very carefully to be properly understood. In reality, Scott is a paid partisan in the Argentine-debt wars, and has been for years. In September 2006, he released a paper entitled “Sovereign Debt Default: Cry for the United States, Not Argentina”, which can be found hosted on the website of ATFA, the vulture-fund-backed pressure group which is the lobbying arm for Argentina’s holdout creditors. (ATFA also emailed me to make sure I’d seen Scott’s piece in Forbes.)

Scott’s 2006 paper was very radical: it suggested massive changes to the Foreign Sovereign Immunities Act which would be tantamount to repealing the entire thing. He said that “the US should endeavor to give creditors the same rights against sovereign borrowers that they have against private borrowers” and that if foreign central banks have assets in the US or Switzerland, those assets should be “available to be attached in satisfaction of debts owed by the sovereign” — as should sovereign payments to the IMF. Creditors should also, he said, be able to seize state-owned companies if those companies were owned by a state in default.

This is very extreme stuff, and violates every norm in international diplomacy: it’s never going to happen. Scott’s paper was a salvo in the court battle over Argentina’s debt, and I have always assumed that it was paid for—as was his amicus brief—by Argentina’s creditors. (Scott was writing briefs siding with them as long ago as 2004.) But as Charles Ferguson showed so well in his movie Inside Job, academics are incredibly bad at disclosing even when they’ve been paid by vested interests, let alone how much they’ve been paid.

Scott, then, is hardly a disinterested law professor here, as a naive reading of his Forbes bio might suggest. Is it too much to ask that he disclose that he’s been paid by Argentina’s creditors, even if he doesn’t have to give a dollar amount?

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