A rare (and temporary) pari passu victory for Argentina

By Felix Salmon
November 28, 2012

This is the best news that Argentina could possibly have hoped for: the Second Circuit Court of Appeals — the same three judges which upheld Judge Griesa’s decision last time around — has decided that this time, he’s gone too far. Here’s their order:

If you recall, the big thing that Griesa did last week was to not put a stay on his order, forcing a showdown on December 15, when Argentina is due to make a $3 billion payment to its exchange bondholders. If Argentina made that payment, said Griesa, it would also have to pay its holdouts in full.

The Second Circuit, here, has said that Griesa was too hasty: it wants time to think a bit over what he’s done, and whether it’s just. So everything is “stayed pending further order” of the Second Circuit, and nothing is going to be decided for a while — at least until after February 27, when oral arguments will be heard. (Expect a packed-to-the rafters courtroom for that one.)

As a result, Argentina has three months’ breathing room — and every interested party in this case, which includes the US government and lots of people representing the hidden plumbing of the markets, will file an amicus brief.

What’s more, the Second Circuit also recognized the exchange bondholders as “interested non-parties” in the case, who can themselves appeal Griesa’s judgment — thereby setting up a Boies vs Olson showdown in February, with Argentina very much on the same side as David Boies, who’s representing the exchange bondholders, and against Ted Olson, who’s representing Elliott Associates.

At this point, handicapping the ultimate outcome is anybody’s guess, although whatever the Second Circuit decides you can be pretty sure that one side or the other will appeal it to the whole circuit, sitting en banc. As a result, don’t expect those Argentine credit default swaps to trigger any time soon: this case is going to be caught up in the law courts well into 2013.

My hope is that somewhere up the chain, principles of national sovereignty and smoothly-functioning markets will prevail, and Griesa will be overruled. But I have no idea where or when that might happen, or how likely it is. All I know for sure is that a lot of lawyers are going to be making an absolutely enormous amount of money in the next few months.


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Hypothetically, it would have been much more interesting, if instead of Elliot, Argentina had purchased a large CDS position on themselves secretly during the past year(s). Then, had the Griesa decision held, they could have continued not paying Elliot, skipped the Dec 15 payment to trigger the CDS payments, and then used that money to create a system to pay the exchange bondholders in Argentina without having to go through New York anymore. That would have accomplished the goals of not paying the holdouts, cutting off more ties with the US financial system, infuriating everyone, and turning a tidy profit…

Posted by Jose1 | Report as abusive

Chrissie has a golden opportunity here to once-and-for-ever ‘trump’ the US court system’s ‘ace’, by demonstrating that it has no power to enforce its judgments against a non-consenting foreign sovereign.

If she replaces BNY with an offshore bank and uses that bank to make the Dec15 payments, the whole case becomes moot – the US courts can’t touch that, and the CDSs won’t be triggered. Elliott will lose all the money it paid to buy the CDSs, all the money it paid to buy the US-law bonds at issue, and OBTW – all the money it spent to litigate the matter.

‘Bout time someone delivered a World-Class butt-f**k to Paul (‘the kosher carrion-eater’) Singer – Chrissie can do it – right-f**king-now!

Posted by MrRFox | Report as abusive

Nostra Sponte on ice. That’s nice. (TM)

Posted by Eericsonjr | Report as abusive

I don´t know why you are in Argentine side…
Are you one of that persons, that when somebody lose they laugh?
I would love to have your hope if you had invest 1 dolar in Argentine bonds
Imagen that person( 80 years old )whom they had stolen there money was your mother…
Why don´t you came and live here in Argentne?or Ecuador
So Ecuador is right also?
Yes you must come and live here make any kinds of investment and then tell me your hope.
This countries are robbers before than sovereigns

Posted by Danielmontero | Report as abusive