Adjudication without Frontiers
Edited by Horatia Muir Watt, Lucia Bíziková, Agatha Brandão de Oliveira and Diego P. Fernandez Arroyo
Chapter 12: Global market for sovereign debt: Argentina v. NML Capital, Ltd.
The NML case points to an inversion of sovereignty, when debt makes purportedly sovereign actors dependent upon their access to global capital markets. NML Capital, Ltd. (NML), a vulture fund specialised in distressed sovereign debt, purchased at extreme discounts Argentine public bonds off a panicking market. In 2001, the Republic of Argentina defaulted on $103 billion of debt due to a severe economic crisis. The government announced that it would not pay its debts, but gave the investors a choice of accepting new bonds worth 70 per cent less. NML Capital did not accept and commenced a collective action against Argentina in Manhattan Federal District Court. The District Court decided in favour of NML, ordering Argentina to pay over US$2 billion to the vulture fund and to prioritise NML Capital’s position over other creditors. In order to execute the judgment against Argentina, NML served subpoenas on Bank of America and Banco de la Naci—n Argentina, requesting information about Argentina’s assets held worldwide. Argentina moved to quash the subpoenas and argued, under the Foreign Sovereign Immunities Act (FSIA), that the locations of its assets were immune from discovery. Nevertheless, the District Court ordered the banks to comply with the subpoena requests. Argentina appealed and the Second Circuit affirmed the discovery order, since it was directed at commercial entities that did not have a claim to sovereign immunity. Argentina then petitioned for a writ of certiorari from the Supreme Court of the United States, and the petition was granted.
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