A hedge fund owner of defaulted Argentine debt can try to seize government assets held in Britain as it seeks to recover the full face value of the bonds, Britain's Supreme Court said in a ruling on Wednesday.
NML Capital Ltd, a unit of New York-based hedge fund Elliott Management, has sought to secure court freezes on up to 284 million US dollars in assets held by Argentina in Britain following a 2006 ruling by a US federal court.
About 92% of the record 100 billion in debt that Argentina stopped servicing in 2002 has been exchanged, at a steep loss for bondholders, in two swaps in 2005 and 2010.
Despite those efforts, so-called holdout creditors, including NML, who rejected the government debt-swaps, are still suing to recover the full value of the defaulted bonds. That has hampered Argentina's bid to return to global debt markets nine years after its default.
Argentina's claim of state immunity in the case was initially accepted by Britain's Court of Appeal. But on Wednesday the Supreme Court ruled in favour of the hedge fund, citing Argentina's submission and waiver of immunity in the bonds”.
The Supreme Court unanimously allows the appeal, a text of the ruling said.
NML, which argued that Argentina waived the immunity as part of its agreement to issue the bonds, welcomed the court's decision.
Britain's Supreme Court -- like the US Supreme Court, the New York Court of Appeals (New York's highest court) and the U.S. federal courts -- has rejected another of Argentina's desperate legal strategies contrived to avoid repaying holders of its defaulted bonds,” the fund said in a statement.
An Argentine government source downplayed the ruling's importance, saying the country does not have assets in Britain that could be seized and adding that similar rulings in Switzerland and Belgium have had no negative impact.
US District Court Judge Thomas Griesa in New York presides over a slew of lawsuits filed by holders of defaulted Argentine bonds, including class-action suits and complaints filed by individual investors.
He has granted several billion dollars in court judgments to litigating holdout creditors. So far they have not been able to collect any money since U.S. sovereign immunity laws protect most assets owned by a country abroad.
Wednesday's legal setback for Argentina comes a day after the government won the lifting of a freeze on 100 million USD of central bank deposits, imposed to satisfy claims by NML and EM Ltd, controlled by the investor Kenneth Dart.
The New York court said the Foreign Sovereign Immunities Act bars NML and EM Ltd., which hold almost 2.4 billion USD in judgments against Argentina, from collecting funds belonging to Banco Central de la Republica Argentina.
The disputed bonds, issued by Argentina in February and July 2000, were purchased by NML between 2001 and 2003, for about half their face value of 172 million USD. The bonds were governed by New York law, resulting in a 2006 U.S. judgment that Argentina owed NML the full value of the bonds plus 112 million in unpaid interest, according to the U.K. ruling.
Argentine central bank President Mercedes Marco Del Pont praised the decision while saying she expects it to be appealed to the U.S. Supreme Court.
Tuesday’s US ruling overturned an April 2010 decision by US District Judge Thomas Griesa in which Argentina’s use of funds from its central bank was found to have “contributed to fraud and injustice perpetrated by the republic on the bondholders.”