MercoPress. South Atlantic News Agency

Argentina appeals to US Supreme Court its legal battle with ‘holdout’ creditors

Will the busy US Supreme Court take the case?

Argentina took on Tuesday its legal battle with “holdout” creditors to the US Supreme Court by appealing an adverse decision handed down by a lower US court in October of last year, according to Telam the official news agency from the Argentine government.

”Today Argentina introduced the first special appeal (Writ of Certiorari) before the Supreme Court of the United States,” Buenos Aires media reported.

The move came while investors are still awaiting a ruling by the 2nd US Circuit Court of Appeals, which is expected in the coming weeks. If the Supreme Court decides to hear Argentina's case, it would not do so until the lower court has ruled.

The creditors, which the Argentine government defines as ‘vulture funds’ are suing to be repaid in full after rejecting two debt swap offers, (2005 and 2010) which were accepted by about 93% of bondholders. The writ, filed during the high court’s busiest week of the year, asks for a review of an Oct. 26 decision by the 2nd U.S. Circuit Court of Appeals.

That body had upheld a federal judge’s ruling that Argentina violated terms of its debt agreements with creditors who rejected the settlement and instead sued. Judge Thomas Griesa ordered Argentina to pay those so-called holdouts at par, an amount now well more than 1.3 billion.

The Supreme Court request does not apply to a related ruling, before the same circuit court, that is pending with a ruling expected soon. Until it makes a decision in that matter -- concerning the manner that Argentina must pay creditors -- the court has placed a stay on Griesa’s order that Argentina pay the holdouts.

Argentina’s Economy Ministry told Telam late Monday that it had waited to file the writ as long as it could in anticipation of a new circuit court ruling but ultimately felt it had to act. The ministry added that the pending circuit court ruling “could also be the object of a request to the Supreme Court.”

The debt fight concerned the sovereign rights of nations, the ministry said: “It’s hard to conceive of an issue that’s more irritating to a foreign state and the international community than an order from the court of one country to another country regarding topics that go to the heart of the definition of sovereignty.”

The closely watched case has been a point of fascination for international financiers, who believe it could bolster the rights of creditors in disputes with sovereign issuers over distressed debt. Some investors strategically purchase such debt at deep discount on the secondary market in hopes of reaping large returns, frequently through litigation.

One such fund, Elliott Management, holds a large share of the Argentine debt and has been a leading force in the dispute with the nation headed by President Cristina Fernandez.

Last October Elliott and other creditors were able to convince a court in Ghana to seize an Argentine military vessel at port in an attempt to recover assets they say they are owed. The ARA Libertad was ultimately released, and last week Ghana’s Supreme Court ruled that the lower body had been in error in agreeing to hold the tall-ship in the first place.

Elliott has also helped fund a public relations and lobbying group based in Washington, the American Task Force Argentina that regularly disseminates critical coverage of the country.

But Argentina also has its backers including Jubilee USA which have been monitoring the case. They believe that if U.S. courts force Argentina to fully repay the remaining creditors, it would make it virtually impossible for other countries to restructure debts they can no longer afford to pay.

Numerous friends of the court briefs have been filed in the case, including several by the US Department of Justice, which has argued that Argentina should not be forced to pay the holdouts.

Despite the high-profile nature of the matter, there is no guarantee the Supreme Court will take the Argentina case. Each year, more than 7,000 writs are filed, of which the high court accepts between 100 and 150.