MercoPress. South Atlantic News Agency

US government intervenes in favor of Argentina in defaulted-bonds ongoing case

Verrilli: the appeals court “erroneously permitted blanket discovery into a foreign state's assets located outside the United States.”

The US government has asked the US Supreme Court to intervene over a hedge fund's effort to gain information about Argentina's non-US assets as part of an ongoing litigation, which is rapidly becoming a lead case regarding sovereign assets and sovereign debts rescheduling.

 The hedge fund, NML Capital, a holder of Argentine bonds, wants repayment in full in a fight that was prompted by Argentina's default on 120 billion dollars in sovereign debt in 2002. That is the subject of high-profile litigation that could be headed to the US Supreme Court in a separate case.

But in the different case in which US Solicitor General Donald Verrilli filed a brief this week, the question is the narrower issue of whether NML could enforce subpoenas against Bank of America and Banco de la Nacion Argentina seeking information about Argentina's non-US assets.

In August 2012, the 2nd U.S. Circuit Court of Appeals in New York rejected Argentina's argument that the subpoenas should be quashed because it would infringe on its sovereign immunity.

Verrilli said in his brief that the appeals court “erroneously permitted blanket discovery into a foreign state's assets located outside the United States.”

NML, a unit of billionaire hedge fund manager Paul Singer's Elliott Management Corp, is one of several bondholders which rejected offers (in 2005 and 2010) accepted by other investors to swap the defaulted debt for new paper at a steep discount. The other major player is Aurelius Capital Management.

Last month, in the more high-profile case, the same appeals court declined to reconsider an order requiring Argentina to pay 1.33bn, ruling in favor of the bondholders. Argentina is now expected to seek a Supreme Court review in that case.

The case in which the U.S. government filed the brief this week is Argentina v. NML Capital Ltd, U.S. Supreme Court, 12-842.