Argentina is asking the high court to consider a ruling last October by the Second U.S. Circuit Court of Appeals in New York that would block the South American country from making payments on its current bonds unless it also pays hedge funds that own defaulted Argentine bonds.
Argentina’s more than decadelong legal battle with creditors follows its decision to stop paying about $100 billion in public debt in 2001, which at the time was the largest sovereign default in history. The country later restructured about 93% of its debt by offering investors new bonds in heavily discounted debt exchanges in 2005 and 2010.
Amy Howe of SCOTUS blog points out,
At Forbes, Rich Samp discusses the pending cert. petition in Republic of Argentina v. NML Capital Ltd., in which Argentina has asked the Court to review whether post-judgment discovery in aid of enforcing a judgment against a foreign state can be ordered with respect to all assets of a foreign state regardless of their location or use. Samp (who filed an amicus brief in support of the bondholders opposing Argentina in the Second Circuit) concludes that “Argentina faces a daunting task in convincing four Supreme Court justices to vote to grant” the petition, and adds that its “task is made even more difficult by the possibility that Justice Sotomayor may recuse herself, thereby reducing the pool of justices from which it needs to find four votes.”
It would be particularly ironic if Justice Sotomayor would recuse herself because of the Argentinian government’s concerted effort to forge close relations with her.
This is an interesting case, not just because Argentina initially had to issue the bonds with a guarantee that they would pay them in full because the country had already defaulted, but also because it may set a precedent for any future sovereign debt or municipal debt restructurings.