Appeals court hands Argentina a victory in bond dispute
A federal appeals court handed Argentina a victory Wednesday in its quest to relieve itself of the pressures of debt owed to American hedge funds and others, saying a judge went too far by letting some bondholders demand payment without proving how much they are entitled to be paid.
The 2nd US Circuit Court of Appeals said a lower-court judge was oversimplifying the definition of the class of bondholders affected by his orders.
A ruling written by Circuit Judge Richard Wesley noted that defining a precise class to which Argentina owes damages for refusing to pay bondholders and calculating those damages have been "exasperating tasks". But the decision issued by a three-judge panel said Judge Thomas P. Griesa was making it too easy for some plaintiffs by creating a class, including bondholders, who were not the original purchasers of the bonds.
"While objective criteria may be necessary to define an ascertainable class, it cannot be the case that any objective criterion will do," Wesley wrote. "A class defined as 'those wearing blue shirts,' while objective, could hardly be called sufficiently definite and readily identifiable; it has no limitation on time or context, and the ever-changing composition of the membership would make determining the identity of those wearing blue shirts impossible."
The dispute over Argentina's debt emerged after the South American nation defaulted on US$100 billion in debt in 2001. Most creditors accepted lower-valued bond swaps in 2005 and 2010. But US hedge funds, led by billionaire hedge fund investor Paul Singer's NML Capital Ltd, refused and took Argentina to court in Manhattan and won. Griesa has repeatedly ruled that Argentina can't pay other creditors until it pays the holdouts.
Tried to seize assets
Argentina has not complied with Griesa's orders, and the funds have tried to seize Argentine assets around the world. Last month, Griesa ruled the plaintiffs can pursue Argentine assets in the US, except for military and diplomatic property.
The plaintiff in Wednesday's decision held a relatively small number of bonds. The appeals court ordered an evidentiary hearing to decide damages.
Attorney Carmine Boccuzzi for Argentina said he was pleased with the ruling.
"The ruling makes clear that plaintiffs may not use the class mechanism to avoid having to prove the actual damages of purported class members," he said.
Jason Zweig, the bondholder's attorney, did not immediately return a message seeking comment.
In court papers, Zweig wrote dismissively of Argentina's arguments, saying the appeal was designed "simply to further delay this already nine-year-old case, in order to prolong the day it must pay its outstanding debts".
In court papers, Boccuzzi wrote that judgments in favour of members of the class were "inflated and inaccurate" because the bonds at stake are regularly traded in the secondary market.