The ruling of New York judge Loretta Preska – if confirmed in the courts of appeals – It is not a sword of Damocles which will weigh on Argentina in an irremediable and catastrophic way. There are alternatives reasonable and fair, subject to the Republic’s ability to pay to honor all its obligations uniformly.
Argentina should also not be subject to a precautionary measure such as that issued under the clause pari passu which prevents it from paying its international obligations. That sentence was a Exceptional case. The bondholders requested this based on the specific terms and conditions of their bonds as part of the foreign debt repudiation set out in the tender blocking law of 2005. That law was the key to losing the trial, as catastrophic as it is useless. The plaintiffs in this case against Argentina base their claim on their rights according to YPF’s corporate statute which does not include the pari passu clause.
In the edition of Clarion of January 11th is explained very clearly Under what conditions is it possible to implement the embargo against the country?. These are more limited than those expected in the circumstances in which she found herself he waived sovereign immunity under the United States Federal Immunity Act of 1976, as is the case with its obligations under New York law. The Province of Buenos Aires has successfully carried out two restructurings of its international debt in 2006 and 2021. Some bondholders have decided not to participate in the exchanges and to take legal action. No one managed to seize assets provincial, with most cases already prescribed. Provincial authorities have always been respectful in resolving their liabilities fairly for all parties and Judge Thomas Griesa, in support of the 2006 exchange, never granted bondholders pari passu-like precautionary measures nor permitted attacks on their bond issues.
Argentina could face a large number of lawsuits in court and arbitration for a much higher claimed amount than in this case (including existing actions that could be brought alleging arbitrary state intervention in the economy in violation of treaties bilateral investment agreements). The country does not have an orderly, transparent and definitive mechanism to resolve all these liabilities in a crisis situation. In 2010, senator Federico Pinedo He asked us for a law in this sense which was presented to the National Congress but was never discussed in the Chamber.
In the Roman Empire, debtors were sold into slavery to pay their debts. In modern bankruptcy laws, human persons They restructure their debts and continue with their lives, collecting salaries and providing a permanent solution to their financial problems. In 1995, for the first time, one million requests for protection under US bankruptcy law for private individuals were exceeded, in the vast majority of cases these were situations in which the debtor had no assets and was completely freed from his obligations pre-existing financial assets. Over the past 20 years, between 400,000 and 2 million people have filed for bankruptcy protection in the United States each year.
This principle also applies to Municipalities. Detroit It is the most recent and notable case. The city of New York in 1975 it was just one day away from filing for bankruptcy protection and many analysts do not rule out that it will soon find itself in a similar situation. As in the case of human persons, and unlike legal persons, municipalities will not auction. A reasonable settlement based on ability to pay is applied, ensuring fair treatment for all similarly situated creditors.
The most notable case is that of Puerto Ricoa territory within the United States without sovereignty of its own, which could not meet its responsibilities in time and it had 45% of the population below the poverty line. In 1984, the United States Congress declared that Puerto Rico could not rely on bankruptcy laws that protect insolvent municipalities. In 2015, the island’s government created a bankruptcy law for its public companies, but the Supreme Court ruled it invalid. Finally, in 2016 the United States Congress passed a law creating a protection mechanism similar to a bankruptcy process for this territory. France, the United Kingdom and Belgium have enacted protective laws for states in certain circumstances. New York State is considering three bills to give bankruptcy treatment to sovereign debts issued under its laws. But none of these projects are sufficient for the integral treatment of all sovereign liabilities due to the litigious contingencies of our country.
Argentina should enact a lawtaking care to adopt adequate legal and procedural measures to maximize the chances of obtaining acceptance in international courts, creating a path that puts an orderly, reasonable, transparent and definitive solution to all your existing or future conflicts due to pre-existing causes based on your reasonable ability to pay.
Source: Clarin
