For Immediate Release
Argentina Faces US Contempt Hearing and Daily $50,000 Penalty for Failure to Pay Hedge Funds
WASHINGTON - US Federal Judge Thomas Griesa scheduled Argentina to appear for a contempt hearing on Monday, September 29. At issue is Argentina's failure to follow a court order to only continue to pay the 92% of bondholders who restructured after the country's 2001 default if Argentina pays a group of hold-out hedge funds. Argentina organized payment to restructured bondholders via an Argentine bank to avoid paying the hedge funds. The hedge funds, popularly known as "vulture funds," are asking the judge to hold Argentina in contempt and fine the South American country $50,000 per day.
"A contempt ruling probably won't help resolve the situation," said Eric LeCompte, executive director of the religious financial reform organization Jubilee USA. "The case continues to highlight how ineffective US courts are at resolving debt disputes."
At a similar hearing in August, Judge Griesa declined to find Argentina in contempt, noting: "In my judgment, it does not add to the scales of settlement to make a finding of contempt." In September, however, the Argentine Congress approved a debt swap bill to pay the restructured bondholders and circumvent the US court's decision to pay the hold-outs. Judge Griesa has called that bill "illegal." In a brief to the US Appeals Court in 2012, the US government argued Judge Griesa's ruling would harm New York as a center of finance because countries would avoid jurisdictions where predatory behavior is tolerated.
"This predatory behavior hurts investors and countries of all sizes," noted LeCompte. "The precedent in this case will hurt developing countries like Grenada and the Democratic Republic of the Congo."
Monday's contempt hearing comes days after Argentine President Christina Fernández de Kirchner's speech to the United Nations General Assembly about the dangers of predatory behavior. Fernández thanked countries that supported a recent UN resolution to advance an international bankruptcy process. The resolution passed September 9 by a vote of 124-11. A global debt resolution process could potentially prevent holdout litigation and limit defaults.
"In UN votes and IMF meetings, most of the world is saying the status quo is not working," said LeCompte, who serves on UN debt expert groups and attended the Argentine President's UN speech. "World leaders want both the predators to be stopped and defaults to become less likely. Only a bankruptcy process can achieve both."
Read a timeline and history of the Argentina case here.
Read the US government's 2012 brief here.
Read Jubilee USA's filing that urged the Supreme Court to take the case here.
Jubilee USA Network is an alliance of more than 80 religious denominations and faith communities, human rights, environmental, labor, and community groups working for the definitive cancellation of crushing debts to fight poverty and injustice in Asia, Africa, and Latin America.