Suspension of Public External Debt Payments - Exequatur of a Foreign Judgment - Another Round for the Claren Corporation Case

On April 5, 2013, the Argentine Attorney General, Alejandra M. Gils Carbó issued an opinion due to the appeal to the Argentine Supreme Court of Justice (the “Supreme Court”) by the plaintiff in re “Claren Corporation c/ Estado Nacional (Artículos 517/518 CPCC Exequátur) s/ Varios” (the “Lawsuit”).

Claren Corporation’s claim in the Lawsuit, both in first instance and before the Court of Appeals, was rejected because the acceptance of the exequatur would have implied a violation of Argentine public policy (orden público).

The exequatur pursued the recognition of the validity of the judgment of Judge Thomas Griesa, court of the Southern District of New York, against Argentina ordering it to pay principal and interest due that corresponded to Global External Bonds 2017 (“Bonex 2017”). Please refer to our comments contained in Marval News # 94 and # 103 for background).

The Attorney General opined that the Court of Appeal’s judgment (rejecting the Lawsuit) should be affirmed since the exequatur does not observe Argentine public policy (orden público).

Her opinion was based, among others, on the following arguments:

(a) The jurisdiction of the courts of New York does not release the foreign judgment from being scrutinized under the scope of Argentine public policy (orden público).

(b) The public policy (orden público) principle control must be made at the time an exequatur is brought before the Argentine courts and cannot be delayed until the time the foreign judgment is to be enforced. Hence, Claren Corporation’s argument that there is a difference between the recognition of the enforceability of a foreign judgment and its actual enforcement was dismissed.

(c) The Bonex 2017 were included in the emergency measures taken by the Argentine government since 2001 due to an inability to honor the payment of public debt as agreed in order to face “what has been the most serious crisis in the contemporary history” of Argentina.

(d) The unilateral restructuring proposal of the government was, to all intents and purposes, the only proposal for the whole body of bondholders of public debt in default as all creditors were treated equally.

(e) In re “Brunicardi” and “Galli” the Supreme Court has established a broad interpretation regarding the Argentine government’s ability to take exceptional measures that limit, suspend or restructure debt payments in accordance with (i) its actual payment possibilities, (ii) the rendering of essential public services and (iii) the fulfillment of basic public duties.

(f) The fact that the lawsuit was brought before a foreign court was against the emergency regulations whose validity was not and could have not been discussed in such foreign jurisdiction.

(g) The Argentine government’s ability to restructure its public debt due to an extreme emergency situation is part of the local public policy (orden público) and has to do with the Nation’s sovereignty. It is an iure imperii act.

(h) No nation can be obliged to honor its debts when such debts exceed its payment capacity. The principle that “no one can do what it is impossible to be done” applies. That means that a government cannot be obliged to risk the rendering of essential services or the fulfillment of its priority duties in order to pay its debts.

(i) When a nation becomes insolvent, the most elementary principles of sovereignty require that it is such nation which holds the privilege to centralize management of all collective obligations to inhibit the ability of creditors to decide -by way of forced executions of individual loans- the fate of the provision of essential public goods that are within its exclusive competence.

The Supreme Court’s definitive ruling is still to be decided.