The Argentine Supreme Court of Justice Confirmed the Legality of “Blue-Chip Swap Transactions”

On July 14, 2015, the Argentine Supreme Court of Justice declared inadmissible the remedy of complaint filed by the Prosecutor of Criminal Court for Economic Matters No. 1 before the refusal of the extraordinary remedy filed against the ruling dated March 11, 2015 by which Division “B” of the Criminal Court of Appeals for Economic Matters confirmed the ruling issued by the Criminal Court for Economic Matters No. 3, Secretary’s Office 6, in the case entitled ““BBVA Banco Frances S.A. for infringement of Law No. 24,144”. This ruling acquitted BBVA Banco Francés S.A. (“BBVA”) and other summoned officials for certain infractions to Law No. 19,359 of the Foreign Exchange Criminal Law (the “Foreign Exchange Criminal Law”) and to other additional Communications published by the Central Bank of the Argentine Republic (“BCRA”). Therefore, the acquittal ruled by Division “B” has become final, with the force and effects of a final judgment.

The Supreme Court applied section 280 of the Argentine Civil and Commercial Code of Procedure, known as “negative certiorari” considering the matter brought up by the Prosecutor to be inadmissible”. Regulations grant him such power: (i) due to a lack of sufficient federal grievance, or (ii) when the matters filed lack sufficient grounds, or (iii) when matters lack importance. The Court has not specified which of such grounds have taken into account when dismissing the remedy imposed by the Prosecutor but its decision made the Division “B” of the Criminal Court for Economic Matters’ final.

Division “B” had ratified the legality of the sale and purchase transactions of securities known as “Blue-Chip Swap Transactions” by stating that there had been, among other matters, non-criminal behavior. This refers to simultaneous sale and purchase of securities’ transactions with the same client, some of which were liquidated in Argentine pesos in Argentina and others, abroad in foreign currency, as an offense under the Exchange Criminal Law by considering that those transactions, whether technically or strictly, were not exchange transactions, i.e. exchange of currencies which  particular involve the Argentine peso.

Nevertheless, not only did Division “B” discard the economic reality principle, but also upheld that there is a constitutional prohibition, that forbids broad interpretation and analog implementation of punitive principles to behaviors that are not provided normatively; since otherwise the legality principle guaranteed by the Argentine Constitution would be violated.

Moreover, Division “B” noted that the transactions investigated were securities’ transactions rather than foreign exchange transactions; therefore, these securities’ transactions could not and should not be conducted through the Official Foreign Exchange Market (MULC) but through a stock exchange market. In short, the Court of Appeals endorsed the principle that, in foreign exchange matters, the legal nature of transactions cannot be appreciated from the perspective of the subjective purposes taken by the participants, but from the objective aspects of their constitutional or structural characteristics.

This ruling of the Court brings a definitive end to any matter brought up by the Office of the Public Prosecutor, making the leading case of Division “B” final which, in turn, had endorsed the old case law established in the matter by the Supreme Court of Justice at the ruling "Esterlina S.A. Foreign Exchange Bureau and Tourism for Infringement of Law No. 9,359” (“Fallos” 318:207).

For the background of this case, please refer to “Securities Trading or Foreign Exchange Transaction?” published in Marval News #125 of February 28, 2013; “Legality of “Blue-Chip Swap Transactions” published in Marval News #139 of May 30, 2014; and “Justice Upheld the Legality of ‘Blue-Chip Swap Transactions’ Again” published in Marval News # 148 of March 31, 2015.