Payment Suspension of Public External Debt

On December 20, 2011, Tribunal II of the Federal Court of Appeals for Contentious Administrative Matters affirmed the first instance judgment in re “Crostelli, Fernando y otros c/ Estado Nacional – Ministerio de Economía (Artículos 517/518 CPCC Exequatur) (BNNY) s/ Varios”, that had rejected the exequatur filed by the plaintiffs in order to obtain the recognition of the judgment dated November 19, 2007 of the District Judge Thomas P. Griesa, of the Southern District of New York, United States of America, that had ordered the Republic of Argentina to pay a given amount of money to the plaintiffs due to the default of certain public debt bonds issued by the Argentine Government.

The Court of Appeals’ judgment was unanimous.

To such extent, it is worth mentioning the following arguments:

a) The mere recognition of the foreign judgment pursued by the plaintiffs would make such judgment enforceable (this being the purpose of exequatur proceedings).

b) The foreign judgment contravenes Argentine public policy principles.

c) The powers of the Argentine Government to face extraordinary circumstances must be recognized as a valid and effective mechanism to protect the public interest; the scope and relevance of the regulation issued to protect such interest is determined by the way in which such interest is affected. Such regulation must be valued and obeyed in light of the characteristics of the pertinent crisis.

d) The Republic of Argentina has exercised government prerogatives to deal with the situation caused by the crisis by issuing regulations that undoubtedly constitute part of its internal public policy.

e) The emergency regulation and that which instrumented the exchange proposals of the public debt carried out by the Argentine Government do not distinguish between those creditors that brought lawsuits against the country in Argentina and those that brought lawsuits abroad.

f) It is a jus gentium principle that no country can be obliged to honor agreements that go beyond its payment possibilities.

g) The Argentine Supreme Court (the “Supreme Court”) in re “Secchi” (June 8, 2010) highlighted what it had previously judged in re “Brunicardi”: in times of important economic crisis the Argentine Government may limit, suspend or restructure payments of its public debt to allocate the use of the pertinent funds in accordance with the actual status of the public finances, the need to render essential services and the fulfillment of basic governmental obligations.

The judgment under analysis follows the path that Tribunal V of the same Court of Appeals established in re “Claren”. As in such case, we presume that the plaintiffs intend to reach the Supreme Court even though the judgment is strongly based on the Supreme Court’s precedents for similar cases.