Temporary suspension of the execution of precautionary measures and judicial decisions

1. Introduction

The Argentine Government has issued a series of regulations restricting the withdrawal of deposits (the “corralito”) and imposing a rescheduling of the deposits.

The Emergency Law abandoned the peg of 1 Peso to 1 U.S. Dollar established by the Convertibility Law No. 23,928 as amended and “pesified” certain foreign currency denominated obligations.

Decree No. 214/2002, as amended, expanded the “pesification” of the economy, and established a 180-day suspension term in all court proceedings challenging the validity of the “corralito” or the “pesification”.

Depositors flushed the courts with claims (“amparos”) and requested the granting of precautionary measures so judges ordered banks to return the depositors their monies in the currency in which the deposits were made or the equivalent in pesos at the market rate of exchange.

The Argentine Supreme Court, in re Smith, declared the “corralito” unconstitutional, while the suspension of proceedings was considered unconstitutional by lower courts.

In April, 2002, the Congress passed Law No. 25,587 (the “Anti-leaking Law”) that limits precautionary measures by establishing that precautionary measures cannot be granted if they have the same practical effect as a final decision. Such law has been declared unconstitutional by the Federal Administrative Court of Appeals, Chamber II.

With the aim of stopping the drainage of deposits from the Argentine financial system, on July 23, 2002, the Federal Government issued Decree No. 1316 (published in the Official Gazette on July 24, 2002), thereby suspending the execution of precautionary measures and judicial decisions related to all judicial proceedings against the Federal Government, financial entities or insurance companies challenging the provisions of the Emergency Law for 120 business days. Most judges of the Federal Administrative Courts informally indicated that they will order the suspension set forth in Decree No. 1316. On the other hand, certain judges and the national ombudsman challenged the constitutionality of Decree No. 1316, while depositors have already demonstrated their opposition to the provisions of Decree No. 1316. There are some judicial decisions that have already declared that Decree 1316 is unconstitutional.

2. Suspension of the execution of precautionary measures and judicial decisions

Section 1 of Decree No. 1316 suspends compliance with and enforcement of precautionary measures and judicial decisions related to all judicial proceedings against the Federal Government, financial entities or insurance companies challenging the provisions of the Emergency Law for 120 business days.

Judicial resolutions have to be registered with the financial entities. Financial entities will subsequently have to submit an acknowledgement of the resolution to the corresponding court and inform the Central Bank.

Once the suspension period lapses, the suspended judicial resolutions will have to be complied with within 30 business days.

3. Exceptions

In the case of individuals aged 75 or more, as well as in those cases in which there is sufficient evidence of risk to health, life or physical integrity ( “Exempted Individuals”), the proceedings for the execution of precautionary measures or judicial resolutions have to be followed before the Central Bank. The Central Bank will comply with the judicial resolutions for the account and order of the obliged financial entity within 5 business days.

4. Administrative proceedings before the Central Bank

Exempted Individuals who have not started judicial proceedings may opt to start an administrative proceeding before the Central Bank, which will decide within 5 business days. This proceeding is gratuitous. Payments will be made in accordance with the necessity indicated in the petition.

In the provinces, the administrative proceeding has to be filed with the corresponding branch of the Banco de la Nación Argentina (the “BNA”). Within 2 business days after the claim is filed, the BNA will submit the claim to the Central Bank. If the Central Bank considers it appropriate, it will order the corresponding financial entity to pay the respective amounts.

Resolutions of the Central Bank may be appealed within 5 judicial business days before the Federal Administrative Court of Appeals, which will decide in an extraordinary summary proceeding.

Exempted Individuals who have already started judicial proceedings, but where no precautionary measure has been ordered nor judicial decision rendered, may also opt for the administrative proceeding, provided that they first renounce the judicial proceeding.