The Banco Nacion case in New York anticipates a new round of attachments, in particular, against state-owned companies
Eugenio A Bruno - Garrido Law Firm - TIG Americas
NML asked judge Griesa to oblige Banco de la Nacion Argentina to disclose the bank accounts in said financial institution of the government of Argentina, its state-owned companies (where the government owns more than 25 per cent of the capital) and certain individual officers. Judge Griesa accepted the NML's asking and ordered, on February 8, to Banco Nacion to disclose such information. The order includes bank accounts not only in the branch of Banco Nacion at New York but also in various countries, including Uruguay, Panama, Brasil and España, among others. BNA responded yesterday (we dont have the response yet, but expect to have it today).
The purpose of the asking of course is to identify those assets with a view to eventually attach them if that is possible under U.S. law.
What assets may NML attach? Of course, NML and other litigant holdouts have tried to attach 30 different assets since 2002, failing in most of the cases. Therefore the odds are still against the fortunes of NML. And that's why the pari passu/Bank of New York case being litigated at the U.S. Court of Appeals is so important, basically because of the prior failures.
The likelihood of attachments of bank accounts of the federal government at Banco Nacion outside Argentina is not high taken into account various precedents similar to this case, particularly bank accounts of the Anses in New York in 2010.
However, the Banco Nacion case will bring into the attention of the parties the bank accounts of state-owned companies, in which the government owns more than 25 per cent.
As an initial clarification we need to say that as such companies are legally separated from the federal government they are therefore not the debtor under the bonds in default (the federal government is) and consequently they are not responsible for the repayment of them. Thus their assets should be immune from attachments based on claims against the federal government. However, there is one exception that may turn their assets into "attachable" ones: that exception is called the "alter ego theory" and means that if those companies are managed by the federal government, then "they would be considered part of it". The criteria to determine whether or not they are managed by the federal government depends on the facts of each case but the main defense is if they are managed independently, with a management team of their own and does not follow instructions from the government. If they dont pass this test, their assets may be attachable.
The alter ego theory was applied by Griesa and the Court of Appeals in a case against Argentine Central Bank reserves, but the U.S. Supreme Court reversed their decisions by using a different protection specifically existing for those kind of reserves arising from the U.S. Foreign Sovereign Immunities Act. But there is no similar protection for assets owned by state companies if they are controlled by the government.
Finally, on a related aspect, NML and other holdout litigants might attempt to attach the shares of the government in YPF, under the theory that those shares are commercial assets and therefore subject to attachments. For the moment it is too soon to determine whether or not such attempts will succedd.
For a complete analysis of the NML latest brief see the following paper:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2255962
*Eugenio A Bruno is a legal counsel for investment banks, financial advisory firms, exchange bondholders and non-litigant holdouts.
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