At a hearing yesterday, U.S. Federal Judge Thomas Griesa decided to hold Argentina in civil contempt of court, asserting that the country’s recent efforts to circumvent his ruling on debt repayment are illegal. Argentina’s Congress passed a law on September 11 that would replace Bank of New York Mellon Corp. as a bond trustee with a branch of Banco de la Nación. This would allow the country to pay the bondholders that agreed to restructuring in 2005 and 2010 in country, while avoiding payment to creditors that rejected restructuring.
Griesa’s ruling came the same day that the Kirchner Administration sent a letter to U.S. Secretary of State John Kerry requesting that the U.S. avoid holding Argentina in contempt and asking for support against the federal judge. After yesterday’s decision, Argentine Foreign Minister Héctor Timerman released a statement claiming that Griesa’s decision was a “violation of international law,” and called for the U.S. to allow the International Court of Justice (ICJ) to preside over the case. The Argentine government filed a suit at the ICJ in August, claiming that the New York court ruling violated their national sovereignty, but no action will be taken by the ICJ until the U.S. agrees to its jurisdiction in the case.
Argentina is scheduled to make a $200 million deposit of an interest payment on restructured debt today in the Banco de la Nación Fideicomiso, and a Central Bank source has indicated that the deposit will be made in spite of the ruling. Timerman affirmed yesterday that the country will continue to fight the blatant violation of Argentina’s autonomy as a nation.
Griesa previously warned Argentina about the potential ramifications of refusing to pay the holdout creditors the approximately $1.5 billion owed to them. However, when NML Capital Ltd. lawyer Robert Cohen called for a daily $50,000 penalty until Argentina pays in full, Griesa declined and stated that potential penalties will be considered at a later, as yet unspecified date.