IN THE

~upreme (!Court of tbe Wniteb ~tates

REPUBLIC OF ARGENTINA,

Petitioner, v.

NML CAPITAL, LTD., et al.,

Respondents.

On Petition for a Writ of Certiorari to United States Court of Appeals

for the Second Circuit

BRIEF IN OPPOSITION FOR THE VARELA RESPONDENTS

MICHAEL C. SPENCER

MILBERG

One Pennsylvania Plaza New York, NY 10119 (212) 594-5300 mspencer@milberg.com

Counsel for Respondents Pablo Alberto Varela, et al.

QUESTIONS PRESENTED

1. 'Whether this Court should certify to the New York Court of Appeals a question of state contract law, where Argentina failed to request certification until after the Second Circuit decided the state-law question, and where that court made clear that the state-law question does not affect this case's out­come.

2. Whether the Second Circuit misapplied the Foreign Sovereign Immunities Act's prohibition on the "attachment,'' "arrest," or "execution" of "proper­ty in the United States of a foreign state," 28 U.S.C. § 1609, by upholding an injunction that does not im­pose any restriction on specific Argentine property, but requi1·es Argentina to comply with its contractual commitment to rank its payment obligations to re­spondents at least equally with its payment obliga­tions under subsequently issued bonds.

11

RULE 29.6 STATEMENT

Pablo Alberto Varela, Lila Ines Burgueno, Mirta Susana Dieguez, Maria Evangelina Carballo, Leandro Daniel Pomilio, Susana Aquerreta, l\1aria Elena Corral, Teresa Munoz de Corral, Norma Elsa Lavorata, Carmen Irma Lavorata, Cesar Ruben Vazquez, Norma Haydee Gines, and Marta Azucena Vazquez are not corporations.

STAT

REAE

I. TJ R

II. T1 N RJ

III. Tl AJ

IV. Tl P1

CONC

.o, Mirta )arballo, t, Maria rna Elsa · Ruben Azucena

lll

TABLE OF CONTENTS

Page

STATEMENT .............................................................. !

REASONS FOR DENYING THE PETITION ............ 9

I. THE INJUNCTION Is AN APPROPRIATE REMEDY FOR ALL INVESTORS ................................. 9

II. THE SECOND CIRCUIT'S DECISION WILL NOT HARM SOVEREIGN DEBT RESTRUCTURINGS ................................................. 12

III. THE INJUNCTION DOES NOT INFRINGE ON ARGENTINA'S SOVEREIGNTY ................................. 30

IV. THE INJUNCTION DID NOT ENJOIN THIRD-PARTY PAYMENT INTERMEDIARIES ....................... 32

CONCLUSION .......................................................... 35

1V

TABLE OF AUTHORITIES Page(s)

Cases

Auto Workers v. Scofield, 382 u.s. 205 (1965) ............................................. 33

, Elliott Assoc. L.P. v. Banco de la Nacion 194 F.3d 363 (2d Cir. 1999) ................................ 11

EM Ltd. v. Republic of Argentina, 473 F.3d 463 (2d Cir. 2007) .................................. 4

EM Ltd. v. Republic of Argentina, 720 F. Supp. 2d 273 (S.D.N.Y. 2010), rev'd on other grounds, 652 F.3d 172 (2d Cir. 2011) ................................ 20

Export-Import Bank of the Republic of China v. Grenada, No. 13-cv-1450, 2013 WL 4414875 (S.D.N.Y. Aug. 19, 2013) ................................ 14,16

Golden State Bottling Co. v. NLRB, 414 U.S. 168 (1973) ............................................. 33

Harrisonville v. W. S. Dickey Clay Mfg. Co., 289 U.S. 334 (1933) ............................................. 15

Hecht Co. v. Bowles, 321 u.s. 321 (1944) ............................................. 15

Moulor v. Am. Life Ins. Co., 111 u.s. 335 (1884) ............................................. 10

Regal Kn 324 u

Texas v. 1 482U

Travelers 557U

Weinberg 456U

Wesley v. 177 u

28 U.S.C.

28 U.S.C.

Fed. R. C

Adam Wi Defau Bloon:

Alexei Be $30B N.Y1

Arturo C. to Ro5 Defm

Page(s)

············· 33

············· 11

,. .............. 4

.............. 20

......... 14,16

.............. 33

). ' .............. 15

' .............. 15

,. ............. 10

v

Regal Knitwear Co. v. NLRB, 324 U.S. 9 (1945) ................................................. 34

Texas v. New Mexico, 482 U.S. 124 (1987) ............................................. 15

Travelers Indem. Co. v. Bailey, 557 U.S. 137 (2009) ............................................. 10

Weinberger v. Romero-Barcelo, 456 U.S. 305 (1982) ............................................. 15

Wesley v. Eells, 177 U.S. 370 (1900) ............................................. 15

STATUTES & RULES

28 u.s.c. § 1606 ........................................................ 30

28 U.S.C. § 1254 ........................................................ 32

Fed. R. Civ. P. 65 ....................................................... 33

OTHER AUTHORITIES

Adam Williams & Y e Xie, Belize Rejecting Argentine Default Model Spurs Bond Rally, Bloomberg (Jan. 14, 2013) .................................. 21

Alexei Barrionuevo, Argentina Nationalizes $30 Billion in Private Pensions, N.Y. Times (Oct. 21, 2008) .................................. 29

Arturo C. Porzecanski, From Rogue Creditors to Rogue Debtors: Implications of Argentina's Default, 6 Chi. J. Int'l L. 311 (2005) ............ 21, 26

Vl

Br. of Competitive Enterprise Institute & Former State Department Officials as Amici Curiae in Support of Respondent, Republic of Argentina v. NML Capital Ltd., No. 12-842 (U.S. Mar. 30, 2014) ......................... 10

Br. for Respondent, Republic of Argentina v. NML Capital Ltd., No. 12-842 (U.S. Mar. 26, 2014) ................... 10, 25

Camila Russo, Argentina Plans New York-Buenos Aires Bond Swap, Bloomberg (Aug. 27, 2013) .................................. 31

Claimants' Document Requests for Phase 2, Abaclat & Others v. Argentine Republic, ICSID Case No. ARB/07/5 (Jan. 25, 2013) ..................................................... 13

Daniele Lepido & Manuel Baigorri, Martinez Buys Telecom Argentina Control for $960 Million, Bloomberg (Nov. 14, 2013) .................................. 12

Dimitri Vayanos, Flight to Quality, Flight to Liquidity, and the Pricing of Risk (N at'l Bureau of Econ. Research, Working Paper No. 10327, 2004) ....................... 25

Elana Duggar, The Role of Holdout Creditors and CACs in Sovereign Debt Restructurings, Moody's Investors Serv. (Apr. 10, 2013) ..... passim

Embassy o Assessi1 offer: ]\

Euroclear, Securit1

Federative Pros pee

Federico S1 Default. (2007) ..

H.R. Rep.l

Hugh Bron Com par

IMF,Arger, to the T. Underst

IMF,Fund to Priva ofthe G

IMF Legal Soverei~ ProcessE

IMF, Mark, A Surve. Market (June 5,

~Former

Curiae in

~z Ltd., ................. 10

tl Ltd., ........... 10, 25

................. 31

;e 2, •lie,

.................. 13

.................. 12

·ht to

.................. 25

ditors :turings, 13) ..... passim

Vll

Embassy of Argentina, Q&A, Assessing Argentina's first debt restructuring offer: Not a bad deal after all ............................... 7

Euroclear, Effortless Yet Effective Securities Issuance .............................................. 32

Federative Republic of Brazil, Prospectus Supplement (Oct. 23, 2013) ....... 17, 29

Federico Sturzenegger & Jeromin Zettelmeyer, Defaults & Lessons From A Decade of Crises (2007) ................................................................... 23

H.R. Rep. No. 94-1487 (1976) ................................... 30

Hugh Bronstein, Argentina Nationalizes Oil Company YPF, Reuters (May 4, 2012) ............... 29

IMF, Argentina-Letter of Intent and Addendum to the Technical Memorandum of Understanding (Mar. 10, 2004) ...................... 5, 19

IMF, Fund Policy on Lending Into Arrears to Private Creditors-Further Consideration of the Good Faith Criterion (2002) ................. 6, 18

IMF Legal Dep't, Recent Developments in Sovereign Debt Litigation & Debt Relief Processes (Mar. 22, 2004) .................................... 18

IMF, Marketing & Capital Markets Dep't, A Survey of Experiences with Emerging Market Sovereign Debt Restructurings (June 5, 2012) ..................................................... 23

Vlll

IMF, P. Gerson, et al., Argentina: Ex Post Assessment of Longer-Term Program Engagement and Ex Post Evaluation of Exceptional Access (July 11, 2006) ..................... 15

IMF, Sovereign Debt Restructuring-Recent Developments & Implications For The Fund's Legal & Policy Framework (Apr. 26, 2013) ................................................. 6, 18

Inst. of Int'l Fin., Principles for Stable Capital Flows and Fair Debt Restructuring in Emerging Markets (2005) ............................... 6, 18

Inst. of Int'l. Fin., Principles for Stable Capital Flows & Fair Debt Restructuring: Report on Implementation by the Principles Consultative Group (Oct. 2013) .................... 21, 26

ISIN, Broker Dealers ................................................ 34

J.F. Hornbeck, Cong. Research Serv., Argentina's Sovereign Debt Restructuring (Oct. 19, 2004) ....................................................... 7

J eromin Zettelmeyer, et al., The Greek Debt Restructuring: An Autopsy (July 2013) ..................................................... 26, 28

Jill E. Fisch & Caroline M. Gentile, Vultures or Vanguards?: The Role of Litigation in Sovereign Debt Restructuring, 53 Emory L.J. 1047 (2004) ...................... 24, 25, 29

John B. Taylor, Address to Fitch's Latin American Conference (Apr. 27, 2004) ................ 19

La

l\1a

Pal:

Rar

Rid .J

Udc

(

(IMJ

United (Jan

f .............. 15

nt Fund's

........... 6, 18

pi tal

··········· 6, 18

1pital

~iples

········· 21, 26

............... 34

·ing ................. 7

topsy ········· 26,28

Utigation

.... 24, 25, 29

................ 19

lX

La Nacion, The Government Is Protecting Itself From Attachment (Feb. 5, 2004) ......................... 10

Marcelo Bonelli, Boudou is Splattered By An Obscure Foreign Pact with a Fund, Clarin (Oct. 18, 2013) .......................................... 20

Pablo Gonzalez & Camila Russo, Argentina Bonds Rally After Paris Club Sets Date for Debt Talks, Bloomberg (Mar. 14, 2014) ................................. 17

Ran Bi, et al., The Problem that Wasn't: Coordination Failures in Sovereign Debt Restructurings (Nov. 2011) ................................. 27

Rich Samp, Is Argentina Paying for Amicus Briefs in Foreign Debt Case Before U.S. Supreme Court?, Forbes (Mar. 19, 2014) ........... 30

Udaibir Das et al., Sovereign Debt Restructurings 1950-2010: Concepts, Literature Survey, and Stylized Fact

(IMF Working Paper 12/203 2012) ..... 7, 19, 20, 26

United Mexican States, Pricing Supplement (Jan. 9, 2014) ....................................................... 17

BRIEF IN OPPOSITION FOR THE VARELA RESPONDENTS

Respondents Pablo Alberto Varela, Lila Ines Burgueno, Mirta Susana Dieguez, Maria Evangelina Carballo, Leandro Daniel Pomilio, Susana Aquer­reta, Maria Elena Corral, Teresa Munoz De Corral, Norma Elsa Lavorata, Carmen Irma Lavorata, Cesar Ruben Vazquez, Norma Haydee Gines, and Marta Azucena Vazquez (collectively, the ''Varela Respond­ents")1 respectfully submit that the petition for a writ of certiorari should be denied.

STATEMENT

This case is about a rogue sovereign debtor whose "uniquely recalcitrant" behavior has injured investors and threatens all future sovereign restruc­turings. Argentina came to the United States, waived its sovereign immunities, and promised that it would not discriminate against one set of payment obligations under its bonds in favor of another. Yet here we are. Argentina ignored international norms for sovereign-debt restructurings that call for good­faith negotiations between a sovereign debtor and its creditors, presented creditors with a paltry restruc­turing offer, and said "take it or leave it." Argentina then delivered on its threats never to negotiate with or pay creditors who rejected the offer, while contin­ually paying those who bowed to its ultimatum. The nation codified these threats in the infamous Lock

1 "Respondents" alone collectively refers to all plaintiff­respondents to Argentina's petition: NML Capital, Ltd., the Aurelius entities, Olifant Fund, Ltd., and the Varela Respond­ents.

2

Law, on which the Argentine courts have relied to refuse to recognize these creditors' valid claims. The courts below properly recognized that this conduct breached the terms of Argentina's bond contracts, and that the only way to remedy Argentina's breach was through specific performance.

The Varela Respondents, as Argentine citizens, are painfully familiar with their country's behavior. They are among the respondents whose claims for specific performance were vindicated in the lower courts. They are middle-class investors who bought their country's bonds in relatively small amounts (between $25,000 and $90,000) for their retirement and general savings, and did so before the bonds went into default in late December 2001. For them, this lawsuit is not about reaping any "windfall." It simply seeks to hold Argentina to its contractual prom1ses.

The reasons for denying Argentina's petition are readily apparent, as the briefs in opposition submit­ted by other respondents demonstrate. The Varela Respondents will not restate those points in this brief.

Instead, the Varela Respondents submit this brief to address several distinct contentions made by Argentina and its amici.

First is Argentina's shameful effort to pitch this litigation as a struggle between a sovereign nation and a so-called "vulture fund." This ad hominem at­tack is utterly irrelevant, as Argentina's bond cove­nants apply to all bondholders. It is also grossly in­accurate, especially as applied to the Varela Re­spondents. They are individual Argentine citizens who purchased relatively small lots of bonds, and did

so before , words, the what Arge but also to

These( cial from c:

that the dE structuring "holdout" s search of ~

that 99% o lective Acti to accept tl ceptable tc this argurr sovereign been holdo ways tore: that all en always bee debtor wm better deal not impede fore or aftE duced non debt restn any sovere creditors. ] it would CI

eign debt01 ior and th: debt restru

Third, , its amici, 1 on Argenti

; relied to :1ims. The [s conduct contracts, a's breach

e citizens, behavior.

claims for the lower ho bought l amounts ~etirement

the bonds For them, :1dfall." It ontractual

etition are m submit­'he Varela ts in this

Lbmit this .s made by

pitch this ign nation •minem at­bond cove­grossly in­Tarela Re­le citizens is, and did

3

so before Argentina defaulted in 2001. In other words, the decision below gives relief not only to what Argentina self-servingly calls "vulture funds," but also to aggrieved individuals.

The second erroneous contention-and most cru­cial from a public policy perspective-is the notion that the decision below will harm sovereign debt re­structurings by encouraging creditors to embrace a "holdout" strategy of spurning restructuring offers in search of a higher payout. Putting aside the fact that 99% of New York law sovereign bonds have Col­lective Action Clauses designed to compel all holders to accept the terms of an offer when the offer is ac­ceptable to a certain threshold number of holders, this argument ignores three important facts about sovereign restructurings: that there have always been holdout creditors, that sovereigns have found ways to resolve the claims of holdout creditors, and that all creditors of sovereigns know that there has always been a significant chance that the sovereign debtor would give holdout creditors a different or better deal. These facts are widely known and have not impeded other sovereign debt restructurings, be­fore or after Argentina's. The decision below intro­duced no new incentives into the world of sovereign debt restructuring and should pose no obstacle to any sovereign that negotiates in good faith with its creditors. Indeed, if the decision below is overturned, it would create a powerful new incentive for sover­eign debtors to emulate Argentina's coercive behav­ior and threaten the future of voluntary sovereign debt restructurings.

Third, contrary to the protests of Argentina and its amici, the disputed Injunction does not infringe on Argentina's sovereignty. Argentina waived its

4

sovereign immunities and consented to be sued in U.S. courts. That Argentina now regrets this deci­sion is no reason not to hold Argentina to the terms of its contract.

Finally, as the Second Circuit explained, the In­junction enjoins only Argentina. This fact alone de­feats the third parties' due process contentions. The­se entities are "bound" only in the sense that the Federal Rules of Civil Procedure prohibit anyone from knowingly assisting an injunction's target to violate that same injunction.

Argentina's petition should be denied.

1. Argentina historically has had difficulty living up to its financial obligations. EM Ltd. v. Republic of Argentina, 473 F.3d 463, 466 n.2 (2d Cir. 2007) (cata­loguing Argentina's "diplomacy of default" through at least five actual or threatened defaults). After it emerged from another round of debt restructuring in 1992, Argentina again sought to borrow money in debt markets around the world. As one might ex­pect, this was not an easy sales pitch.

But Argentina again assured investors that this time was different. In its 1994 Fiscal Agency Agreement governing the bonds in this case ("FAA Bonds"), Argentina purported to bind its hands against future mischief by providing that New York law would govern the interpretation of the FAA Bonds, that any disputes would be litigated in New York courts, and that its sovereign immunity would prevent neither a suit .nor a subsequent attempt to collect on any judgment. Pet. App. 38. Each of these procedural protections aimed to assure investors that Argentina could not manipulate its legal system to avoid the consequences of a future default.

Argentir tection to in Argentina p under the [ least equall unsecured c:

ness." Pet. 1

to its prorr assured inv( inate again: Bonds in fav

Investor among therr chased their and before 1

see also C.A 3447, 3457,:

2. Arger December 2( no paymentE gan to prepa ised the In which at thE sums-that: tions with a launching a1 Intent and dum ofUnd€ of Intent"), arg/02/index

2 One of the 2003, but did s been acquired r

;o be sued in ·ets this deci­L to the terms

ained, the In­fact alone de­entions. The­~nse that the >hibit anyone m's target to

~d.

ifficu1ty living v. Republic of r. 2007) (cata­lt" through at lts). After it structuring in ·ow money in me might ex-

;tors that this ~iscal Agency is case ("FAA 1d its hands 1at New York

of the FAA gated in New munity would nt attempt to Each of these investors that gal system to ult.

5

Argentina also offered a further substantive pro­tection to investors, the Equal Treatment Provision: Argentina promised that its "payment obligations ... under the [FAA Bonds] shall at all times rank at least equally with all its other present and future unsecured and unsubordinated External Indebted­ness." Pet. App. 32. This promise-made in addition to its promise to repay principal and interest­assured investors that Argentina would not discrim­inate against payment obligations under the FAA Bonds in favor of another set.

Investors of all stripes purchased FAA Bonds, among them the 13 Varela Respondents, who pur­chased their FAA Bonds as early as December 1998 and before Argentina's 2001 default. Pet. App. 31; see also C.A. Joint App. ("J.A.") A-3416, 3425, 3434, 3447, 3457, 3470.2

2. Argentina defaulted on the FAA Bonds in late December 2001. Pet. App. 33. Then, after making no payments for more than two years, Argentina be­gan to prepare for a debt exchange. Argentina prom­ised the International Monetary Fund ("IMF")­which at the time was lending Argentina significant sums-that it would "engage in constructive negotia­tions with all representative creditor groups" before launching an exchange offer. Argentina-Letter of Intent and Addendum to the Technical Memoran­dum of Understanding, IMF (Mar. 10, 2004) ("Letter of Intent"), http://www .imf.org/external/np/loi/2004/ arg/02/index.htm. It promised, in other words, to fol-

2 One of the Varela Respondents purchased FAA Bonds in 2003, but did so only to replace Argentine-law bonds that had been acquired prior to the default.

6

low international norms, endorsed by the G-20 and the IMF, regarding sovereign debt restructurings, which entail "regular dialogue," "creditor commit­tee[s]," and "timely good faith negotiations." See Inst. of Int'l Fin., Principles for Stable Capital Flows and Fair Debt Restructuring in Emerging Markets 11-14 (2005); IMF, Fund Policy on Lending Into Ar­rears to Private Creditors-Further Consideration of the Good Faith Criterion 8-9 (2002) ("IMF Lending Into Arrears"), http://www.imf.org/external/pubs/ft/ privcred/073002.pdf.

But Argentina broke that promise, too. Brazenly eschewing constructive dialogue with its creditors and reneging on its commitment to the international community, Argentina presented a "non-negotiated" and non-negotiable offer to FAA Bondholders in 2005. IMF, Sovereign Debt Restructuring-Recent Developments & Implications For The Fund's Legal & Policy Framework 36 (Apr. 26, 2013) ("2013 IMF Report"), https://www.imf.org/external/np/pp/eng/ 2013/042613.pdf. It "offered" to exchange defaulted FAA bonds for "Exchange Bonds," which were worth roughly one-quarter as much as the FAA Bonds but which Argentina would actually pay. Pet. App. 33-34. To convince FAA Bondholders to accept this low­ball offer, Argentina vowed not to pay one penny­ever-to any FAA Bondholder who did not partici­pate in the exchange. Id. at 34 (The Government "has no intention of resuming payment on any bonds eligible to participate.").

The country backed up those threats with legis­lation, passing Law 26,017-the Lock Law-which prohibited the Argentine government from settling with FAA Bondholders who did not enter the Ex­change. Pet. App. 34-35. Despite these threats, only

76% of FAi a historical gar, The Rc ereign Debt Serv. (Apr. Das et al., ~ Concepts, L tbl.4 (IM http://www. 3.pdf.3

Argenti exchange terms despj tions in Ar partici pa tir: Law 26,54; governmen1 holders wh Despite ha decade, mo Bondholder

3 Even the participation, cepted the 2( non-Argentin• gentina, Q&J offer: Not a ("[A]lmost all ed the < argentina. us/< beck, Cong. R turing 3 (Oct. lion in defauli ing that only : non-Argentin«

oy the G-20 and ; restructurings, ~reditor commit­sotiations." See ,ze Capital Flows nerging Markets [.ending Into Ar­Consideration of ) ("IMF Lending 'external/pubs/ft/

;e, too. Brazenly ith its creditors the international "non-negotiated" Bondholders in

:tcturing-Recent ,he Fund's Legal 013) ("2013 IMF ternal/np/pp/ eng/ ~hange defaulted rhich were worth ! FAA Bonds but y. Pet. App. 33-) accept this low­pay one penny-

did not partici­rhe Government ent on any bonds

treats with legis­ock Law-which mt from settling )t enter the Ex­Lese threats, only

7

76% of FAA Bondholders accepted Argentina's offer, a historically low figure. See id. at 35; Elana Dug­gar, The Role of Holdout Creditors and CACs in Sov­ereign Debt Restructurings 9 Ex.8, Moodv's Investors Serv. (Apr. 10, 2013) (C.A. Dkt. #950, Ex~ A); Udaibir Das et al., Sovereign Debt Restructurings 1950-2010: Concepts, Literature Survey, and Stylized Fact 24-25 tb1.4 (IMF Working Paper 12/203 2012), http://www .imf.org/external/pubs/ft/wp/20 12/wp 1220 3.pdf.3

Argentina repeated this effort in 2010, offering to exchange FAA bonds on even more unfavorable terms despite dramatically improved economic condi­tions in Argentina, again vowing never to pay non­participating FAA Bondholders, and passing a law, Law 26,547, that again prohibited the Argentine government from honoring its obligations to bond­holders who did not participate. Pet. App. 35-36. Despite having received no payments for nearly a decade, more than 30 percent of the remaining FAA Bondholders rejected the 2010 exchange. The total

3 Even the 76% figure likely overstates the level of voluntary participation, as "almost all Argentjne domestic investors" ac­cepted the 2005 exchange offer, meaning that nearly half of non-Argentine entities declined the offer. See Embassy of Ar­gentina, Q&A, Assessing Argentina's first debt restructuring offer: Not a bad deal after all (last accessed May 2, 2014) ("[A]lmost all Argentine domestic investors (99 percent) accept­ed the deal."), http://embassyofargentina.us/embassyof argentina.us/email/120725 debtrestructuring.htm; J.F. Horn­beck, Cong. Research Serv., Argentina's Sovereign Debt Restruc­turing 3 (Oct. 19, 2004) (noting that 47% of Argentina's $81 bil­~ion in defaulted FAA Bonds was held by Argentines and imply­mg that only $23 billion of the $43 billion in FAA Bonds held by non-Argentines entered the 2005 exchange).

8

participation in the 2005 and 2010 exchanges was 93 percent. Ibid.; Duggar, supra, at 9 Ex.S.

Argentina has made regular payments on the Exchange Bonds, on time and in full, since they were issued. But, in furtherance of its "sovereign policies," Pet. 32, it has not paid a cent to, or attempted to ne­gotiate with, FAA Bondholders who did not partici­pate in the exchange offers. Pet. App. 37.

3. The Varela Respondents were among the FAA Bondholders who rejected Argentina's offers and, in 2011, sued Argentina for payment and for breach of the Equal Treatment Provision. J.A. A-3495. Dur­ing hearings before the district court, Argentina de­clined to present evidence that it could not afford to honor its obligations, despite the district court's ex­plicit invitation that it do so. J.A. A-2321 ("I would very much appreciate a balance sheet, a current bal­ance sheet of Argentina."). After concluding that Ar­gentina breached the Provision in December 2011, Pet. App. 70-75, on February 23, 2012, the district court issued the Injunction in the various respond­ents' actions, ordering Argentina to abide by its commitment not to discriminate against respondents' bonds, id. at 94-99.

Argentina appealed, and the Second Circuit af­firmed the bulk of the district court's judgment. Pet. App. 30. Specifically, it concluded that Argentina has the financial wherewithal to honor its obliga­tions. Id. at 60. The court remanded and the district court amended the Injunction to identify which third parties would likely be acting in "active concert or participation" with Argentina if it violated the In-

junction. Ia and the Se completely. pending thi tion. Pet. A:

REASOr

I. THE II' REMEDY

Argentir: Injunction iE because resr: bilee Br. 1; I unhelpful to Equal Treat FAABondho versity endo widow or an

In any e'i vestment fur: dividual Arg< small amour 3434, 3447, ~ Bonds years Pet. App. 31. the Injunctio plied to them

To the ex vant to equit table remedy absent such I

4 Such clarific cal disregard of 1

~hanges was 93 8.

yments on the since they were ~reign policies," ttempted tone­did not partici-37.

1mong the FAA offers and, in

td for breach of . A-3495. Dur­' Argentina de­ld not afford to ~rict court's ex­·2321 ("I would , a current bal­luding that Ar­)ecember 2011, 12, the district :trio us respond­) abide by its .st respondents'

ond Circuit af­judgrnent. Pet. that Argentina 1nor its obliga­and the district ;ify which third :tive concert or iolated the In-

9

junction. ld. at 147-154.4 Argentina again appealed, and the Second Circuit again affirmed-this time completely. !d. at 2. The court stayed the Injunction pending this Court's resolution of Argentina's peti­tion. Pet. App. 28.

REASONS FOR DENYING THE PETITION

I. THE INJUNCTION Is AN APPROPRIATE RE:MEDY FOR ALL INvESTORS

Argentina and its amici argue at length that the Injunction is inequitable or otherwise inappropriate because respondents are "vulture funds." Pet. 8; Ju­bilee Br. 1; France Br. 5. Such characterizations are unhelpful to this Court and legally irrelevant, as the Equal Treatment Provision protects each and every FAA Bondholder "regardless of whether it was a uni­versity endowment, a so-called 'vulture fund,' or a widow or an orphan." Pet. App. 3.

In any event, the Varela Respondents are not in­vestment funds, "vulture" or otherwise. They are in­dividual Argentine citizens who purchased relatively small amounts of FAA Bonds. J.A. A-3416, 3425, 3434, 3447, 3457, 3470. Many purchased their FAA Bonds years before Argentina's 2001 default. Ibid.; Pet. App. 31. Argentina thus presents no reason why the Injunction is inequitable or inappropriate as ap­plied to them.

To the extent that a bondholder's identity is rele­vant to equity, the Injunction is a particularly equi­table remedy for the Varela Respondents because, absent such relief, the Varela Respondents would be

4 Such clarification was necessary given Argentina's histori­cal disregard of court orders.

·- ·-··· ....

10

left without any effective remedy whatsoever, let alone an "adequat e remedy." See Pet. App. 12. Ar­gentina has, with the assistance of expensive and so­phisticated counsel, spirited assets out of the United States to attempt to evade attachment. See The Gov­ernment Is Protecting Itself From Attachment, La Nacion (Feb. 5, 2004).5 At the end of the day, it is easier for a sovereign to hide its assets than it is for a creditor to find them. And chasing Argentina around the globe is prohibitively expensive for indi­vidual bondholders like the Varela Respondents.

That is why individual investors seek antidis­criminatory contractual provisions like the Equal Treatment Provision. As even Argentina's ally, Jo­seph Stiglitz, recognizes, antidiscrimination provi­sions '<make 0 good economic sense: For financial markets to function, participants must have some assurance that one set of bondholders will not be ranked above or below another." Stiglitz Br. 5. Ar­gentina would have this Court disregard these as­surances as empty words. But this Court h as long held that written contracts ought to be enforced. Moulor v. Am. Life Ins. Co., 111 U.S. 335, 340-41, 4 S. Ct. 466, 469 (1884) (Where a contract is valid, "the duty of the court is to enforce it according to its terms"); see also Travelers Indem. Co. v. Bailey, 557 U.S. 137, 150 (2009) ("[I]t is black-letter law that the terms of an unambiguous private contract must be enforced .... ").6 If Argentina didn't really intend to

5 See also Br. for Respondent at 11, Republic of Argentina u. NML Capital Ltd., No. 12-842 (U.S. Mar. 26, 2014).

6 See also Br. of Competitive Enterprise Institute & Former Sta te Department Officials as Amici Curiae in Support of Re-

maint• tions'' under shoulc

In the Ir fall" 1 spond the s• at th<= 10. 'J vant. same ly up Ellio. 363, secor woul even prim coun SOffil

ositi all t fore 1991

[Foo·

spon 12-8 inte!

7

de fa pati Fini

. . ...... _ -... _____ --------

vhatsoever, let '· App. 12. Ar­)ensive and so­t of the United '· See The Gov­Lttachment, La f the day, it is ;s than it is for ;ing Argentina msive for indi­;pondents.

; seek antidis­ike the Equal ttina's ally, Jo­lination provi-

For financial Jst have some lrS will not be ;litz Br. 5. Ar­gard these as-0ourt has long o be enforced. 335, 340-41, 4

ct is valid, "the ccording to its

v. Bailey, 557 er law that the 1tract must be eally intend to

Uc of Argentina v. !014).

tstitute & Former in Support of Re-

11

maintain the equal "rank" of its "payment obliga­tions" under the FAA Bonds-even under its own understanding of the Equal Treatment Provision-it should never have promised to do so.

In a last gasp, Argentina and others contend that the Injunction would provide an inequitable "wind­fall" to respondents, presumably because some re­spondents purchased many of their FAA Bonds on the secondary market following Argentina's default at then-prevailing market prices. Pet. 1; Fintech Br. 10. This argument is wrong and in any event irrele­vant. Purchasers in the secondary market have the same rights as those investors who purchased direct­ly upon issuance-regardless of the bond's price. See Elliott Assoc. L.P. v. Banco de la Nacion, 194 F.3d 363, 380 (2d Cir. 1999) ("A well-developed market of secondary purchasers of defaulted sovereign debt would thereby be disrupted and perhaps destroyed even though its existence provides incentives for primary lenders to continue to lend to high-risk countries."). But even if post-default purchasers somehow received diminished legal rights, this prop­osition has no bearing as to the Varela Respondents, all but one of whom purchased their FAA Bonds be­fore Argentina's 2001 default, as early as December 1998.7

[Footnote continued from previous page]

spondent at 33, Republic of Argentina v. NML Capital Ltd., No. 12-842 (U.S. Mar. 30, 2014) ("Indeed, this is the core principle of international law; pacta sunt servanda.").

7 Fintech, an Exchange Bondholder, purports also to be a pre­default creditor, Fintech Br. 1, presumably to make its partici­pation in Argentina's exchanges appear altruistic. But Fintech's carefully worded declarations in the courts below

,._

12

II. THE SECOND CmCUIT'S DECISION WILL NOT liARM SOVEREIGN DEBT RESTRUCTURINGS

Argentina and its amici insist that the Injunction will "undermine the voluntary system of cooperative resolution of sovereign debt crises." Pet. 33; see also Stiglitz Br. 1; Brazil Br. 14; Mexico Br. 23-24; France Br. 15. The Second Circuit properly dismissed these points as "speculative, hyperbolic, and almost entire­ly of [Argentina's] own making." Pet. App. 22. In­deed, far from a broad pronouncement on the propri­ety of injunctions against sovereigns, the Second Cir­cuit made clear that its finding of breach and the is­suance of the Injnnction was appropriate only in light of Argentina's specific, and uniquely egregious, misconduct: violating the norms of sovereign-debt restructuring, ignoring court orders, and refusing to honor its obligations despite its unquestioned ability to pay. Such a remedy might not be appropriate as applied to any other sovereign debtor that followed international norms, could not afford to pay its credi­tors, or complied with couTt orders. And even if this

[Footnote continued from previous page]

make clear that it purchased only a fraction its FAA Bonds pri­or to Argentina's default. C.A. Supp. App. ("Supp. App.") SPE-1161 ("Fintech was among the Republic's original bondholders. Fintech later purchased approximately $834 million face value of [FAA Bonds]."); SPE-1162 (suggesting that Fintech traded all of its FAA Bonds in the 2005 Exchange, and later exchanged additional FAA Bonds in the 2010 Exchange). Moreover, Fintech maintains substantial investments in the regulated Argentine telecommunications industry, which surely benefit from friendly relations with the Argentine government. See Daniele Lepido & Manuel Baigorri, Martinez Buys Telecom Ar­gentina Control for $960 Million, Bloomberg (Nov. 14, 2013), http://v.-ww.bloomberg.com/news/2013-11-14/telecom-italia­agrees-to-sell-argentina-unit-for-960-million.html.

ruling could context of Ar~

by Argentina

1. The co ci are premis Second Circt: stand for the sovereign wit bonds is abou er, the unpa: and receive <. from paying nnpaid credit of one amicz "creditors wb quences, no 1

structure tha Br. 12-13; Br:

Rather, b sian-the fin, Treatment P1 appropriate with ArgentiJ . . umque m1sco

8 Professor 81 rently employee tration before i vestment Disp1 Phase 2, at 54, Republic, ICSII "expert Stiglit< let?requestTyp~ 3_En&caseld=(

HONWILLNOT 'RUCTURINGS

that the Injunction stem of cooperative :." Pet. 33; see also o Br. 23-24; France rly dismissed these and almost entire­Pet. App. 22. In­

nent on the propri­us, the Second Cir­, breach and the is­ppropriate only in 1niquely egregious, ' of sovereign-debt :rs, and refusing to nquestioned ability c be appropriate as ~btor that followed Jrd to pay its credi­s. And even if this

;ion its FAA Bonds pri­'P· ("Supp. App.") SPE­s original bondholders. i834 million face value that Fintech traded all !, and later exchanged :xchange). Moreover, ents in the regulated . which surely benefit tine government. See :inez Buys Telecom Ar­lberg (Nov. 14, 2013), ·14/telecom-italia­ion.htmL

13

ruling could conceivably be applied outside of the context of Argentina, none of the horribles predicted by Argentina and its amici will come to pass.

1. The concerns raised by Argentina and its ami­ci are premised on a fundamental misreading of the Second Circuit's decision. The decision does not stand for the sweeping proposition that, whenever a sovereign with an equal treatment provision in its bonds is about to pay one set of debts but not anoth­er, the unpaid creditor can race to the courthouse and receive an injunction prohibiting the sovereign from paying its other debts unless it also pays the unpaid creditor in full. It also does not, in the words of one amicus, automatically grant injunctions to "creditors who refuse to deal, no matter the conse­quences, no matter the efforts by the debtor to re­structure that debt." Stiglitz Br. 5; see also France Br. 12-13; Brazil Br. 16-17.8

Rather, both aspects of the Second Circuit's deci­sion-the finding that Argentina breached the Equal Treatment Provision and that equitable relief was an appropriate remedy-were inextricably interwoven with Argentina's pervasive, decade-long and entirely unique misconduct.

8 Professor Stiglitz's brief neglects to mention that he is cur­rently employed by Argentina as an expert witness in an arbi­tration before the International Center for Settlement of In­vestment Disputes. See Claimants' Document Requests for Phase 2, at 54, 55, 59, 60, 73, 74, Abaclat & Others v. Argentine Republic, ICSID Case No. ARB/07/5 (Jan. 25, 2013) (referring to "expert Stiglitz"), https://icsid.worldbank.org/ICSID/FrontServ let?requestType=CasesRH&action Val=show Doc&docld=DC315 3_En&caseid=C95.

14

First, the Second Circuit's breach analysis was based on Argentina's unabashed repudiation of its obligations to FA..<\ Bondholders. The court did not establish any across-the-board standard categorically addressing how a sovereign debtor might breach any equal treatment provision. Pet. App. 61 n.16. The court instead concluded that "[t]he particular lan­guage of the FAA's [Equal Treatment Provision] dic­tated a certain result in this case." Pet. App. 27. The court then held only that Argentina's particular "course of conduct"-its unprecedented "executive declarations" that it would never honor its obliga­tions under the FAA Bonds and "legislative enact­ments," including the Lock Law-breached the Pro­vision; indeed, the court concluded that Argentina had breached the Provision even under Argentina's own interpretation of it. Pet. App. 52-53, 61 n.16. Moreover, the court explicitly declined to hold that "a breach would occur with any nonpayment that is coupled with payment on other debt" or that a "'legis­lative enactment' alone could result in a breach." Pet. App. 61 n.16.

Indeed, the one other court that has ruled on an alleged breach of an equal treatment provision-the district court in Export-Import Bank of the Republic of China v. Grenada, No. 13-cv-1450, 2013 WL 4414875 (S.D.N.Y. Aug. 19, 2013)-recognized the narrow scope of the Second Circuit's decision. That court explained that Grenada's payment of one set of bonds, coupled with a statement that it would not pay the plaintiffs debt "'unless resources become available,"' "fail[ed] to establish Grenada's liability under [the decision below)." Id. at *4. To the contra­ry, the court ordered the parties to proceed to discov­ery "so that a factual record may be developed" re­garding Grenada's alleged breach. Id. at *1.

Second, ys1s were a:: alone wouk an injunctic This Court is never de but as one\ Texas v. NE court is nev or an injun• the circum~ Ibid. (quot (1900)); see U.S. 305 ( which issm W. S. Dick (1933))); H (1944) ("Tb the power mould eacb case. Flm guished it.'

An inj unique faci tiate with changes, c and coerci Duggar, su maintainec ("In sum, coming."); Ex Post A gagement ( cess 16 (Ju not "engag resentativ1

·each analysis was repudiation of its The court did not

ndard categorically ::-might breach any !\pp. 61 n.16. The he particular Ian­lent Provision] dic-3e." Pet. App. 27.

. :entina's particular ~dented "executive r honor its obliga-"legislative enact­

-breached the Pro­ed that Argentina under Argentina's

)p. 52-53, 61 n.16. ined to hold that "a mpayment that is )t" or that a "'legis­suit in a breach."

at has ruled on an ,ent provision-the :nk of the Republic v-1450, 2013 WL 3)-recognized the it's decision. That yment of one set of that it would not resources become

Grenada's liability *4. To the contra­

> proceed to discov-· be developed" re­Id. at *1.

15

Second, even if the Second Circuit's breach anal­ysis were as sweeping as Argentina contends, breach alone would not automatically entitle the creditor to an injunction similar to the Injunction issued below. This Court has made clear that "specific performance is never demandable as a matter of absolute right, but as one which rests entirely in judicial discretion." Texas v. New lvfexico, 482 U.S. 124, 131, (1987). A court is never required to grant specific performance, or an injunction having a similar effect, '"if under all the circumstances it would be inequitable to do so."' Ibid. (quoting Wesley v. Eells, 177 U.S. 370, 376 (1900)); see also Weinberger v. Romero-Barcelo, 456 U.S. 305 (1982) (an injunction '"is not a remedy which issues as of course"' (quoting Harrisonville v. W. S. Dickey Clay Mfg. Co., 289 U.S. 334, 337-38 (1933))); Hecht Co. v. Bowles, 321 U.S. 321, 329 (1944) ("The essence of equity jurisdiction has been the power of the Chancellor to do equity and to mould each decree to the necessities of the particular case. Flexibility, rather than rigidity, has distin­guished it.").

An injunction was clearly appropriate on the unique facts of this case. Argentina refused to nego­tiate with creditors prior to the 2005 and 2010 ex­changes, demonstrating its "unique," "unilateral[,] and coercive approach to . . . debt restructuring," Duggar, supra, at 1, an approach that Argentina has maintained throughout this litigation, see Pet. App. 5 ("In sum, no productive proposals have been forth­coming."); see also P. Gerson, et al., IMF, Argentina: Ex Post Assessment of Longer-Term Program En­gagement and Ex Post Evaluation of Exceptional Ac­cess 16 (July 11, 2006) (explaining that Argentina did not "engage in constructive negotiations with all rep­resentative creditor groups"). Argentina has vowed

16

to disobey-or, as Argentina's attorneys put it, "not voluntarily obey"-any judicial order with which it disagrees, despite submitting to the jurisdiction of U.S. courts. Ibid. It has taken the highly unusual­indeed, unique-steps of telling investors that it has "no intention of resuming payment on any bonds eli­gible to participate" in an exchange offer, id. at 34, and then passing legislation prohibiting its govern­ment-and the Argentine judiciary-from recogniz­ing its obligations under the FAA Bonds, id. at 52.9

And, above all, Argentina has presented no good rea­son for refusing to pay, as Argentina unquestionably has the financial resources to do so. Pet. App. 23, 60.

The Injunction against Argentina thus plainly was warranted on these unprecedented facts. But that conclusion has no bearing on other nations that default on their debts. Unless another sovereign not only refuses to pay, but also follows the trail blazed by Argentina-and shows similarly defiant "disre­gard for its legal obligations" despite ample financial resources, Pet. App. 59-no other sovereign will ever face the prospect of a similar injunction without a full opportunity to distinguish its conduct from that of Argentina. 10

9 In contrast, other nations that have informed investors that they would not pay nonexchanged debt have indicated that they would do so only because they lacked the resources to pay. See, e.g., Grenada, 2013 WL 4414875, at *4 ("Grenada will not pay any non-tendered Eligible Claims unless resources become available to do so."). 10 Mexico and Brazil recognize that the decision below turns

on Argentina's conduct and financial position. In recent disclo­sures to the Securities & Exchange Commission, both countries explained to investors that they could not "predict" "how [the

2. ArgentiJ mitted to stan chilling effect c restructurings.'' Brazil Br. 17; France Br. 14.11

non -participatir ings is misplac norms comes IJ

fact-bound ruliJ tion of Argeni proach to restn

[Footnote continue

lower court's] jud1 respect to their o' Mexican States, I http://www .sec.gov 08099/d657042d4:: spectus Suppleme tus"), http://www. 2513410549/d615E 11 Though Arge Fintech and theE nancial stake in tl itself as merely l rounding internat lending markets." as a member of tl: substantial credit filing of France's lion it owes to the "Argentina Bonde Talks," Bloombeq news/2014-03-141 begin-formal-talk'

: put it, "not ith which it risdiction of ly unusual­s that it has :1y bonds eli­~r, id. at 34, ~ its govern­)m recogniz­s, id. at 52.9

no good rea­questionably App. 23, 60.

thus plainly l facts. But nations that overeign not ·trail blazed fiant "disre-ple financial ign will ever tU without a . ct from that

l investors that cated that they :es to pay. See, :la will not pay ources become

on below turns n recent disclo­both countries

diet" ''how [the

17

2. Argentina and its friends argue that, if per­mitted to stand, the decision below "will have a chilling effect on . . . voluntary and negotiated debt restructurings." Pet. 33 (emphasis added); see also Brazil Br. 17; Mexico Br. 23-24; Stiglitz Br. 14; France Br. 14_11 Their obsessive focus on the effect of non-participating creditors on sovereign restructur­ings is misplaced. The real peril to international norms comes not from Argentina's creditors or the fact-bound ruling below, but from any further adop­tion of Argentina's "unilateral and coercive" ap­proach to restructuring.

[Footnote continued from previous page]

lower court's] judgment will be applied or implemented" with respect to their own similar equal treatment clauses. United Mexican States, Pricing Supplement, at PS-9 (Jan. 9, 2014), http://www.sec.gov/Archives/edgar/data/101368/0001193125140 08099/d657042d424b2.htm; Federative Republic of Brazil, Pro­spectus Supplement, at S-7 (Oct. 23, 2013) ("Brazil Prospec­tus"), http://www.sec.gov/Archives/edgar/data/205317 /00011931 2513410549/d615647d424b5.htm . 11 Though Argentina's Exchange Bondholders-non-parties

Fintech and the Euro Bondholders-state forthrightly their fi­nancial stake in this litigation, the Republic of France presents itself as merely having "a substantial interest in issues sur­rounding international financial stability and global sovereign lending markets." France Br. 1. France fails to mention that, as a member of the Paris Club, id. at 2, it is one of Argentina's substantial creditors. Indeed, roughly concurrently with the filing of France's brief, Argentina offered to repay the $10 bil­lion it owes to the Paris Club. Pablo Gonzalez & Camila Russo, "Argentina Bonds Rally After Paris Club Sets Date for Debt Talks," Bloomberg (Mar. 14, 2014), http://www.bloomberg.com/ news/2014-03-1414/argentina-awaits-notice-from-paris-club-to­begin-formal-talks.html.

18

As Argentina recognizes, there is no statutory "bankruptcy regime" for sovereign debtors. Pet. 7. If sovereign debtors are unable to pay all their debts, they must rely on voluntary arrangements with their creditors. To facilitate this trust-intensive endeavor, the international community, including the G-20 and the IMF, recognizes that creditors and debtors must come together, negotiate in good faith, and "reach a collaborative agreement." See Brazil Br. 17; see also France Br. 14 ("Modern sovereign restructuring de­pends on coordination, close dialogue and fair nego­tiations among all creditors and the sovereign debt­or."); Inst. of Int'l Fin., supra, at 11-14. Similarly, the IMF "advise[s] members seeking a debt restruc­turing to engage in a constructive dialogue with their creditors, so as to maximize ... broad creditor sup­port!' IMF Lending Into Arrears, supra, at 8-9. That is because "the extent of litigation against sov­ereign debtors may largely depend on the actions of the sovereign debtors themselves." Legal Dep't, IMF, Recent Developments in Sovereign Debt Litigation & Debt Relief Processes 2 (Mar. 22, 2004).

International norms recognize that both creditors and sovereigns have incentives to cooperate. During restructuring negotiations, the sovereign wants to offer as little as possible, while attracting as many creditors as possible to minimize its total debt bur­den. In contrast, private creditors want the sover­eign to offer as much as possible, provided that the sovereign's resulting debt burden is sustainable. Private creditors' potential recovery value is limited by a sovereign's ability to pay: if the sovereign offers to pay too much, it might soon default on these re­structured obligations, and the parties would return to square one. See 2013 IMF Report, supra, at 23-24 (referring to "repeated restructurings" where initial

restructuring "do[< ity").

This voluntary ful. Since 1997 A

' one of only two the: least 90% of the so supra, at 8. Indeec turings since 1997 ipation, with the a' months after the sc

Argentina chos ise to the IMF and ate with its credito ed States, 14 it prest below what its the

12 Only the restructu approximately 70,000 J Das, supra, at 29 n.20. rate, Dominica "paid a count" "as a sign of goc tors. Duggar, supra, at 13 See Letter of Intent transparently with ere, discuss with crediton fer .... "). 14 In a speech in Apri John Taylor explained emphasized that debt private creditors must take needed to encour exchange." See John B can Conference (Apr. ~ center/press-release siP

no statutory ors. Pet. 7. If 11 their debts, nts with their sive endeavor, · the G-20 and debtors must and "reach a

:r. 17; see also tructuring de­:md fair nego­)Vereign debt­.4. Similarly, debt restruc­

gue with their creditor sup­

upra, at 8-9. r1 against sov­the actions of al Dep't, IMF, t Litigation &

both creditors ?rate. During ~ign wants to :ting as many :>tal debt bur­mt the sover­rided that the

sustainable. tlue is limited 1vereign offers t on these re-would return

'lpra, at 23-24 where initial

19

restructuring "do[es] not restore debt sustainabil­ity").

This voluntary process has been largely success­ful. Since 1997, Argentina's 2005 restructuring was one of only two that failed to attract support from at least 90% of the sovereign's creditors. 12 See Duggar, supra, at 8. Indeed, nearly three-quarters of restruc­turings since 1997 have received at least 95% partic­ipation, with the average restructuring concluding 18 months after the sovereign's default. ld. at 4, 8.

Argentina chose another path. Despite its prom­ise to the IMF and its creditors that it would negoti­ate with its creditors13 and entreaties from the Unit­ed States, 14 it presented a take-it-or-leave-it offer far below what its then-recovered economy could afford

12 Only the restructuring of Dominica, a Caribbean nation of approximately 70,000 people, had a lower acceptance rate. See Das, supra, at 29 n.20. But, even with this lower participation rate, Dominica "paid all interest falling due into an escrow ac­count" "as a sign of good faith" to these non-participating credi­tors. Duggar, supra, at 10. 13 See Letter of Intent, supra ("We will deal constructively and transparently with creditors .... "); ibid. ("[I]t is our intention to discuss with creditors all aspects of the debt exchange of­fer .... "). 14 In a speech in April 2004, Under Secretary of the Treasury John Taylor explained the United States' position: "We have emphasized that debt negotiations between Argentina and its private creditors must be transparent and have the give-and­take needed to encourage creditors to participate in the debt exchange." See John B. Taylor, Address to Fitch's Latin Ameri­can Conference (Apr. 27, 2004), http://www.treasury.gov/press­center/press-releases/Pages/js14 76.aspx.

20

to pay.15 As a result, nearly a quarter of Argentina's creditors chose not to participate in the 2005 Bond Exchange-an acceptance rate far below previous sovereign restructurings-even though Argentina's offer did not close until more than 40 months after it first defaulted. Duggar, supra, at 4, 9; Das et al., su­pra, at 24. Argentina then passed the Lock Law, an act constituting the "literalO ... repudiation of its le­gal obligations." EM Ltd. v. Republic of Argentina, 720 F. Supp. 2d 273, 279 (S.D.N.Y. 2010), rev'd on other grounds, 652 F.3d 172 (2d Cir. 2011). Through such arm-twisting-over the course of an additional five years-Argentina was finally able to bring credi­tor participation over 90% in its 2010 exchange. But that "achievement" likely had more to do with Argen­tina's decade of non-payment than any perception of fairness. 16 As third parties have recognized, "the case of Argentina was and remains unique in its uni­lateral and coercive approach to the debt restructur­ing." Duggar, supra, at 1.

15 See SPE-1352 (memorandum from current member of Ex­change Bondholder Group, Gramercy, criticizing the 2005 ex­change offer as "unilateral in nature," "not a result of good faith negotiations," and "not consistent with Argentina's capacity to pay"). 16 Indeed, the Argentine media has placed the 2010 exchange in an even more suspicious light. One outlet reports that Ar­gentina opened the 2010 exchange only after Gramercy-the one-time holdout creditor that became the leader of the 2010 exchange offer and now a member of the Exchange Bondholder Group in this Court-provided Argentina's Vice President Amado Boudou with "illegal commissions." Marcelo Bonelli, Boudou is Splattered By An Obscure Foreign Pact with a Fund, Clarin (Oct. 18, 2013), available at http://rolfjkoch.blogspot.com/ 20 13/10/boudou-is-splattered-by-a bscure-foreign.html.

If this Co disturbing the and coercive" become the no current syste "complex and velopment" m ineffective by ticipants." Fr exchange-an achieved sub: good-faith nef Principles for structuring: ciples Consull Consultative structuring a negotiations). fear of the co with their cr world that a faith, soverei tives" away f repudia tion. 1'

17 Indeed, Beli tine model, whE turing offer to i Xie, Belize Reje ly, Bloomberg news/20 13-01-1 -region-best-ral the ledge when creditors, and s who is to say tl: ereign would co

·of Argentina's the 2005 Bond )elow previous gh Argentina's months after it ; Das et al., su­e Lock Law, an liation of its le­e of Argentina, 2010), rev'd on :011). Through f an additional l to bring credi­exchange. But do with Argen­y perception of ecognized, "the Lique in its uni­lebt restructur-

nt member of Ex­zing the 2005 ex­:esult of good faith :1tina's capacity to

che 2010 exchange :t reports that Ar­er Gramercy-the eader of the 2010 hange Bondholder s Vice President

Marcelo Bonelli, Pact with a Fund, lmch.blogspot.com/ gn.html.

21

If this Court condones Argentina's behavior by disturbing the decision below, Argentina's "unilateral and coercive" approach to restructurings may soon become the norm. Argentina's amici explain that the current system of sovereign-debt restructuring is "complex and informed by decades of historical de­velopment" and "[t]his mechanism can be rendered ineffective by the slightest shift in incentives to par­ticipants." France Br. 15. Prior to Argentina's 2005 exchange-and, indeed, since then-nations have achieved substantial creditor participation through good-faith negotiations. See, e.g., Inst. for Int'l. Fin., Principles for Stable Capital Flows & Fair Debt Re­structuring: Report on Implementation by the Prin­ciples Consultative Group 11 (Oct. 2013) ("Principles Consultative Group") (discussing Belize's 2013 re­structuring as model of success through good-faith negotiations). Indeed, many may have done so for fear of the consequences of not dealing in good faith with their creditors. But, if Argentina shows the world that a sovereign need not negotiate in good faith, sovereign debtors will face a "shift in incen­tives" away from negotiations, and towards outright repudiation. 17 See Arturo C. Porzecanski, From

17 Indeed, Belize recently came close to embracing the Argen­tine model, when it unilaterally suggested an onerous restruc­turing offer to its creditors in mid-2012. Adam Williams & Ye Xie, Belize Rejecting Argentine Default Model Spurs Bond Ral­ly, Bloomberg (Jan. 14, 2013), http://www.bloomberg.com/ news/20 13-0 1-14/belize-rejecting-argentine-default-model-spurs -region-best-rally.html. Although Belize ultimately backed off the ledge when creditors balked at this offer, negotiated with its creditors, and successfully restructured 100% of its bonds, ibid., wh~ is to say that, under the Argentine precedent, a future sov­ereign would come to its senses.

22

Rogue Creditors to Rogue Debtors: Implications of Argentina's Default, 6 Chi. J. Int'l L. 311, 331 (2005) ("The case of Argentina suggests that much of the academic and policy making literature has ignored the realistic possibility that rogue sovereign debtors, rather than rogue private creditors, are the ones that pose the greatest threat to the integrity and efficien­cy of the international financial architecture.").

3. Argentina and its amici also contend that af­firming the decision below will empower so-called "holdout" creditors to thwart future restructurings. Nonsense. This contention ignores the fact that there have always been creditors that choose not to participate in a sovereign's proposed restructuring, and there has always been a very good chance that those non-participating creditors would receive more favorable terms, or even would be paid on time and in full. It also ignores the simple truth that not eve­ry creditor can be a "holdout"-if all creditors choose not to participate in a restructuring, then nobody gets paid and all are worse off. The decision below thus did not introduce a new element that will im­pede restructurings. Indeed, the two restructurings since the district court issued its Injunctions-those of Greece and Belize-amply demonstrate that credi­tors are willing to accept a fair restructuring offer arrived at through good-faith negotiations.

a. According to the submissions by Argentina and its amici, non-participating creditors appear to be the scourge of the international financial commu­nity-thwarting restructurings at every turn. See Pet. 35; Brazil Br. 20-21; France Br. 2; Mexico Br. 4; Stiglitz Br. 6-7; Jubilee Br. 10-11. Argentina and its friends are mistaken.

First, Ar~ serts "[t]he PJ ter otherwise restructure a nearly every ing since 199 not to partici restructuring rate was 959. the average : only 7 of tht 100% partici were not det restructurin~ that "a sing from particiJ

Second, Stiglitz's cor partial payn ing process , at the end." parently un non-particip structuringE Uruguay, tl uador (in U time and in Greece); Fe( telmeyer, D ses 158 (20( Markets DE ing Market 5, 2012) (D templating structuring

Implications of 311, 331 (2005)

1at much of the ure has ignored •vereign debtors, 1re the ones that ~ity and efficien­tecture.").

contend that af­tpower so-called , restructurings. s the fact that at choose not to d restructuring, ood chance that 1ld receive more aid on time and tth that not eve­creditors choose ,g, then nobody ~ decision below nt that will im­J restructurings unctions-those trate that credi­tructuring offer tions.

.s by Argentina iitors appear to nancial comm u­very turn. See 2; Mexico Br. 4; ~gentina and its

23

First, Argentina's amicus Jubilee incorrectly as­serts "[t]he presence of even a single holdout can de­ter otherwise cooperative creditors from agreeing to restructure a country's debt." Jubilee Br. 10-11. In nearly every one of the 34 sovereign-debt restructur­ing since 1997, there have been creditors who chose not to participate in the restructuring. Across these restructurings, the average creditor participation rate was 95%. Duggar, supra, at 8. In other words, the average non-participation rate was 5%. Indeed, only 7 of the 34 restructurings eventually achieved 100% participation. Ibid. Yet creditors apparently were not deterred from participating in the other 27 restructurings. This history thus refutes any notion that "a single holdout" could deter other creditors from participating in a restructuring.

Second, this history also belies Professor Stiglitz's contention that "no creditors would opt for partial payment at the beginning of the restructur­ing process when they can hold out for full payment at the end." Stiglitz Br. 7. Professor Stiglitz is ap­parently unaware that many sovereigns have paid non-participating creditors in full after voluntary re­structurings. Indeed, at least four nations­Uruguay, the Dominican Republic, Greece, and Ec­uador (in 1999)-paid non-participating creditors on time and in full. Duggar, supra, at 10 (Ecuador and Greece); Federico Sturzenegger & Jeromin Zet­telmeyer, Defaults & Lessons From A Decade of Cri­ses 158 (2007) (Uruguay); IMF, Marketing & Capital Markets Dep't, A Survey of Experiences with Emerg­ing Market Sovereign Debt Restructurings 16 (June 5, 2012) (Dominican Republic). Thus, creditors con­templating whether to participate in a proposed re­structuring have always had the option to "hold out

24

for full payment." Yet they participated, and in large numbers. 18

b. Nor will the decision below increase creditors' desire not to participate in a restructuring.

First, as explained above, because there is no "absolute right" to equitable relief, creditors cannot guarantee that they will receive an injunction simi­lar to the Injunction here, and courts might well not issue one without first finding serious misbehavior similar to Argentina's. See supra pp. 16-20. So to the extent that the decision below could increase creditors' incentives not to participate in a restruc­turing, it would do so only if the sovereign followed Argentina's recalcitrant path.

Second, for a variety of reasons, creditors may have different price thresholds for accepting a re­structuring offer. For instance, many creditors lack the resources to support a prolonged holdout strate­gy. See Jill E. Fisch & Caroline M. Gentile, Vultures or Vanguards?: The Role of Litigation in Sovereign Debt Restructuring 53 Emory L.J. 1047, 1075-76 (listing the diverging investment strategies among mutual funds, hedge funds, retail investors, and in­stitutional investors). Some institutions, by their own policies, cannot hold defaulted debts in their

18 Besides reflecting ignorance of or inattention to history, Pro­fessor Stiglitz's submission is flatly inconsistent with the rule of law. To hold out for full payment at the end is merely to make a sovereign honor the contract it freely entered into. In the ab­sence of any sovereign bankruptcy scheme, Professor Stiglitz apparently would have courts make up ad hoc exceptions to contractual promises. Whether good or bad economic policy, that certainly is not law.

portfolios. As its creditors ha: Republic of Ar.§ 842 (U.S. Mar. government cm risk, see Pet. 1. payoff, non-par tie up their sc defaulted debt, for such debt, v V ayanos, Fligh the Pricing of} Working Pape: liquidity is to r tive to the [m org/papers/w1 C and other insb their portfolim often daily .... ' a sovereign an bonds-the ec~ eign's initial o then again, so ing offer far bE

Third, eve: market partici or risk profile~ ryone will ho quickly relearJ simplest term

19 Individual inv typically mark-t( be higher than known and accm

ated, and in large

ncrease creditors' ~turing.

ause there is no creditors cannot

1 injunction simi­ts might well not 'ious misbehavior pp. 16-20. So to w could increase >ate in a restruc­overeign followed

1s, creditors may r accepting a re­my creditors lack ~d holdout strate-Gentile, Vultures tion in Sovereign J. 1047, 1075-76 strategies among investors, and in­tutions, by their ~d debts in their

ntion to history, Pro­stent with the rule of nd is merely to make ;ered into. In the ab­le, Professor Stiglitz xd hoc exceptions to bad economic policy,

25

portfolios. As the litigation between Argentina and its creditors has shown, see Br. for Respondent at 13, Republic of Argentina v. NML Capital Ltd., No. 12-842 (U.S. Mar. 26, 2014), litigating against a foreign government comes with numerous uncertainties and risk, see Pet. 1.19 Moreover, prior to any hypothetical payoff, non-participating creditors would be forced to tie up their scarce capital in the sovereign debtor's defaulted debt, which, because of the limited market for such debt, would be difficult to resell. See Dimitri Vayanos, Flight to Quality, Flight to Liquidity, and the Pricing of Risk 2 (N at'l Bureau of Econ. Research, Working Paper No. 10327, 2004) ("[O]ne cost of il­liquidity is to make an asset riskier, and more sensi­tive to the [market's] volatility."), http://www.nber. org/papers/w10327.pdf; Fisch, supra, at 1077 ("Banks and other institutional investors record the values of their portfolios of sovereign bonds at market prices, often daily .... "). Put together-the cost of pursuing a sovereign and the capital tied up in difficult-to-sell bonds-the economic costs of not accepting a sover­eign's initial offer can be a prohibitive burden. But then again, so can the costs of accepting a restructur­ing offer far beneath the sovereign's capacity to pay.

Third, even if the decision below somehow caused market participants to change their business models or risk profiles-the prerequisite to Argentina's "eve­ryone will hold out" argument-the market would quickly relearn that not everyone can hold out. In its simplest terms, a "holdout" creditor stands to profit

19 Individual investors, such as the Varela Respondents, do not typically mark-to-market and accordingly their price point may be higher than other investors--this distinction is entirely known and accounted for in the sovereign debt market.

26

only if the sovereign is otherwise able to restructure the vast majority its debt, as that is the deal from which the creditor is "holding out" for better terms. If suddenly everyone in the market held out for a better deal, then there would be no deal, and every­one would lose. Sophisticated financial institutions already realize the self-defeating nature of this strategy, and the current equilibrium will remain stable or will quickly return.

c. Even if the decision below did increase a credi­tor's incentive to reject a restructuring offer, sover­eigns can overcome collective-action concerns through well-tested, common sense practices without changing a word in their bond contracts, both of which Argentina ignored in its 2005 and 2010 ex­changes.

First, working with creditor committees is one measure sovereigns have used "to conclude the debt restructurings fairly quickly." See Principles Consul­tative Group, supra, at 15 (describing recent experi­ence of Grenada and Belize). Argentina, however, chose not to negotiate with the numerous creditor groups that formed following its 2001 default. See Das, et al., supra, at 24 tbl.4; Porzecanski, supra, at 324 ("[T]he government failed to recognize-never mind negotiate with-such a committee .... ").

Second, sovereigns can also increase participa­tion unilaterally by requiring a high minimum­participation condition in their restructuring offers. Such conditions provide that a restructuring will not close unless a certain percentage of creditors partici­pate, a condition that has "been used in most debt exchange offers since the mid-1990s," including Greece's 2012 restructuring. See Jeromin Zettelmey­er, et al., The Greek Debt Restructuring: An Autopsy

12 (July 2013), ht viewcontent.cgi?arti, arship. Argentina E

J.A. A-678 (2005 I promise to the IMF Intent, supra (prom minimum participa broadly supported r and coupled these cc tions-Argentina we ence of a minimur may be enough to problem" of dispers The Problem that ~ Sovereign Debt E http://www .imf.org/E 5.pdf.20

d. The recent :r lize-both ofwhich ( issued the Injm demonstrate that tl restructurings. G:r structuring in histo creditor participatic amici note that cert attract sufficient cn bonds' collective act 23; Mexico Br. 27; E suggests that the G To the contrary-c:r

20 Moreover, newer bOJ action clauses, which w' Br. in Opposition for Au

e to restructure s the deal from or better terms.

held out for a :leal, and every­cial institutions nature of this 1m will remain

cncrease a credi­ing offer, sover­::tion concerns ractices without 1tracts, both of 5 and 2010 ex-

nmittees is one nclude the debt inciples Consul­g recent experi­ntina, however, nerous creditor )1 default. See anski, supra, at ;:)Cognize-never

") ee .....

rease participa­ligh minimum­ucturing offers. .cturing will not reditors partici­ld in most debt 90s," including )min Zettelmey­rtg: An Autopsy

27

12 (July 2013), http://scholarship.law.duke.edu/cgi/ viewcontent.cgi?article=5343&context=facultyschol arship. Argentina elected not to pursue this course, J.A. A-678 (2005 Prospectus), notwithstanding its promise to the IMF that it would do so, see Letter of Intent, supra (promising to include an "appropriate minimum participation threshold necessary for a broadly supported restructuring"). Had it done so­and coupled these conditions with good-faith negotia­tions-Argentina would have learned that "the pres­ence of a minimum participation threshold alone may be enough to deal with the collective action problem" of dispersed bondholders. Ran Bi, et al., The Problem that Wasn't: Coordination Failures in Sovereign Debt Restructurings 4 (Nov. 2011), http://www.imf.org/external/pubs/ft/wp/2011/wp1126 5.pdf.20

d. The recent restructurings of Greece and Be­lize-both of which closed after the district court first issued the Injunction in February 2012-demonstrate that the decision below will not harm restructurings. Greece conducted the largest re­structuring in history in mid-2012, achieving 96.6% creditor participation. Although Argentina and its amici note that certain series of Greek bonds did not attract sufficient creditor participation to trigger the bonds' collective action clauses, Pet. 35; France Br. 23; Mexico Br. 27; Stiglitz Br. 11, that by no means suggests that the Greek restructuring was a failure. To the contrary-creditor participation was on par

20 Moreover, newer bond issuances will benefit from collective action clauses, which were not present in the FAA Bonds. See Br. in Opposition for Aurelius Respondents.

28

with other successful restructurings. See Duggar, supra, at 8 ("The average creditor participation rate was 95%.").21 And in the case of Belize, creditors did not withhold support out of fear that some creditors might not participate. To the contrary, Belize suc­cessfully used a collective action clause in its bonds to achieve 100% participation among its creditors. ld. at 9.

"Holdout" creditors were no barrier to either Greece or Belize, even after those creditors were aware of the Injunction here. If holdouts posed no threat in those cases, there is no reason to believe they should do so in future restructurings.

4. Two amici contend that the decision below will harm poor nations that cannot afford to service their obligations absent "debt relief' or restructuring. Jubilee Br. 1; Stiglitz Br. 4 ("Poor countries are typi­cally at a huge disadvantage in bargaining with big multinational lenders."). They are mistaken. The Second Circuit explained that the Injunction was eq­uitable because Argentina has the wherewithal to pay respondents and its other creditors. Pet. App. 23, 60. Argentina presented no evidence-none­that it lacked for resources. Ibid. Nor could it do so: it is a G-20 country with billions of dollars in liquid cash reserves, plenty of other assets, and the political

21 Greece's participation rate likely would have been even higher had it not offered a single restructuring package to all creditors, regardless of different tenns among different series, which meant that bonds maturing sooner experienced a much larger haircut than bonds maturing later. See Zettelmeyer, su­pra, at 21.

·'·.

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will to expropriate prope an oil company22 or a pen

Far from harming pc low ensures that they w creditors for cheaper lo " h . l w y a rat10na sovereigJ traduce ex ante a pari pa contracts if, as in the c~ tion, it so significantly , vices its debt." France I ous: sovereign debtors b for more favorable borro pra, at 1054 ("If creditor: from opportunistic defau restricted and borrowing haps that is why, in its J

again chose to issue debt and to maintain the sam the equal treatment pro• tus, supra, at S-3, 5.24

22 See Hugh Bronstein, Argf YPF, Reuters (May 4, 2012. 20 12105/04/us-argentina-ypf-id 23 See Alexei Barrionuevo, A in Private Pensions, N.~ http://wvrw .nytimes.com/2008/ rgentina.html? _r=O. 24 Rather than change the t sion or contractually prohibit tion to enforce the provision, I bility of an injunction as a "ri~ pra, at S-7.

'ee Duggar, ipation rate :redi tors did ne creditors Belize sue­

in its bonds ;s creditors.

r to either ditors were ts posed no 1 to believe

:ision below d to service structuring. ies are typi­ng with big ;aken. The ;wn was eq­rewithal to

Pet. App. Lce-none­uld it do so: .rs in liquid che political

ve been even )ackage to all fferent series, meed a much ctelmeyer, su-

29

will to expropriate property to its own benefit be it ' an oil company22 or a pension fund. 23

Far from harming poor nations, the decision be­low ensures that they will be able to bargain with creditors for cheaper loans. Amicus France asks "why a rational sovereign debtor would willingly in­troduce ex ante a pari passu clause into its sovereign contracts if, as in the Court of Appeals' interpreta­tion, it so significantly constrained the way it ser­vices its debt." France Br. 10. The answer is obvi­ous: sovereign debtors bind themselves in exchange for more favorable borrowing terms. See Fisch, su­pra, at 1054 ("If creditors cannot protect themselves from opportunistic defaults, access to loans will be restricted and borrowing costs will be higher."). Per­haps that is why, in its recent debt issuance, Brazil again chose to issue debt governed by New York law and to maintain the same language in its version of the equal treatment provision. See Brazil Prospec­tus, supra, at S-3, 5.24

22 See Hugh Bronstein, Argentina Nationalizes Oil Company YPF, Reuters (May 4, 2012), http://www.reuters.com/article/ 2012/05/04/us-argentina-ypf-idUSBRE8421GV20120504. 23 See Alexei Barrionuevo, Argentina Nationalizes $30 Billion in Private Pensions, N.Y. Times (Oct. 21, 2008), http://www .nytimes.com/2008/1 0/22/business/worldbusiness/22a rgentina.html? _r=O. 24 Rather than change the text of its equal treatment provi­sion or contractually prohibit creditors from seeking an injunc­tion to enforce the provision, Brazil merely identified the possi­bility of an injunction as a "risk factor." Brazil Prospectus, su­pra, at S-7.

<

I 30

Ill. THE INJUNCTION DOES NOT INFRINGE ON ARGENTINA'S SoVEREIGNTY

With no meritorious contention that the Second Circuit committed any legal error-as made clear in the briefs in opposition filed by other respondents­or that the decision violates any public-policy con­cern, Argentina's only other contention is that the Injunction offends Argentina's "sovereign dignity." See Pet. 18; see also Brazil Br. 7.25 Given that Argen­tina has told a federal court-to its face-that it will not "voluntarily obey" any order it dislikes, Pet. App. 5, the Varela Respondents question whether in this situation Argentina should be accorded any dignity, sovereign or othenvise.

In any event, Argentina waived its sovereign immunity and voluntarily submitted to the jurisdic­tion of the U.S. courts. Pet. App. 2, 59. And under the law to which Argentina consented, this meant that Argentina would be ''liable in the same manner and to the same extent as a private individual under like circumstances." 28 U.S.C. § 1606. In particular, like any other litigant, Argentina consented to the possibility of being subjected to an "injunction or specific performance" if such relief was "clearly ap­propriate." H.R. Rep. No. 94-1487, at 21-22 (1976).

25 Brazil's reliance on sovereign dignity is highly ironic, given the numerous press reports suggesting that Argentina pur­chased Brazil's support in this litigation by removing trade bar· riers for key Brazilian industries. See Rich Samp, Is Argentina Paying for Amicus Briefs in Foreign Debt Case B efore U.S. Su­preme Court?, Forbes (Mar. 19, 2014), http://www.forbes.com/ sites/wl£'2014/03/19/is-argentina-paying-for-amicus-briefs-in­foreign-debt-case-before-u-s-supreme-courtJ (linking to Brazili­an news sources and English-language translations thereof).

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debtor." Pet. A ("[T]he case of A its unilateral ar structuring."). J "Argentina's n unique.'' Puentt: pendent voices.

26 It is for this r e ployment laws agai nothing to do with Br. 12-13. The Inj Argentina specifica tions" under the FA under other debt. the United States : ployrnent contracts 27 Such assertiom Caja de Valores, sh tities would be Arg ! Argentina to evade ) payments through Plans New York·Bu 2013) {describing 1 New York-law bon• that is "aimed a1 http}/W\\--w. bloom be new-york-buenos-ai

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~d its sovereign j to the jurisdic­' 59. And under 1ted, this meant he same manner individual under 16. In particular, ~onsented to the n "injunction or was "clearly ap­at 21-22 (1976).

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If Argentina's sense of self-worth-its "sovereign dignity"- is so fragile that it cannot withstand con­sented-to adjudications, then perhaps Argentina should have borrowed money elsewhere. zs

Indeed, Argentina's name-calling-this "vulture" nonsense-is a mere ploy to divert attention from one simple t ruth: Argentina stands apart in the community of nations as a "uniquely recalcitrant debtor." Pet. App. 26; see also Duggar, supra, at 1 ("[T)he case of Argentina was and remains unique in its unilateral and coercive approach to the debt re­structuring."). Amici contest this point, arguing that "Argentina's recalcitrance is not meaningfully unique." Puente Br. 11.27 But this is belied by inde­pendent voices. Moody's analysis of sovereign bond

26 It is for this reason that Brazil's threat to enforce its em­ployment laws against the United States via an injunction has nothing to do \v"ith either "comity" or "reciprocity." See Brazil Br. 12-13. The Injunction here was appropriate only because Argentina specifically p1·omised to "rank" its "pa}ment obliga­tions" under the FAA Bonds "at least equally" to its obligations under other debt. Brazil's hypothetical does not sugges t that the United States has placed any similar covenant in its em­ployment contracts in Brazil. 27 Such assertions by Puente or the other Argentine amicus, Caja de Valores, should be taken with a grain of salt. Both en­tities would be Argentina's key accomplices in any scheme by Argentina to evade the Injunction by rerouting Exchange Bond payments through Argentina. See Camila Russo, Argentina Plans New York-Buenos Aires Bond Swap, Bloomberg (Aug. 27, 2013) (describing proposal by Argentina to "swap holders of New York-law bonds into debt governed by local legislation" that is "aimed at circumventing the U.S. court ruling"), http://www .bloomberg.com/news/20 13-08-27 /argentina-plans­new-york-buenos-aires-bond -swap-on -singer .html.

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exchanges over the past decade and a half shows that "only one case-that of Argentina-resulted in persistent litigation." Duggar, supra, at 2.

IV. THE INJUNCTION DID NOT ENJOIN THIRD· PARTY PAYMENT INTERMEDIARIES

Third parties that process payments on some se­ries of Exchange Bonds-Euroclear28 and Caja de Valores-complain that they have been unfairly swept into this case and now find themselves en­joined from making payments on the Exchange Bonds, which will result in yet another parade of horribles. See Euroclear Br. 3-8; Caja Br. 1-2, 8-10; see also Fin tech Br. 27-32. Euroclear and Caja are mistaken, as the Injunction enjoins only Argentina. Moreover, it will not be difficult for these institutions to withhold their assistance should Argentina at­tempt to violate the Injunction. The international payment system will not risk explosion -- indeed, it would not be materially affected.

1. At the outset, the issues raised by Euroclear and Caja-amici both in this Court and in the court below-are not properly before this Court. This Court's certiorari jurisdiction is limited to questions presented by a "party," 28 U.S.C. § 1254(1), and ami-

28 Euroclear suggests that it does not have financial arrange­ments with Argentina. See Euroclear Br. 2 ("Euroclear Ban does not act on behalf of securities issuers."). This statement is almost certainly misleading. Euroclear markets itself to securi­ties issuers, like Argentina, purporting to "streamline [an] issu­ance," "increase investor loyalty," and "rais[e] market efficien­cy." See Euroclear, Effortless Yet Effective Securities Issuance, https://www .euroclear .com/en/services/issuing-securities.html (last visited Apr. 17, 2014). Surely Euroclear does not do these things gratis.

ci are not parties Scofield, 382 U.S tion does not raiE payment interme termediary below Injunction-the E 9-has not petitic the question whe payment interme Court.

2. In any eve been enjoined, re process argument cond Circuit expl:: injunctions again: App. 16. Their r1 this Court-is wit dure, which prohi tive concert or pa to violate an inju are identified in tl P. 65(d)(2)(C). T the payment pari (f), Pet. App. 151-ment system part able through Rule lating the district phasis added). 0 stitute an '"adjudi, ing Golden State 1 180 (1973)). If thE tina's violation of consequences unt hearing, after ade Ibid.

half shows -resulted in .. TmRD-

on some se­nd Caja de en unfairly mselves en­~ E xch ange r parade of :r. 1-2, 8-10; nd Caja are ., Argentina. , institutions rgentina at­nternational -- indeed, it

by Euroclear in the court ~ourt. This to questions (1), and ami-

.ancial arrange­"Euroclear Ban ois statement is ; itself to securi­mline [an) issu­market efficien­rrities Issuance, ~curities.html oes not do these

33

ci are not parties entitled to petition, Auto Workers v. Scofield, 382 U.S. 205, 209 (1965). Argentina's peti­tion does not raise any issues with respect to these payment intermediaries. And the only payment in­termediary below that had standing to challenge the Injunction- the Bank of New York Mellon, Pet. App. 9-has not petitioned for review of that issue. Thus, the question whether the Injunction may apply to payment intermediaries at all is not before this Cour t.

2. In any event, neither Euroclear nor Caja has been enjoined, rendering irrelevant Euroclear 's due process ar gument. See Euroclear Br. 3-8. As theSe­cond Circuit explained, "the district court has issued injunctions against no one except Argentina." Pet. App. 16. Their real complaint-which is not before this Court- is with the Federal Rules of Civil Proce­dure, which prohibit any person from working in "ac­tive concert or participation" with an enjoined party to violate an injunction, regardless of whether they are identified in the relevant injunction. Fed. R. Civ. P. 65(d)(2)(C). The portions of the Injunction that the payment participants complain about-<j[<j[ 2(e)­(f), Pet. App. 151-52-"simply provide notice to pay­ment system participants that they could become li­able through Rule 65 if they assist Argentina in vio­lating the district court's orders." Pet. App. 16 (em­phasis added). Of course, such notice does not con­stitute an '"adjudication of liability."' !d. at 17 (quot­ing Golden S tate Bottling Co. v. NLRB, 414 U.S. 168, 180 (1973)). If these thll·d parties elect to aid Argen­tina's violation of the Injunction, they will face no consequences until after "'a full opportunity at a hearing, after adequate notice, to present evidence."' Ibid.

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But Euroclear, Caja, and other third parties that might fall under Rule 65(d)'s umbrella need not risk a contempt hearing to discover whether they have obligations if Argentina attempts to violate the In­junction. As this Court has explained, district courts may provide parties with "clarification" of their du­ties under an injunction in light of "transactions [that] raise doubts as to the applicability of the in­junction." Regal Knitwear Co. v. NLRB, 324 U.S. 9, 15 (1945). Indeed, the Injunction itself provides that "any non-party that has received proper notice of this ORDER ... and that requires clarification as to its duties, if any, under this ORDER may make an ap­plication to this Court .... Such clarification will be promptly provided." Pet. App. 153. The district court here thus made sure that no third party would face an "unwitting contempt[}." Regal Knitwear, 324 U.S. at 15.

3. Even if Euroclear and Caja do have obliga­tions under the Injunction, compliance would not be difficult, and certainly would not "disrupt interna­tional bond markets and payments systems." Caja Br. 8. The U.S. counterpart to Euroclear and Caja, the Depository Trust Company, explained to the dis­trict court that it could identify and stop payments on the Exchange Bonds if it were provided with the Bonds' identification number. Supp. App. SPE-1290-91. Those identification numbers ru·e called a CUSIP number in the United States and an !SIN number in Europe. See !SIN, Broker Dealers ("This identifier, often in the form of an !SIN number code or a CUSIP number code, enables a prospective investor to type via a computer or trading terminal one's unique code and view the company's basic information."), http://isin.netibroker-dealers (last visited Apr. 25, 2014). The record shows that Argentina's Exchange

Bonds a See Sur with th~ the inju automat

The' I nied.

Resp

May 7, 2

rird parties that .la need not risk ~ther they have • violate the In­d, district courts ion" of their du­of "transactions tbility of the in­B B, 324 U.S. 9, elf provides that per notice of this ication as to its .ay make an ap­i.fication will be 3. The district 1ird party would zl Knitwear, 324

do h ave obliga­tce would not be disrupt interna­systems." Caja oclear and Caja, ained to the dis­l stop payments :ovided with the App. SPE-1290-~ called a CUSIP ISIN number in :''This identifier, code or a CUSIP investor to type ne's unique code

information."), risited Apr. 25, 1tina's Exchange

35

Bonds are associated with a particular ISIN number. See Supp. App. SPE-527, 529, 537. Thus, armed with the bond identification number, complying with the injunction could become "a largely ministerial, automated task." SPE-1291.

CONCLUSION

The petition for a writ of certiorari should be de­nied.

Respectfully submitted.

May 7, 2014.

MICHAEL C. SPENCER JVIILBERG LLP One Pennsylvania Plaza New York, N .Y. 10119 (212) 594-5300 mspence:r@milberg.com

Counsel for Respondents Pablo Alberto Varela, et al.

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