DOES REASON PREVAIL?

There was a story out today that the Argies have decided that rather than raging at the failing of the light, they were going to ask the District Court that issued the now-upheld opinion to assist in negotiations with EMC Capital et. al. in settlement talks to see if in fact this thing can be settled.  Having called Judge Griesa of the Southern District just about every name imaginable, this takes some set of stones, but it appears, that true to his trade the good judge has put all of that in the past and actually appointed an attorney to help in the upcoming negotiations.  Of course one might well ask the question what does the other side have to gain from this having won a resounding victory in the SC topped off by Justice Scalia's almost joyful rendering of the Court's decision.  Well, aside from finally getting rid of this thing and moving on with life--with an  anticipated very healthy profit with out which there will NOT be a deal, there is perhaps a even more practical reason to go forward.

Let's look at it from this standpoint: if I were the Argies and their counsel, despite suffering this very severe and comprehensive defeat, they might have well gained a powerful argument in return.  Keep in mind that the part of the ruling that did not receive as much attention was green light for a very broad discovery as to the size, nature and location of Argentine assets world-wide on the part of the creditors.  If I were them I would start my search not too far removed from 33 Liberty Street in New York…yep, the home of the New York Fed.

Throughout the years, certainly for the last 40 when I was involved, there has always been a discussion of in what way would or could the Fed be involved in a situation such as faced by Argentina.  I have always argued that national assets held by the Fed were not immune from attachment in aid of execution of a judgement against a sovereign as long as those assets qualified as being available under the Sovereign Immunities Act of 1976.  That has not been the prevailing view as for some reason the Fed was felt to hold a special status among depositories.  I have always believed that view was incorrect in fact as well as in law and this decision may well prove my assertion to be correct.  One thing I do know for certain: whilst perhaps not a nightmare scenario, the Fed has always deemed getting drawn into this mess not a good thing as the possibility of a knock-on effect being the disruption of the international payments system by Argentine assets suddenly being held subject to discovery as to their nature under a Federal District Court order could result in chaos.  Soooo, if I were the Argies, I would trot down to Liberty Street and tell the boys that I know it's not what you wanted but now is the time to become involved to a greater extent than just a friend of the court brief.  It's one thing to hold firm to a position affirmed as being correct by the highest court in the land but it's quite another to face the Fed as Queen Victoria making it known that "We are not amused…" or at least that's the way it was in the good old days.  Lads, you are in the business of finance and in this thing there's plenty of money to satisfy everybody.  My advice would be: don't blow it.


In the greatest act since Lazerus, El Tri got through.  Left for dead a few months ago, Mexico qualified only because the United States played 90 minutes against Panama and won although they were already the winners of the section.  Panama needed to but tie to have put Mexico out.  Mexico has justified their inclusion whereas, in the greatest irony of the tournment, the USA must tie or beat powerhouse Germany in order to advance.  A strange, magnificent and yet cruel sport.

IT'S NOT GONNA HAPPEN

Sticking to the normal schedule during the World cup.  If you though I was going to move from the TV yesterday you had another think coming.  That will be the case for the next few weeks.  Trouble and Strife and I are just too much into it for that.

Which was a shame because in addition the the U. S. A.'s thrilling victory, yesterday was a joyous day.  The Supreme Court ruled to deny Certiorari to Argentina and left standing the ruling of the Second Circuit in the landmark case of EMT vs. Argentina.  It was a victory for the rights of contract and the rule of law.  Argentina, having agreed to be bound by the laws of the State of New York and having voluntarily submitted to the jurisdiction of the courts of that state and Federal Jurisdiction, agreed to a parri passu clause in their contracts by which the agreed to treat all holder of their debt equally.  The originally plaintiffs were upheld in their claim.

Regular reader might well remember that this result was predicted on these pages.  The decision turned on the Foreign Sovereign Immunities Act of 1976 and a goodly body of law on the doctrines of sovereign immunity and Act of State Doctrine for which one of the defining case in U.S. Jurisprudence is one simply known as Dunhill, involving the famous tobacconist and the Republic of Cuba.  Before he reached his present position, Dunhill was argued before the court by Mr. Justice Scalia as an Assistant Attorney General.  Argentina I suspect, had a very hard time explaining to Justice Scalia what the issues in their case were all about and it is not surprising that the decision was 7-1 with only Justice Ginsberg dissenting.  Ginsberg and Scalia being fast friends I guess she thought she could or should.  On the subjects of Foreign Immunity or the Act of State Doctrine, with Scalia around, it is wise to tread carefully.  On the sancticy of contract, few of the nine leave little wiggle room.

The court also reject the idea that the creditors, now armed with this decision, could not have subpoenas issue to track down Argentine assets in other jurisdictions which, whilst following logically, makes one wonder how to enforce such orders in a place like Brazil, but that is an issue for another time.  Suffice to say, however, that this non-action by the Court in refusing to grant Cert is no little thing.  It could be huge and it is this that we shall explore over the coming days.  In the mean time, the question is what will the Argies do?  That's easy: nothing until the end of the World Cup.  They may be crazy but they're not nuts.