16 June 2014

Law in Plain English: Republic of Argentina v. NML Capital

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

SCOTUSblogRepublic of Argentina v. NML Capital

Argument: Apr 21 2014 (Aud.)

Background: In December 2001, the Republic of Argentina defaulted on payment of its external debt. While most of Argentina's bondholders agreed to voluntary restructurings in 2005 and 2010, others, including Plaintiff-Appellee NML Capital, Ltd. ("NML"), did not. NML filed eleven actions in the Southern District of New York to collect on its defaulted Argentinian bonds. The district court has entered five money judgments  in NML's favor totaling (with interest) approximately $1.6 billion; and summary judgment to NML in the remaining six actions, in which NML's claims total (with interest) more than $900 million. Argentina has not satisfied these judgments and NML has thus attempted to execute them against Argentina's property. NML sought discovery of all bank accounts maintained by or on behalf of Argentina without territorial limitation. The district court approved a subpoena indicating that extraterritorial asset discovery did not infringe on Argentina's sovereign immunity, but limited the subpoena to discovery that was reasonably calculated to lead to attachable property. Argentina appealed, arguing that the district court's discovery order, by compelling disclosure about Argentinian assets abroad, violated the Foreign Sovereign Immunities Act ("FSIA"). The Second Circuit affirmed, holding that because the discovery order involves discovery, not attachment of sovereign property, and because it is directed at third-party banks, not at Argentina itself, Argentina's sovereign immunity was not infringed.

Issue: The question before the Court is whether post-judgment discovery in aid of enforcing a judgment against a foreign state can be ordered with respect to all assets of a foreign state regardless of their location or use, as held by the Second Circuit, or is limited to assets located in the United States that are potentially subject to execution under the Foreign Sovereign Immunities Act of 1976 (“FSIA”), 28 U.S.C. § 1602 et seq., as held by the Seventh, Fifth, and Ninth Circuits.

Holding: In a 7-1 decision (with Justice Sotomayor recused), the Supreme Court ruled that no provision of the Foreign Sovereign Immunities Act immunizes a foreign sovereign debtor from post-judgment discovery of information concerning its extraterritorial assets.
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