Belgian Court to Rule on Enforceability of US Argentine Debt Injunction


On August 23rd, the US Court of Appeals for the Second Circuit affirmed an injunction ordering Argentina to make ratable payment to holders of initial defaulted bonds whenever it would make payments on its restructured debt. 

Despite not being parties to the injunction, the US Court made clear that holders of the restructured debt might be found in contempt if they assisted Argentina in evading the injunction.

Several European holders of the restructured debt, including Knighthead Capital Management LLC, are seeking a declaration from a Belgian court that the injunction is unenforceable in Europe and that Belgian intermediaries may pass payments despite the injunction. Katia Porzecanski at Bloomberg reports that a hearing is scheduled today in Brussels. 

I understand that the defense to the recognition of the injunction is a 2004 Belgian Law prohibiting any obstruction in cash payments made by settlement agents. This suggests that the argument should be framed in public policy terms.

In June, Knighthead Capital Management LLC and other third parties had sought an interim injunction ordering Belgium based intermediary Euroclear to pass payments to be made by Argentina to holders of the restructured debt. The Belgian Court held that the application was premature, as the issue of the impact of the injunction on Euroclear would only arise if Argentina actually made the relevant payments. At the time, however, the Court found that it had not been provided with evidence that Argentina would, in breach of the injunction. The Court suggested that, should Argentina want to pay holders of the restructured debt, plaintiffs would still have 30 days to apply for a declaration that Euroclear should pay notwithstanding the US injunction.

1 reply
  1. Patrick Wautelet says:

    For those interested in technical details, the 2004 Act referred to in this post is most probably the Act of 19 November 2004 (published in the Official
    Gazette of 28 December 2004). Article 15 of the Act amended Article 9 of the Belgian Settlement Finality Law. The modified text reads as follows : “Every settlement account concerning cash with an operator of the system [such as Euroclear Bank] or with a settlement organization of a system as well as every transfer order of monies through a credit institution operating under Belgian or foreign law that must be transferred to such a settlement account concerning cash, shall not be subject to attachment, receivership or blocking in any
    way, by a participant (other than the operator or the settlement organization), a counterparty or a third party”

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