Argentina will have to pay $1.3bn to hedge funds

Argentina will have to pay $1.3bn to hedge funds that refused to restructure their debts after the country's 2001 default when it makes regular payments to its restructured bondholders in December, a US court has ordered. The ruling, made late onWednesday in New York, raises the possibility that Argentinawill default once more, and if upheld representsa major chink in the armour of sovereign immunity against creditors that has largelyreigned in international law for almost a century. US District Court Judge Thomas Griesa first madethe order earlier this year, which after appealswas unexpectedly largely affirmed by the US federal appeals courton October 26. The case was then sent back to the original judge to clarify certain aspects, such as how much was due to the funds, led by Elliott Associates, an aggressive hedge fund that has made suing countries its hallmark. "It is hardly an injustice to have legal rulings which, at long last, meanthat Argentina must pay the debts which it owes," Judge Griesa saidin an updated opinion."After 10 years of litigation this is a just result." More controversially, thejudge largely reaffirmedthe extent that third parties would be affected by his order. Argentina has refused topay on past judgments against it, arguing that the funds were"vultures" and"scavengers", but JudgeGriesa gave his order teeth by landing an injunction on Argentina, its agents "and other persons who are in active concert or participation with the parties or their agents". This includes Bank of New York Mellon, the trustee of Argentina's restructured bonds, which acts as a conduit of the country's payments to investors in these securities. The judge argued that whenBNY Mellon pays restructured bondholders, those creditors that refused to join the restructuring should also be paid what they are due. Despite vehement protests from BNY Mellon, restructured bondholders and a NewYork Federal Reserve opinion in Argentina's favour, the judge confirmed that his injunction extended to the US payments system -- which some legal experts have argued hasa systemic impact on future sovereign debt restructurings. "It is probably true that these parties are not all agents of Argentina, but they surely are 'in activeconcert or participation' with Argentina in processing the paymentsfrom Argentina to the exchange bondholders,"the order stated.