On October 2, 2012, the West African nation of Ghana’s court seized an Argentinian Navy fragate, Libertad, in an effort to force Argentina to make good on outstanding bond debts owed to the United States hedge fund management company, KML Capital. The Argentine ship was carrying some 300+ Navy personnel, including fifteen Chileans and three Peruvians. A Ghanian judge declared that Argentina must post a $20M bond to secure its debt before the Navy vessel will be released. It is estimated that Argentina owes approximately $1.6B.
This debt scandal is the result of more than eight years of Argentina’s failure to make good on its obligation to pay NML, who purchased devalued Argentinian bonds during Argentina’s financial crisis in the years 2000-2002. The Ghanian seizure is just one, most recent instance where Argentina is being heavily challenged by other nations to pay their debt. In 2006 the 2nd Circuit Court of Appeals ruled in favor of the private investment firm NML. However, NML has not been able to collect on their award because Argentina has successfully claimed foreign sovereign immunity, preventing NML from collecting its award by attaching Argentinian bank accounts in the United States.
Similarly, in 2011, the U.K. ruled against Argentina in a case brought by NML; Argentina has paid a mere $270,000 of its owed debt. Now, the Ghanian court has exercised its jurisdiction over the Argentinian Navy vessel in hopes that they will secure an enforcement for NML. The question is, however, whether the Ghanian Court’s jurisdiction is valid, or whether it violated International Law. The Ghanian court has ruled against Argentina by seizing a military vessel which was ostensibly being used for legitimate military purposes at the time it was detained. Under the United Nations Convention on the Law of the Seas (UNCLOS), the seizure seems to be in violation of International Law, which is the claim being made by Argentina in its challenge to the Ghanian judgment.
UNCLOS Article 28(2) states: “The coastal State may not levy execution against or arrest the ship for the purpose of any civil proceedings, save only in respect of obligations or liabilities assumed or incurred by the ship itself in the course or for the purpose of its voyage through the waters of the coastal State”, implying that this seizure by Ghana is unlawful. However, Ghana claims that their national laws permit the seizure, making both their jurisdiction and judgment valid and binding. Perhaps they are justified under UNCLOS Article 28(3) , which states: “Paragraph 2 is without prejudice to the right of the coastal State, in accordance with its laws, to levy execution against or to arrest, for the purpose of any civil proceedings, a foreign ship lying in the territorial sea, or passing through the territorial sea after leaving internal waters.” Finally, there is always the question of Foreign Sovereign Immunity, which may bar Ghana from seizing a “warship” where they might have otherwise been perfectly within their right to seize an ordinary ship.
In light of the competing forces of a sovereign-national jurisdiction and foreign sovereign immunity (see UNCLOS Art. 32), and with respect to the great weight of the evidence establishing Argentina’s clear rejection of its obligations to repay its debt, what should be the outcome? Should the Ghanian judgment be invalidated by International Law? Or Should the Argentinian Navy ship continue to be held until Argentina pays its dues?