You may recall that back on October 17 I posted a story about an Argentinian naval ship, ARA Libertad, that was seized by a Ghanian court in order to enforce a judgement in favor of the United States hedge fund, NML Capital. Just three weeks later, Argentina’s foreign sovereign debt problems are getting worse. Not only has the Ghanian court refused to reverse itself on a decision that is most readily perceived as unlawful by the international community, but it has taken affirmative steps to promote its decision.
The Ghanian court has now issued an order that the Argentine ship be moved from its current location at the port of Tema (Ghana’s largest port) to a location that will be less burdensome to Ghanian commercial activity. This order by the court smacks of a fervent resolve by the Ghanian court to stick to its initial and recurrent view that the seizure of the navy vessel is lawful. Seemingly, Ghana is intent on retaining the ship until the time that Argentina agrees to cough up the $20 million dollar bond that it ordered Argentina to pay in order to secure the release of Libertad. Argentina has been adamant that it will not pay.
Argentina has refused to pay the $20 million bond price mandated by the Ghanian court, not because it seeks to avoid its debt obligations, but because it argues that the seizure of their naval vessel is a violation of UNCLOS, the Vienna Convention, and the principles of Foreign Sovereign Immunity. Additionally, Argentina submits that NML Capital is a ‘vulture fund’, and is thus undeserving of repayment. A super majority of Argentina’s creditors (93%) have agreed to restructuring agreements in light of Argentina’s grave financial circumstances. Contrarily, NML has refused restructuring agreements and has perpetually stalked Argentina’s world-wide assets to get its money, attempting to impound Argentina’s sovereign assets some 28 times since receiving favorable judgments in the U.S. and U.K. just last year. Despite strong language from the Argentinian President, Cristina Fernandez, that the so-called ‘vulture-fund’ will not receive its money, and her continued pursuit of an international remedy, NML seems to have turned a blind eye.
Most recently, NML is after another Argentinian Navy ship, the ARA Espora, which entered the South African port city of Simonstown on October 25th due to mechanical difficulties. While waiting for replacement parts, so that it can continue on to the high seas for the naval training exercises that it was engaged in before the breakdown, NML has petitioned the South African courts for a judgement similar to the Ghanian judgement. As NML holds two awards, granted by the United States and United Kingdom, respectively, it maintains its position that its money is owed in full and it will do whatever it takes to get paid. At this time, South African and Argentinian officials are working closely and awaiting the South African court’s decision on the matter. Therefore, currently, Argentina is contesting the Ghanian ruling, and anticipating a contest with NML in the South African courts as well.
Yet, Argentina is not sitting on its hands to wait for the outcome of its appeal in the Ghanian court, or to see whether the situation in South Africa will ripen into a seizure of its second ship. Argentina is filing suit in the Law of the Sea Tribunal in Hamburg, Germany. It will assert that the seizure of a sovereign naval ship is a violation of UNCLOS Article 28(2), and seeks to recover damages, including its port fees and servicing costs, which amount to $3,000 and $50,000 per day, respectively. If Argentina were to receive a judgement from the UNCLOS Tribunal in its favor, this would be the first of its kind. UN legal counsel has stated that “there are no similar cases on record.”
As this is a twenty-first century issue, because we now have privately-owned firms, like NML Capital, purchasing foreign sovereign bonds and utilizing municipal courts to enforce repayment. The international community has seemingly not yet developed a uniform approach to this problem. How do you think that the international community should approach the problem? Should Argentina be fully accountable to NML, despite the broad preference of world-wide creditors to restructure Argentina’s sovereign debt? Should municipal courts have the right to attach government property to enforce awards and compel payment of outstanding sovereign debts? What are your thoughts on the direction that international law should take to address this apparently new development in the area of foreign sovereign debt?
Photo Source: Article.wn.com