# Amicus Curiae Brief — Grupo Mexicano De Desarrollo, SA v. Alliance Bond Fund, Inc.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1999
- **Citation:** 527 U.S. 308

## Text

FEB 16 1999

No. 98-231
—

Jn the Supreme Court of the United States

OCTOBER TERM, 1998

EE —

GRUPO MEXICANO DE DESARROLLO, S.A., ET. AL.,
PETITIONERS

Vv.

ALLIANCE BOND FUND, INC., ET. AL.
RESPONDENTS

ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

BRIEF OF AMICI CURIAE THE SECURITIES
INDUSTRY ASSOCIATION AND THE EMERGING
MARKETS TRADERS ASSOCIATION IN SUPPORT OF
RESPONDENTS

RICHARD A. ROSEN
Counsel of Record
ROBERT S. SMITH
LEWIS E. FARBERMAN
PAUL, WEISS, RIFKIND,
WHARTON & GARRISON
Attorneys for Amici Curiae

1285 Avenue of the Americas

New York, New York 10019
(212) 373-3000

- _—_—_—- -—

BEST AVAILABLE COPY

QUESTION PRESENTED

Whether, in an action for money damages, principles of
international comity deprive a federal court of the power, under
any and all circumstances, to enjoin a foreign company that has
sold securities in the United States from dissipating its assets in
order to frustrate the enforceability of a judgment.

QUESTION PRESENTED .......6 0c eeeeeeeees i
TABLE OF AUTHORITIES .......-5 20 ee eeees iii
INTERESTS OF THE AMICI CURIAE ........... l

INTRODUCTION AND SUMMARY OF ARGUMENT. 3

I. THE RULE PETITIONERS PROPOSE
WOULD DO SERIOUS FARM TO THE
GLOBAL MARKETPLACE AND TO
UNITED STATES INVESTORS ........... 4

Il. ©THE COMITY CONSIDERATIONS
STRESSED BY THE DOMINICAN
REPUBLIC FURNISH NO REASON
FOR ADOPTING THE RULE
PETITIONERS SEEK .........6+ee005: il

A. The Issue in this Case is the Existence
of Power, not its Exercise .......... ll

B. The Injunction Issued in this Case
Did Not Violate Principles of Comity. ... 16

CONCLUSION 2... ccececcesnveeeereeees 20

TABLE OF AUTHORITIES
CASES

Airlines Reporting Corp. v. Barry,
825 F.2d 1220 (8th Cir.1987) ............ 12

Alliance Bond Fund, Inc. v. Grupo Mexicano de
Desarrollo, S.A., 143 F.3d 688
GEG Ge ot cca db od sev b's 8, 15, 18, 19

Basic Incorporated v. Levinson, 485 U.S. 224,
108 S. Ct. 978, 99 L.£d.2d 194 (1988) ...... 6

Dixie Carriers, Inc. v. Channel Fueling Service, Inc.
(In re: Fredeman Litigation),

843 F.2d 821 (Sth Cir.1988) ............. 12
Foltz v. U.S. News & World Report,

760 F.2d 1300 (D.C.Cir.198S5) ............ 12
Green v. Drexler (In re: Feit & Drexler, Inc.),

760 F.2d 406 (2d Cir.1985) .............. 12
Hoover v. Wagner, 47 F.3d 845 (7th Cir. 1995) ...... 13

Los Angeles v. Lyons, 461 U.S. 95, 103 S. Ct. 1660,
OD bw Ge Be ED ba eO beh coc eces 14

Mitsubishi Int’l Corp. v. Cardinal Textile Sales,
14 F.3d 1507 (11th Cir.1994) ............ 12

Roland Machinery Co. v. Dresser Industries, Inc.,
749 F.2d 380 (7th Cir.1984) ............. 12

iv

Securities and Exchange Commission v.
Banca Della Svizzera Italiana,
92 F.R.D. 111 (S.D.N.Y. 1981) .......

Societe Nationale Industrielle Aerospatiale v.
U.S. Dist. Court for Southern Dist. of lowa,
482 U.S. 522, 107 S. Ct. 2542,
96 L.Ed.2d 461 (1987) ............

Teradyne, Inc. v. Mostek Corp.,
797 F.2d 43 (ist Cir. 1986) ..........

Tri-State Generation and Transmission Ass'n, Inc. v.
Shoshone River Power, Inc.,
805 F.2d 351 (10th Cir.1986) ........

United States ex rel. Taxpayers Against Fraud v.
Singer Co., 889 F.2d 1327 (4th Cir.1989) .

University of Texas v. Camenisch,

451 U.S. 390, 101 S. Ct. 1830,

7 © |. fOr re
Varity Corp. v. Howe,

516 U.S. 489, 116 S. Ct. 1065,

134 L.Ed.2d 130 (1996) ............

STATUTES AND RULES

Federal Rule of Civil Procedure 64 ..........

Federal Rule of Civil Procedure 65 ..........

FOREIGN LAW

Derby & Co. v. Weldon, {1989} 1 All Eng.

Ren: 0008, 1001 AD ......... 9, 11, 14, 15

James v. Merrill Lynch Internat’! Bank Lid,

{1998} 1 S.L.R. 785 (C.A.) 2... eee eee eee

Mareva Compania Naviera S.A. v.
International Bulkcarriers S.A.,

[1975] 2 Lloyd’s Rep. SO9(C.A.) .........

Mooney v. Orr, {1994} 1994 ACWSJ LEXIS 10688, *3

Ge: Sap. Ghd < & sian AUR ATCA Sines ce

Nat'l Australia Bank Ltd v. Bond Brewing Holdings Lid,

[1991] 1 V.R. 386 (Victoria App. Div.) ......

Natural Gas Corp. Holdings Ltd v. Grant,

[1994] 2 N.Z.L.R. 252 (H.C. Auckland) .....

Orwell! Steel (Erection and Fabrication) Ltd. v.
Asphalt and Tarmac (U.K.) Ltd,

[1984] | W.L.R. 1097 (Q.B.D.) ..........

The Tuyuti, {1984} 2 Lloyd’s L.R. SI(C.A.) .......

OTHER AUTHORITY
1998 Securities Industry Association Fact Book (1998)

Department of the Treasury, Financial Management
Service, Treasury Bulletin, Table CM-V-5

GOOUOMRET TEUEP cece eee tee. seer

a

7

vi

Department of the Treasury, Financial
Service, Treasury Bulletin, Table CM-V-4

i Ce

Department of the Treasury, Financial Management
Service, Treasury Bulletin, Table CM-D

i arty capa eg alien

(published by the International Financial

J. O'Hare and R. Hill, Civil Litigation (8th ed. 1997)

10, 15

INTERESTS OF THE AMICI CURIAE”

The Securities Industry Association ("SIA") brings
together the shared interests of more than 750 securities firms
throughout North America. SIA members — _ including
investment banks, broker-dealers, specialists, and mutual fund
companies — are active in all markets and in all phases of
corporate and public finance. In the United States, SIA members
employ approximately 400,000 individuals. SIA member firms
manage the accounts of more than 50 million investors directly,
and tens of millions of investors indirectly, through corporate,
thrift, and pension plans. The U.S. securities industry accounts
for $270 billion of revenues in the U.S. economy.

The Emerging Markets Traders Association (““EMTA”)
is a New York based not-for-profit organization that promotes
greater efficiency, professionalism and transparency in the
trading of emerging markets debt instruments. EMTA was
formed in 1990 by a group of global financial institutions in
response to the new trading opportunities presented by the Brady
Plan, a United States policy relating to debt obligations owed by
foreign sovereigns. EMTA now has approximately 140 member
institutions worldwide, including substantially all of the major
commercial and investment banks that actively trade emerging
markets debt instruments in the secondary markets.

Y The parties have consented to the filing of this amicus curiae brief
and letters indicating their consent have been filed with the Clerk of the
Court. No party, nor any party’s counsel, authored any part of this brief
nor has any person or entity other than the amici curiae made a monetary
contribution to the preparation and submission of this brief. Several
respondents or their affiliates or officers are members of the Securities
Industry Association and/or the Emerging Markets Traders Association.

SIA and EMTA submit this amicus curiae brief to assist
the Court in determining whether Federal Rule of Civil
Procedure 65 permits a district court in an action for money
damages to enjoin a party from disposing of assets so as to
frustrate an eventual judgment. This amicus brief will focus on
this question in the specific context of international capital
markets transactions like the one involved in the present case.
The wealth of experience SIA has acquired in the securities field,
and in international securities transactions in particular, and
EMTA’s extensive knowledge and interest in foreign debt
transactions render the associations uniquely qualified to provide
the Court with information and comment relevant to this topic.

INTRODUCTION AND SUMMARY OF ARGUMENT

The purpose of this amicus brief is to demonstrate the
following two points:

1. | The rule proposed by petitioners, that a federal court
in an action at law for money damages lacks power to enjoin a
defendant’s dissipation of assets, would, if adopted, do serious
harm to global capital markets and to United States investors in
those markets. Investments by United States citizens in equity
and debt offerings by foreign issuers are of growing importance
to this country and to the world. To deprive United States
investors of the kind of remedy granted here would increase the
risk and cost associated with such transactions and would create
a serious disincentive to investments in entities whose assets are
overseas. Indeed, reversal of the decision below would often
leave some creditors with no effective remedy and would render
nugatory the contractual protections for which United States
investors normally bargain. The need for injunctive relief to
prevent the dissipation of assets in a proper case has been
recognized by English and other courts for sound reasons that
justify taking a similar approach in this country.

2. The considerations of international comity discussed
in the amicus curiae brief of the Dominican Republic furnish no
reason for adopting the law-equity distinction that petitioners
advocate. The issue here is the power to issue an injunction;
considerations of comity bear only on whether such an injunction
should be issued in a particular case. Comity can and should be
taken into account, together with all other equitable
considerations, when an injunction against the dissipation of
assets is sought. Here, the district judge properly weighed
comity as well as other factors, and reached a correct result.

ARGUMENT

I. THE RULE PETITIONERS PROPOSE WOULD DO
SERIOUS HARM TO THE GLOBAL
MARKETPLACE AND TO UNITED STATES
INVESTORS.

Petitioners’ argument is, in essence, that Rules 64 and 65
of the Federal Rules of Civil Procedure codify the ancient
distinction between law and equity, and thus prohibit the use of
an injunctive remedy to prevent dissipation of the defendant’s
assets in an action at law. Such an injunction, petitioners
contend, may be issued only “when a plaintiff, in an action for
equitable relief, seeks an injunction with respect to the same res
or thing that is the subject ct its underlying claim." Brief for
Petitioners at 10. Petitioners say that because this action, which
seeks damages for breach of contract, would historically have
been classified as legal rather than equitable, only attachment and
other traditional common-law means of securing satisfaction of
a judgment can be employed. The Second Circuit’s opinion
contains a well-considered analysis of the text and history of
Rules 64 and 65, as well as of the decisions of this Court and
lower-court precedents that refute petitioners’ theory of an
impenetrable barrier between law and equity.

Because these issues will doubtless be discussed in detail in
respondents’ brief, this amicus brief will focus on the policy
considerations that also support respondents’ position in this case.
If this Court should decide, as petitioners ask, that the equitable
powers of a federal district judge do not, in the relevant respect,
exceed the powers of a medieval Chancellor, the consequences
would be most unfortunate for today’s global marketplace and
United States participants in it.

The importance of international capital transactions in
which foreign entities raise capital in the United States securities
markets is enormous. In 1997, non-United States issuers
registered over $100 billion in securities for public offering in
the United States. More than 1,000 companies from 55 countries
had SEC reporting obligations in the United States by the end of
1997, the last year for which statistics are available. Mark S.
Bergman, 1999 Capital Markets Yearbook, 24 (published by the
International Financial Law Review).

But foreign registrants represent only a small portion of
foreign equity trading. In 1997, the value of global equity
trading hit $19.5 trillion, a 43% increase over the record $13.6
trillion traded in 1996; markets in the United States accounted
for 52.4% of that trading. See 1998 Securities Industry
Association Fact Book, 75 (1998). Moreover, gross sales of
foreign bonds by foreigners to U.S. residents exceeded $1.999
trillion and gross sales of foreign stocks and bonds together
exceeded $2.295 trillion. See Department of the Treasury,
Financial Management Service, Treasury Bulletin, 94-95, Table
CM-V-5 (December 1998). Over $15.6 billion in Mexican
bonds alone were sold to residents of the United States in 1997.
See id. Between 1994 and 1997, United States residents
increased their net purchases (purchases minus sales) of foreign
bonds by 422%. See id. at 96, Chart CM-D.

The growt’: in international capital transactions has brought
and continues to bring enormous benefits to United States
investors and to people all over the world. For investors in this
country, of course, this trend has given rise to greater
opportunities for diversification and higher yields than are
available through instruments sold exclusively by United States
issuers. From the foreign issuers’ perspective, in many
countries, including those lately emerged or still emerging from
conditions of dire poverty, capital for development is now

a i

available on an unprecedented scale. The home countries of
issuers that are now benefiting from access to the United States’
capital markets include Colombia, Malaysia, Lebanon, Liberia,
Zaire and Syria. See Department of the Treasury, Financial
Management Service, Treasury Bulletin, 92-93, Table CM-V-4
(December 1998)” It is surely in the interests of both the United
States and the developing world to foster the growth of these
markets by assuring that participants in them have the benefit of
modern and effective legal remedies.

Today’s international capital markets are extraordinarily
"efficient" in two senses of the term. First, they are efficient in
the speed at which transactions can be accomplished. Literally
billions of dollars can be moved from one country to another
almost instantaneously, by computer transmission. The markets
are also "etficies.t" in their assessmen! of information ~clevant to
risk. Cf Basic Incorporated v. Levinson, 485 U.S. 224, 246-47
& n.24 (1988) (recognizing that “[rjecent empirical studies have
tended to confirm Congress’ premise that the market price of
shares traded on well developed markets reflects all publicly
available information”). Investors calculate their risks with great
precision, and insist on a return on investment that compensates
them for that risk. This means that anything that needlessly

¥ The list of emerging market countries whose nationals have sold
securities in the United States in 1997 alone includes: Argentina,
Baharms, Bermuda, Bosnia, Brazil, British West Indies, Bulgaria, Chile,
Colum*ia, Croatia, Czech Republic, Ecuador, Egypt, Ghana, Guatemala,
Herz-govina, Hungary, Indonesia, Israel, Jamaica, Lebanon, Liberia,
Malaysia, Mexico, Montenegro, Morocco, Netherlands Antilles,
Palestine, Panama, People’s Republic of China, Peru, Philippines,
Poland, Remania, Russia, Serbia, Singapore, Slovenia, Syria, Thailand,
Trinidad and Tobago, Turkey, Uruguay, Venezuela, and Zaire. See
Department of the Treasury, Office of Financial Management, Treasury
Bulletin, 92-93, Table CM-V-4 (December 1998).

increases investors’ risks increases the cost of raising money in
the United States capital markets and makes it that much more
difficult for those markets to perform their function.

The power of courts in the United States to grant injunctive
relief against the dissipation of any assets, wherever located, is
an important underpinning of the legal regime in which
international capital markets operate. The situation that the
District Judge in this case sought to remedy — the choice by an
insolvent Mexican entity to pay its Mexican creditors while
leaving its obligations to United States citizens unpaid — is
certainly not an every-day occurrence. But the risk of such
conduct for potential investors in the equity or debt securities of
a foreign issuer is palpable and must be factored into every
transaction.

When a foreign issuer does default and then dissipates its
assets, petitioners concede that attachment and similar remedies
will generally be useless, since the debtor’s assets will be located
in foreign countries, or can be moved to foreign countries in a
matter of seconds. And when the debtor and its assets are
outside the country, the United States bankruptcy laws are not
effective to prevent discrimination among creditors, as they are
in disputes with United States parties on both sides.

Even sophisticated investors cannot adequately protect
themselves through contract. After all, here respondents were
induced to invest through promises by the issuer to submit to the
personal jurisdiction of the United States courts and to treat the
United States investors on a pari passu basis with its unsecured
home country creditors. See Alliance Bond Fund, Inc. v. Grupo
Mexicano de Desarrollo, S.A., 143 F.3d 688, 691 (2d Cir.
1998); see also Joint Appendix (“J.A.”) 12, 90. Yet such
contractual provisions would prove completely unavailing against
any financially beleaguered foreign issuer which, out of

dishonesty or by virtue of local political and economic pressures,
decides systematically to favor local creditors. When the
problem of discrimination in favor of the debtor’s home-country
creditors arises, it can be dealt with effectively only by the sort
of injunctive relief that the District Court granted.

If this Court were to conclude that the narrowly-tailored
remedy fashioned by the District Court here is never available,
on any set of facts, to United States investors, some investors
will conclude that overseas investment is imprudent, and many
will demand a higher rate of return to compensate for the
increased risk of uncollectibility. This will foreseeably
curtail—and in some cases altogether deny—access to the United
States capital markets by foreign issuers on reasonable economic
terms.

The practical importance of this kind of injunctive relief is
reflected in the development over the last twenty years of the so-
called Mareva injunction in England and other countries of the
British Commonwealth. In Mareva Compania Naviera S.A.
v. International Bulkcarriers S.A., [1975] 2 Lloyd’s Rep. 509
(C.A.), the Court of Appeals of England held:

If it appears that the debt is due and owing -- and
there is a danger that the debtor may dispose of his ;
assets so as to defeat it before judgment -- the Court

has jurisdiction in a proper case to grant an
interlocutory judgment so as to prevent him disposing

of those assets.

Mareva, 2 Lloyd’s Rep. at 510.
Although initially Mareva injunctions were available only

for assets located within the court’s jurisdiction, the English
courts later recognized that, since an injunction is premised on

in personam and not in rem jurisdiction, the Mareva holding is
equally applicable to prevent dissipation of assets located outside
the country. See, e.g., Derby & Co. v. Weldon, [1989] 1 All
Eng. Rep. 1002, 1011 (C.A.); Orwell Steel (Erection and
Fabrication) Ltd v. Asphalt and Tarmac (U.K.) Ltd, [1984] 1
W.L.R. 1097, 1100 (Q.B.D.); The Tuyuti, [1984] 2 Lloyd’s
L.R. 51, 56 (C.A.).

Courts in Commonwealth countries other than England
have followed England’s lead in adopting the Mareva-type
injunction. See, e.g., Natural Gas Corp. Holdings Ltd v. Grant,
[1994] 2 N.Z.L.R. 252 (H.C. Auckland) (New Zealand court
noting in dicta that Mareva injunction having “world-wide” effect
was properly issued); Mooney v. Orr, [1994] 1994 ACWSJ
LEXIS 10688, *3 (B.C. Sup. Ct.) (Canadian court noting that
“defendants obtained a world-wide Mareva injunction . . .” in
deciding issue relating to whether the court had power to order
certain disclosures); Nat'l Australia Bank Ltd v. Bond Brewing
Holdings Ltd, {1991} 1 V.R. 386 (Victoria App. Div.)
(Australian court issuing a Mareva injunction and appointing a
receiver over foreign assets); James v. Merrill Lynch Internat'l
Bank Lid, {1998} 1 S.L.R. 785 (C.A.) (Singapore court noting
that a “world-wide” Mareva injunction had been obtained in both
Singapore and Hong Kong and appointing receiver over foreign
assets); see also Mealey’s International Arb. Report, Vol. 9,
No. 9 (Sept. 1992) (reporting issuance of Mareva injunction in
Hong Kong arbitration).

Thus, the courts of the country in which the distinction
between law and equity originated have taken the lead in
recognizing that the general principles of equity jurisdiction, not
the ancient boundary between legal and equitable cases, should
govern the issuance of an injunction. The standard for issuing
Mareva injunctions in England is not a technical one, but
incorporates the same equitable principles familiar to United

10

States judges in dealing with applications for injunctive relief.
The Mareva standard is summarized in a leading treatise as
follows:

(1) whether the plaintiff has a good arguable case;

(2) whether the plaintiff can adduce sufficient evidence
as to the existence and location of assets which the
injunction, if made, would affect; and

(3) whether there is a real risk that the defendant may
deal with those assets so as to render nugatory any
judgment which the plaintiff may obtain.

J, O'Hare and R. Hil', Civil Litigation, 296 (8th ed. 1997).

The development of the Mareva injunction was founded in
part on a recognition that it is suited to the needs of participants
in modern business transactions. As the English Court of

Appeals stated:

We live in a time of rapidly growing commercial and
financial sophistication and it behooves the courts to
adapt their practices to meet the current wiles of
those defendants who are prepared to devote as much
energy to making themselves immune to the courts
orders as to resisting the making of such orders on
the merits of their case.

Derby, 1 All Eng. Rep. at 1007.

The position of the petitioners in this case is that the
Federal Rules of Civil Procedure deprive Uniied States District
Courts of the flexibility to “adapt their practices” to this era of
“rapidly growing commercial and financial sophistication." But

the rules can not fairly be read to impose any such strait jacket
on United States District Courts. If the rules were so read, the
result would be a significant adverse impact on international
global markets and on the participation of United States investors
in those markets.

Il. THE COMITY CONSIDERATIONS STRESSED BY
THE DOMINICAN REPUBLIC FURNISH NO REASON
FOR ADOPTING THE RULE PETITIONERS SEEK

A. The Issue in this Case is the Existence
of Power, not its Exercise.

The amicus brief of the Dominican Republic argues that a
result in favor of respondents here would violate principles of
international comity — a contention not raised by petitioners
either in the District Court or in the Court of Appeals. This
argument is based on a misunderstanding of the issue before this
Court, which is simply whether the Federal Rules of Civil
Procedure authorize a District Judge to issue an injunction like
the one entered in this case. If a District Judge has power to
issue such an injunction, principles of international comity may,
in some cases, cause him or her to refrain from exercising that
power. But principles of international comity cannot rationally
support a holding that the power does not exist.

The legal issue of a District Court’s power to issue an
injunction against the dissipation of assets in an action for money
damages is the same whether the dispute is international or not.
To be sure, such injunctions are especially important to the
predictability and efficiency of international business transactions.
But if petitioners’ theory is upheld, a District Judge sitting in
New York could not issue such an injunction even where the
defendant is a United States citizen and the asset in question is
a bank account in Delaware. Indeed, most of the prior Court of

12

Appeals cases considering this question involved transactions and
assets within the United States.” It would be strange indeed if
considerations of international comity disabled a District Court
from issuing this kind of injunction in such purely domestic
disputes.

The Dominican Republic appears to suggest that the issue
of a District Court’s power to enter an injunction may turn on
whether the dispute is a domestic or international one — i.e., that
Rules 64 and 65 of the Federal Rules of Civil Procedure should
be read to prohibit injunctions against dissipation of assets in
international cases, whether or not they are so read in a domestic
context. Such a distinction is without any support in the
language of the rules themselves, their legislative history or any
decision interpreting them. But beyond that, such a distinction
would be both unwise and unnecessary. It would be unwise for
the reasons siated in Point I above: It is important to the
international capital markets, and to United States participants in
those markets, that such a remedy be available where needed.
And it is unnecessary because principles of international comity
can and will be taken into account by Di «rict Courts in deciding

¥ See Teradyne, Inc. v. Mostek Corp., 797 F.2d 43, 52-53 (1st Cir.
1986); Roland Machinery Co. v. Dresser Industries, Inc., 749 F.2d 380,
386 (7th Cir. 1984); Folrz v. U.S. News & World Report, 760 F.2d 1300,
1309 (D.C.Cir.1985); Green v. Drexler (In re: Feit & Drexler, Inc.),
760 F.2d 406, 416 (2d Cir.1985); United States ex rel. Taxpayers Against
Fraud v. Singer Co., 889 F.2d 1327 (4th Cir.1989); Airlines Reporting
Corp. v. Barry, 825 F.2d 1220, 1227 (8th Cir.1987); Tri-State
Generation and Transmission Ass'n, Inc. v. Shoshone River Power, Inc.,
805 F.2d 351, 355 (10th Cir.1986); Dixie Carriers, Inc. v. Channel
Fueling Service, Inc. (In re: Fredeman Litigation), 843 F.2d 821, 824
(Sth Cir.1988); Mitsubishi Int'l Corp. v. Cardinal Textile Sales, 14 F.3d
1507 (11th Cir. 1994).

13

whether to issue injunctions in specific cases, and by Courts of
Appeals in reviewing those decisions.

The mere existence of power does not mean that it must be
exercised in every case. No one disputes the basic principle,
stated in the Dominican Republic’s brief, that "the exercise of
judicial power beyond a court's national boundaries must be
constrained by principles of comity." Brief of Amicus Curiae
the Dominican Republic in Support of Petitioners ("Dom. Rep.
Br.") at 6 (emphasis added). In deciding whether to grant an
injunction a court of equity is always constrained by, among
other things, the impact that an injunction would have upon the
public interest. See, e.g., University of Texas v. Camenisch, 451
U.S. 390, 392, 101 S.Ct. 1830, 1832, 68 L.Ed.2d 175 (1981).
Among the public interests to be weighed, the principle of
comity may be an important one. Cf. Hoover v. Wagner, 47
F.3d 845, 850 (7th Cir. 1995) (holding in context of
federal/state concerns that “[e]quitable remedies are powerful,
and with power comes responsibility for its careful exercise.
These remedies can affect nonparties to the litigation in which
they are sought; and when, as in this case, they are sought to be
applied to officials of one sovereign by the courts of another,
they can impair comity, the mutual respect of sovereigns . . .”);
see also Los Angeles v. Lyons, 461 U.S. 95, 112, 103 S. Ct.
1660, 1670- 71, 75 L.Ed.2d 675 (1983).

Where comity counsels against such an injunction, it should
not be issued. As an English court stated in discussing whether
to issue a Mareva injunction, the essential issue is:

whether in particular circumstances the grant [of a
preliminary injunction] is right or just. What changes
is not the power or the principles but the
circumstances, both special and general, in which
courts are asked to exercise this jurisdiction. This

14

can and does call for changes in the practice of the
courts.

Derby, 1 All Eng. Rep. at 1007.

Indeed, the very existence of the Mareva injunction in
England and other countries undermines the Dominican
Republic’s argument that injunctions against the dissipation of
assets in foreign countries are intrinsically an infringement of
principles of comity. English and other courts have granted such
injunctions in proper cases without noticeable damage to the
fabric of international relations. The Court of Appeals in this
case noted that it was "impressed" by the English experience of
the past twenty years, as supporting the Court of Appeals’
conclusion that the “>.rade of horribles" foretold by petitioners
mimes e Hersam Alliance Bond Fund, 143 F.3d at

The Dominican Republic seeks to brush off the Mareva
injunction practice in a footnote, stating that the issuance of such
injunctions “has been limited to a few extraordinary cases,
typically involving fraud." (Dom. Rep. Br. at 21 n.13). This
is not an accurate summary of the English practice. As noted
above, the English courts base Mareva injunctions on traditional
equitable principles, and fraud is not an essential element of the
required showing, although “a real risk that the defendant may
deal with . . . assets so as to render nugatory any judgment” is
required. O’Hare and Hill, Civil Litigation at 296.

It is quite true, however, that the English courts do not
issue Mareva injunctions lightly. Indeed, one such Court noted
in the course of weighing a Mareva injunction:

Considerations of comity require the courts of this
country to refrain from making orders which infringe

15

the exclusive jurisdiction of the courts of other
countries.

Derby, 1 All Eng. Rep. at 1011. Nor do respondents or the
amici supporting them suggest that District Courts should lightly

issue the kind of injunction at issue in this case. We do contend
that the District Courts have power to issue such injunctions —
a contention that the Dominican Republic brief does nothing to
refute.

B. The Injunction Issued in this Case
Did Not Violate Principles of Comity.

As we understand it, the question of whether the particular
injunction issued by the District Court here was in violation of
principles of comity is not before this Court. This fact-specific
issue was not raised below, was not presented by the petition for
certiorari, is not the subject of any conflict among the Circuit
Courts of Appeal, and would not be an appropriate subject for
this Court’s discretionary exercise of its powers of review. If
the Court should find it appropriate to reach that question,
however, it should conclude that the decision of the District
Court, affirmed by the Court of Appeals, was well within the
District Court’s discretion, and that no principle of comity was
violated.

Contrary to the picture painted by the Dominican
Republic’s brief, the District Judge in this case was careful to
respect Mexican sovereignty. Indeed, he rejected a suggestion
by respondents that a trust be imposed on property located in
Mexico, stating that the Court was not prepared “to start running
things in Mexico." Petitioners’ Appendix 30a, 37-39a. The
District Judge required only that the defendants refrain from
dealing with their assets in Mexico in such a way as to nullify
the effect of a United States judgment. Powerful equitable

16

considerations supported his decision to grant such relief on the
facts of this case:

(1) The defendants, while they are Mexican citizens,
chose to raise $250 million through an offering of 84%
Guaranteed Notes in the United States pursuant to Rule 144A
under the Securities Act of 1933. It is well established that a
foreign citizen who takes advantage of United States markets
must conform its conduct to the dictates of United States law.
See, e.g., Securities and Exchange Commission v. Banca Della
Svizzera Italiana, 92 F.R.D. 111, 117 (S.D.N.Y. 1981) (holding
that Swiss corporation could be compelled to comply with
discovery even though disclosure violated Swiss law and noting
that “(t]he strength of the United States interest in enforcing its
securities laws to ensure the integrity of its financial markets
Cainot sericusly be doubted”). Cf Societe Nationale Industrielle
Aerospatiale v. U.S. Dist. Court for Southern Dist. of lowa, 482
U.S. 522, 544 & n.29, 107 S.ci. 2542, 2556 & n.29 (1987).
This commonly accepted principle applies even in cases, unlike
this one, where there is a real tension between United States and
foreign law. Thus, foreign defendants can be compelled to make
disclosures which they contend would violate the laws of their
home countries. See id. No such conflict between United States
and foreign law arises in this case.

(2) The petitioners expressly submitted themselves—in the
instruments by which they raised $250 million—to the
jurisdiction of United States courts. Thus, in order to obtain a
large infusion of capital, petitioners led vespondents to expect
that, in any proceeding to enforce petitioners’ obligations,
respondents would have available to them the same legal
remedies that would be available against a domestic borrower.
There is no inequity or violation of comity in enforcing that
expectation.

17

(3) Having consented to United States jurisdiction,
petitioners committed exactly the sort of act which would lead
creditors in respondents’ position to insist on invoking United
States jurisdiction: Petitioners distributed their assets to Mexican
creditors in preference to United States creditors, even though
the Mexican and United States claims of unsecured creditors
were to have been treated pari passu, and even though petitioners
had agreed that assets pledged to such other creditors would be
ratably pledged to the United States creditors. See Alliance Bond
Fund, 143 F.3d at 691.

(4) Petitioners affirmatively misled respondents about
their dissipation of assets. As the Second Circuit noted, they
disclosed for the first time during a hearing before the District
Court that they had pledged between $214 and $238 million of
the Mexican Government notes to Mexican creditors - not the
$117 million they had previously sworn to in an affidavit. Jd. at
697.

(5S) Petitioners made no attempt to invoke bankruptcy or
other insolvency laws in Mexico. It may be that, where such
laws are invoked, a United States court should ordinarily
consider leaving the rights of the parties to adjudication in the
foreign forum. Indeed, in at least some instances United States
creditors will not want to interfere with foreign bankruptcy
proceedings, which may be the best way to assure fair treatment
of all creditors. But the District Court’s injunction here did not
interfere with any foreign proceedings, because there were none.
On the contrary, the District Court’s order expressly states:

{N]Jothing contained herein shall prohibit [GMD] from
commencing any insolvency proceedings under
applicable law.

J.A. 75, 77

(6) Petitioners acted in bad faith. The District Court was
clearly of this view, and tie Court of Appeals concurred that
petitioners’ actions were “less than benign." Alliance Bond
Fund, 143 F.3d at 697. The Dominican Republic brief simply
ignores the factual findings of the courts below, although this
Court has stated that such findings should be respected. See,

e.g., Varity Corp. v. Howe, 516 U.S. 489. 498, 116 S.Ct. 1065,
1071 (1996).

In sum, the District Court and the Court of Appeals for the
Second Circuit gave ample deference to the principles of

international comity. The injunction issued here was not an
abuse of discretion.

19

CONCLUSION
The judgment of the Court of Appeals should be affirmed.

Dated: February 16, 1999
New York, New York

RICHARD A. ROSEN pare
Counsel of Record
ROBERT S. SMITH
LEWIS E. FARBERMAN
PAUL, WEISS, RIFKIND, WHARTON
& GARRISON

Attorneys for Amici Curiae Securities
Industry Association and Emerging
Markets Traders Association

1285 Avenue of the Americas
New York, New York 10019
(212) 373-3000

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0219%3A10. Public record. Not legal advice.