Appendix — EM, Ltd. and NML Capital Capital, Ltd. v. Republic of Argentina (No. 06-1576)

la

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

August Term, 2006

(Argued: August 29, 2006 Decided: January 5, 2007)

Docket Nos. 06-0403-cv, 06-0405-cv, 06-0406-cv

ei aad iat es Shae Sieoe eh hh ee a eee xX

EM LTD.,

Plaintiff-Appellant,

V.

REPUBLIC OF ARGENTINA,

Defendant-Appellee.

NML CAPITAL, LTD., i

Plaintiff-Appellant,

Mase. 2

THE REPUBLIC OF ARGENTINA,

Defendant-Appellee.

fk oh Saas Se es nds Gok ha ahh ar tla in Na ie na ea alae hn xX

NML CAPITAL, LTD.,

Plaintiff-Appellant,

V.

THE REPUBLIC OF ARGENTINA,

Defendant-Appellee,

BANCO CENTRAL DE LA REPUBLICA ARGENTINA,

Interested-Non-Party-Appellee.

2a

Before: WINTER, CABRANES, and POOLER, Circuit Judges.

Plaintiffs appeal from an order of the United States District

Court for the Southern District of New York (Thomas P. Griesa,

Judge) vacating restraining notices and orders of attachment

imposed with respect to an account of the Banco Central de la

Republica Argentina at the Federal Reserve Bank of New York

on the ground that those assets were protected from attachment

by the Foreign Sovereign Immunities Act of 1976.

Affirmed.

DAVID W. RIVKIN (Dennis H. Hranitzky, Jason R. Abel, on

the brief), Debevoise & Plimpton LLP, New York, NY, for

Plaintiff-Appellant EM Ltd.

ROY T. ENGLERT, JR., Robbins, Russell, Englert, Orseck &

Untereiner LLP, Washington, DC (Alan E. Untereiner, Robbins,

Russell, Englert, Orseck & Untereiner LLP, Washington, DC;

Robert A. Cohen, Dechert LLP, New York, NY, on the brief),

for Plaintiff-Appellant NML Capital, Ltd.

JONATHAN I. BLACKMAN (Carmine D. Boccuzzi, Michael

J. Byars, on the brief), Cleary Gottlieb Steen & Hamilton LLP,

New York, NY, for Defendant-Appellee The Republic of

Argentina.

JOSEPH E. NEUHAUS (Laurent S. Wiesel, Claire E. Coleman,

Julia M. Guaragna, Sergio J. Galvis, on the brief), Sullivan &

Cromwell LLP, New York, NY., for /nterested-Non-Party-

Appellee Banco Central de la Republica Argentina.

SERRIN TURNER, Assistant United States Attorney (Michael

J. Garcia, United States Attorney, Kathy S. Marks, Assistant

United States Attorney, United States Attorney’s Office for the

Southern District of New York, New York, NY; Peter Keisler,

Assistant Attorney General, Douglas N. Letter, Irene Solet,

Department of Justice, Washington, D.C.; Arnold I. Havens,

General Counsel, Department of Treasury, Washington, D.C..;

3a

John B. Bellinger, Ill, Legal Adviser, Department of State,

Washington, D.C., on the brief), United States Attorney’s Office

for the Southern District of New York, New York, NY, for

Amicus Curiae United States of America in support of

Appellees.

BARRY M. SCHINDLER (Thomas C. Baxter, Jr., General

Counsel, James P. Bergin, Andrew C. Huszar, on the brief),

Federal Reserve Bank of New York, New York, NY for Amicus

Curiae Federal Reserve Bank of New York in support of

Appellees. '

JOSE A. CABRANES, Circuit Judge:

This appeal arises from the efforts of plaintiffs-appellants

NML Capital, Ltd. (“NML”) and EM Ltd. (“EM”) (collectively,

“plaintiffs”) to attach certain funds held in an account of the

Banco Central de la Republica Argentina (“BCRA”), the central

banking authority of the Republic of Argentina (“Argentina” or

“the Republic’), at the Federal Reserve Bank of New York

(“FRBNY”) (the “FRBNY Account”).' EM holds, and NML

seeks, a judgment against the Republic arising out of the

Republic’s default on debt obligations held by EM and NML.

Even though plaintiffs do not hold or seek judgments against

BCRA, they contend that they are entitled to attach $105 million

of BCRA’s funds held in the FRBNY Account (the “FRBNY

Funds”). In particular, plaintiffs argue that the Republic

obtained an attachable interest in the FRBNY Funds after the

President of the Republic issued two decrees that gave the

Republic the authority to use BCRA funds for repayment of the

Republic’s debts to the International Monetary Fund (“IMF”),

' Plaintiffs also sought to attach accounts held by BCRA in other New

York banks, but the FRBNY Account was the only one in which there were

any substantial assets. Our conclusions in this opinion concerning the

FRBNY Account also apply to all other accounts that were attached by

plaintiffs.

4a

but that did not specifically designate the FRBNY Funds for use

in repaying the IMF. The United States District Court for the

Southern District of New York (Thomas P. Griesa, Judge)

vacated orders of prejudgment attachment obtained by NML,

and postjudgment restraining notices obtained by EM, that had

previously been ordered with respect to the FRBNY Funds. This

appeal followed. ;

We consider here whether the Republic’s actions associated

with the repayment of its debt to the IMF deprived the FRBNY

Funds of immunity from attachment under provisions of the

Foreign Sovereign Immunities Act of 1976 (“FSIA”) related to

the attachment of sovereign assets, 28 U.S.C. §§ 1609-11. We

affirm the order of the District Court, concluding that the

FRBNY Funds are immune from attachment under the FSIA

because, notwithstanding the issuance of the decrees, the

FRBNY Funds continue to be owned by BCRA, a separate

juridical entity from the Republic, and are not available to

satisfy a judgment against the Republic. Moreover, we conclude

that the provisions of the FSIA allowing attachment of a foreign

state’s “property in the United States . . . used for a commercial

activity in the United States,” 28 U.S.C. § 1610(a); see also id.

§ 1610(d) (allowing prejudgment attachment of a foreign state’s

property “used for a commercial activity in the United States’),

would not permit attachment of the FRBNY Funds even if the

funds were considered an attachable asset of the Republic. A

government’s repayment of its debt to the IMF is not a

“commercial activity,” and the record is barren of any evidence

that the FRBNY Funds were to be “used for” repayment of the

IMF.

BACKGROUND

1. Facts and Procedural History

In December 2001, in the midst of a financial crisis in

Argentina, the Republic announced a moratorium on its debt

service payments. Since that time, the Republic has not made

Sa

scheduled payments on the debt instruments at issue in this

litigation.”

* We note that Argentina has made many contributions to the law of

foreign insolvency through its numerous defaults on its sovereign obligations,

as well as through what we might term a diplomacy of default.

Argentina’s history of defaulting on, or requiring restructuring of, its

sovereign obligations has produced a rich literature. After selling bonds on

the London stock exchange in the early part of the 1820s, Argentina defaulted

on its debt in 1827 (at roughly the same time that other Latin American

nations defaulted on their foreign debt), and did not reach a settlement with

creditors on the debt until 1857. See Carlos Marichal, A Century of Debt

Crises in Latin America 14, 34-35, 55-60, 59 t.2 (1989). Argentina again

defaulted on its debts in 1890, causing a financial panic in England as

Argentina’s primary creditor, the London merchant bank Baring Brothers,

experienced a liquidity crisis upon Argentina’s default. See id. at 149-59. In

1956, Argentina’s threatened default led to the creation of the Club of Paris,

an international organization established “for the purpose of settling

controversies concerning debts that were guaranteed or owed by LDC [Less

Developed Country] governments to creditor governments.” Mashaalah

Rahnama-Moghadam, David A. Dilts, & Hedayeh Samavati, The Clubs of

London & Paris, Disp. Resol. J., Nov. 1998, at 71, 72; see also Paris Club,

Description of the Paris Club, http://www.clubdeparis.org/en

/presentation/presentation.php?BATCH=B01WPO1 (last visited Nov. 29,

2006) (describing first meeting of Paris Club in 1956 among Argentina and

creditor nations). In 1982, Argentina, along with other Latin American

nations, experienced a financial crisis that led it to suspend interest payments

on foreign debt and to engage in difficult negotiations with foreign and

multilateral lenders. See Ernest J. Oliveri. Latin American Debt and the

Politics of International Finance 163-203 (1992); see also Republic of

Argentina v. Weltover, 504 U.S. 607, 609-10 (1992) (discussing Argentina’s

failure to meet foreign exchange insurance obligations in 1982 and foreign

debt obligations in 1986). According to one commentator, as the Argentinian

debt crisis developed between 1983 and 1985, “Argentina emerged as the

single most resistant debtor in international finance.” Oliveri, ante, at 164.

Then, in December 2001, Argentina announced that it would impose a

moratorium on public sector debt payments—causing the largest default of

a forcign state in history. See, e.g., Arturo C. Porzecanski, From Rogue

Creditors to Rogue Debtors: Implications of Argentina's Default, 6 Chi. J.

Int'l L. 311, 317 (2005) (describing Argentina’s most recent default as “by

far the largest and potentially most complex default the world has ever

6a

known”); see also Eternity Global Master Fund Ltd. v. Morgan Guar. Trust

Co. of N.Y., 375 F.3d 168. 175 (2d Cir. 2004) (discussing events leading up

to 2001 “debt moratorium’’).

In light of this history, it is perhaps unsurprising that Argentina’s

scholars and diplom ats have contributed to development of innovative

theories of international law in response to the world community’s efforts to

collect on defaulted sovereign obligations. The nineteenth century Argentine

jurist Carlos Calvo propounded a theory (later called the “Calvo Doctrine”)

that “absolutely condemn|ed] diplomatic as well as armed intervention as

legitimate methods of enforcing any or all private claims of a purely

pecuniary nature, at least such as are based upon contract or are the result of

civil war, insurrection, or mob violence.” Amos S. Hershey, The Calvo and

Drago Doctrines, 1 Am. J. Int'l L. 26, 26-27 (1907); see also Banco

Nacional de Cuba v. Chase Manhattan Bank, 658 F.2d 875, 888 n.19 (2d Cir.

1981) (“[T]he Calvo doctrine, based on the writings of the nineteenth century

Argentine jurist Carlos Calvo, holds that a state need compensate aliens only

to the extent that it would compensate its own nationals. If under a state’s

laws its nationals are entitled to no compensation for expropriated property,

an alien likewise would have no right to compensation.” (citing G.

* Hackworth, Digest of Int'l Law § 530 (1943))). The Calvo Doctrine stands in

contrast to principles of customary international law establishing an

international] standard for claim s of injury to aliens derived from Emmeric

de Vattel’s assertion that an injury to an alien living in a foreign State

constitutes an injury to the alicn’s state of nationality. See E. de Vattel, The

Law of Nations or the Principles of Natural Law 136 (C. Fenwick trans.,

Legal Classics Library special ed. 1993) (1758) (“Whoever ill-treats a citizen

indirectly injures the State, which must protect that citizen.”). From Vattel’s

famous doctrine flows the “international minimum standard,” which, in

contrast to the Calvo Doctrine, “takes into account the possibility that the

standards prevailing in a given State may be so low that, even if nationals and

aliens are treated (or oppressed) alike, the norms of international law

{concerning the protection of alicns] will have been violated.” Richard B.

Lillich, The Human Rights of Aliens in Contemporary International Law 17

(1984); see also Frank Gnffith Dawson & Ivan L. Head, /nternational Law

N ational Tribunals and the Rights of Aliens 10 (1971) (describing the

“International Minimum Standard of Justice” as “the standard of substantive _

and procedural treatment which aliens purportedly should receive in

‘civilized’ States and which they thus should reccive abroad under

international law’). Under this principle, aliens may be entitled under

customary intemational law to compensation for expropriation of property

rights (e.g., through the state’s default on its debt obligations) even where

nationals of the expropriating state are not. See Louis B. Sohn & R.R. Baxter.

Responsibility of States for Injuries to the Economic Interests of Aliens, 55

Ta

On April 10, 2003, EM, a holder of defaulted Argentine

debt, filed an action against the Republic in the United States

District Court for the Southern District of New York to recover

more than $700 million in interest and principal owed on an

Argentine bond it had acquired. EM moved for summary

judgment, and the Court granted the motion on September 12,

2003, awarding final judgment to EM in the amount of

$724,801 ,662.56. See EM Lid. v. Republic of Argentina, No. 03

Civ. 2507 (TPG), 2003 WL 22120745 (S.D.N.Y. Sept. 12,

2003), amended by EM Lid. v. Republic of Argentina, No. 03

Civ. 2507 (TPG), 2003 WL 22454934 (S.D.N.Y. Oct. 27,

2003).* We affirmed the judgment in favor of EM on August 31,

2004. See EM Lid. v. Republic of Argentina, 382 F.3d 291, 292-

94 (2d Cir. 2004).

NML, another holder of defaulted Argentine debt, filed suit

in the United States District Court for the Southern District of

New York on November 7, 2003, seeking to recover funds due

on approximately $170 million in defaulted bonds that the

Republic had issued. NML filed a second action on February 28,

2005, seeking payment on approximately $32 million in so-

called “Argentine Floating Rate Accrual Notes.” No judgment

Am. J. int'l L. 545, 557 (1961) (“[{T]he provision of com pensation to aliens

whose property is taken is consistent with that special protection which is

given to aliens, even in cases where such protection may place aliens in a

privileged position vis-a-vis the nationals of the State concerned.”).

In 1902, Argentina’s Minister of Foreign Affairs, Luis M. Drago,

developed a narrower proposition (later called the “Drago Doctrine”) that

“the public debt [of an American state] can not occasion armed intervention,

nor even the actual occupation of the territory of Am erican nations by a

European power.” Hershey, ane, at 30 (quoting Letter from Luis M. Drago,

Argentine Minister of Foreign Affairs. to Sr. Merou, Argentine Minister at

Washington (Dec. 29, 1902)); see also, e.g., Dawson & Head, ante, at 12-13

(discussing subsequent history of Drago Doctrine).

> As of December 30, 2005, almost $21 million in postjudgment interest

had accrued, bringing the total value of the judgment as of that date to

$745,544 496.12.

8a

had been rendered in cither of NML’s suits at the time NML

sought to attach the FRBNY Funds.

In the terms and conditions governing EM’s bond, the

Republic “irrevocably agreed not to claim and has irrevocably

waived . . . immunity to the fullest extent permitted by the laws

of [the] jurisdiction.” Terms and Conditions Governing Bond

Issued June 22, 2001 , Joint Appendix (“J.A.””) 54. The Republic

also “consent[ed] generally for the purposes of the Foreign

Sovereign Immunities Act to the giving of any relief or the issue

of any process in connection with any Related Proceeding or

Related Judgment, provided that attachment prior to judgment

or attachment in aid of execution shall not be ordered by the

Republic’s courts with respect to. . . the assets which constitute

freely available reserves.” /d. The bonds that NML acquired

contained similar waivers.

On December 15, 2005, Argentina’s President, Néstor

Kirchner, issued two emergency executive decrees: Decree

1599/2005 and Decree 1601/2005 (the “Decrees”). Decree 1599

provided that BCRA reserves in excess of the amount needed

for the backing of the Republic’s “monetary base,” see Law No.

23,928 of 3/27/91 art. 6, as amended by Law No. 25,561 of

1/7/02 art. 4, J.A. 447 (defining “monetary base” as “composed

of the monetary circulation [of Argentine pesos] plus the

demand deposits of the financial entities with [BCRA], in

checking accounts or special accounts’), “may be used for

payment of obligations undertaken with international monetary

authorities.” Decree 1599/2005 art. 1, J.A. 22. These excess

reserves were dubbed “unrestricted reserves” by the decree

(“Unrestricted Reserves”).* Decree 1601/2005 directed the

Ministry of Economy and Production (the Ministry”) to take

*“Unrestricted Reserves” under the Decrees are to be distinguished from

the “freely available reserves” referenced in the terms and conditions of the

bonds. While the term “frecly available reserves” referred to reserves held in

support of the monetary base, the term “Unrestricted Reserves” as used in the

Decrees refers to reserves not necessary for support of the monetary base.

9a

the necessary steps to repay the Republic’s debt to the IMF out

of the Unrestricted Reserves. At the time of the Decrees, BCRA

had approximately $26.8 billion in reserves and needed $18.4

billion to cover the monctary base; thus, approximately $8.4

billion in reserves became Unrestricted Reserves pursuant to the

Decrees. On December 29, 2005, the Ministry issued Resolution

No. 49, directing BCRA to repay the Republic’s debt to the IMF

and providing that, in exchange, the Republic would give BCRA

a non-transferrable note. See Resolution No. 49 art. 1, J.A. 511

(“Let [BCRA] be instructed in line with [the Decrees] . . . to

repay the debt incurred with the [IMF].”).

On December 30, 2005, EM moved in the District Court for

an ex parte order in aid of enforcing its judgment, and Judge

Barbara S. Jones, sitting in Part |, see Rules for the Division of

Business Among District Judges of the Southern District of

New York 5(b) (motions for “emergency matters in civil cases”

presented to the district judge sitting in “Part I”), entered

restraining notices, see 28 U.S.C. § 1610(c) (requiring that a

court order the attachment of, or execution against, the assets of

a foreign state or its instrumentalities); see also Fed. R. Civ. P.

69(a) (“The procedure on execution . . . shall be in accordance

with the practice and procedure of the state in which the district

court is held . . . except that any statute of the United States

governs to the extent it is applicable”); N.Y. C.P.L.R. § 5222

(establishing procedure for service of restraining notices on

parties holding property of judgment debtor), with respect to

property of the Republic and the BCRA held at cight garnishee

banking institutions, including the FRBNY. NML

contemporaneously sought and obtained from Judge Jones ex

parte orders of prejudgment attachment and temporary

restraining orders concerning the same assets, see Fed. R. Civ.

P. 64 (providing that remedies involving “seizure of .. .

property for the purpose of securing satisfaction of [a] judgment

. . are available under the circumstances and in the manner

provided by the law of the state in which the district court is

held”): N.Y. C.P.L.R. § 6201 (setting forth grounds for

prejudgment attachment under New York law).

10a

On January 3, 2006, the Republic’s debt to the IMF was

repaid by BCRA using BCRA’s assets. The FRBNY Funds

were not used in connection with that payment, although the

parties dispute whether the funds might have been used for this

purpose in the absence of the court-ordered restraints on the

transfer of the funds.

On January 6, 2006, the Republic and BCRA moved by

order to show cause to vacate the attachments and restraining

notices (collectively, the “Restraining Notices”). Following a

conference held that day before Judge Griesa, to whom EM’s

and NML’s suits against the Republic had been assigned, the

parties agreed to modify the Restraining Notices pending

resolution of the order to show cause, and on January 9, 2006,

the District Court entered a stipulation and consent order that

amended the Restraining Notices so that BCRA could conduct

its day-to-day operations. Pursuant to these amended

attachments and restraining notices (collectively, the “Amended

Restraining Notices”), the garnishee institutions were required

to maintain in any covered account a sum not less than 95% of

the amount on deposit at the close of business on January 6,

2006. Of the putative garnishee institutions, only the FRBNY

held any significant amount-—namely, $105 million—that was

subject to the Amended Restraining Notices. EM and NML

cross-moved on January 10, 2006 to confirm the Amended

Restraining Notices, and, in the alternative, EM sought

discovery on five issues relating to the validity of the Amended

Restraining Notices.”

$

EM claim s to have sought discovery on the following issues:

(1) the effect of the Decrees under Argentine law; (2) the purposes

of the funds subject to the Amended Restraining Notices; (3) how

and from where Argentina paid the International Monetary Fund

(“IMF”) on January 3, 2006; (4) how the Central Bank's actions in

implementing the Decrees compare to the “traditional” central

banking activities of central banks; and (5) what Argentina plans to

do with the foreign exchange reserves subject to the Decrees that

will accumulate in the future.

lla

Il. The District Court’s Decision

Following submissions by the parties and oral argument,

the District Court vacated the Amended Restraining Notices by

oral decision on January 12, 2006. The District Court described

four separate grounds for its decision. First, operating under the

premise that assets owned by BCRA could not be used to satisfy

judgments against the Republic, it rejected plaintiffs’ argument

that the Decrees had the effect of transferring ownership of the

Unrestricted Reserves in general, or the FRBNY Funds in

particular, from BCRA to the Republic. Plaintiffs had conceded

at oral argument on the parties’ cross-motions that the

Unrestricted Reserves were the property of BCRA, not the

Republic, before the issuance of the Decrees. The District Court

concluded that the Decrees had no effect on the ownership of

the Unrestricted Reserves, and certainly no effect on the

ownership of the FRBNY Funds; thus, the Unrestricted

Reserves and the FRBNY Funds remained the property of

BCRA. The District Court agreed that the Decrees reflected the

Republic’s power to direct BCRA to take certain actions with

respect to BCRA’s assets, but, according to the District Court,

the Republic’s ability to exercise some control over BCRA did

not mean that the ownership of the FRBNY Funds changed

hands from BCRA to the Republic.

Second, the District Court held that even if it were to treat

the FRBNY Funds as if they were owned by the Republic,

plaintiffs would not be entitled to attach it under the FSIA

Br. of Appellant EM 7. EM has not, however, cited to any part of the record

demonstrating that these specific requests were made to the District Court.

When disputing EM °s contention that it was improperly denied discovery,

the Republic refers to discovery requests made in EM*s Memorandum in

Support of Plaintiffs’ Motion to Confirm, which was apparently filed with the

Distnct Court, but which was not included among the materials in the Joint

Appendix submitted to this Court. Accordingly. no documents presented to

this Court indicate that the requests listed above were made to the District

Court. Nevertheless, we assume arguendo that, as represented by EM, these

requests were made.

12a

unless they were able to demonstrate that the funds had become

property of the Republic “used for a commercial activity in the

United States,” 28 U.S.C. § 1610(a)(1) (permitting

postjudgment attachment of a foreign state’s property “used for

a commercial activity in the United States” if the foreign state

had waived immunity from attachment); id. § 1610(d)(1) (same

as to prejudgment attachment).° The District Court concluded

* 28 U.S.C. § 1610 provides, in pertinent part, as follows:

(a) The property in the United States of a foreign state... , used for a

commercial activity in the United States, shall not be immune from

attachment in aid of execution, or from execution, upon a judgment

entered by a court of the United States or of a State . . . if—

(1) the foreign state has waived its immunity from attachment in aid of

execution or from execution either explicitly or by implication,

notwithstanding any withdrawal of the waiver the foreign state may

purport to effect except in accordance with the terms of the

waiver ....

(b) In addition to subsection (a), any property in the United States of an

agency or instrumentality of a foreign state engaged in commercial

activity in the United States shall not be immune from attachment

in aid of execution, or from execution, upon a judgment entered by

2 court of the United States or of a State after the effective date of

this Act, if—

(1) the agency or instrumentality has waived its immunity from

attachment in aid of execution or from execution either explicitly or

implicitly, notwithstanding any withdrawal of the waiver the agency

or instrumentality may purport to effect except in accordance with

the terms of the waiver ....

(d) The property of a foreign state ... , used for a commercial activity

in the United States, shall not be immune from attachment prior to

the entry of judgment in any action brought in a court of the United

States or of a State, or prior to the elapse of the period of time

provided in subsection (c) of this section. if—

(1) the foreign state has explicitly waived its immunity from attachment

prior to judgment, notwithstanding any withdrawal! of the waiver the

foreign state may purpor: to effect except in accordance with the

terms of the waiver, and

13a

that plaintiffs did not satisfy this requirement here because the

Republic’s payments to the IMF, which were facilitated by the

Decrees, constituted a “government financial activity and not a

commercial activity.”

Third, the District Court concluded that another provision

of the FSIA, 28 U.S.C. § 1611(b)(1), provided a separate and

independent basis for vacating the attachments and restraining

orders. That statutory provision protects from attachment

property “of a foreign central bank . . . held for its own

account,” unless the protection has been explicitly waived by

the central bank or the bank’s parent foreign government.’ In the

view of the District Court, the FRBNY Account “was, is, and

continues to be the property of the central bank used for central

banking functions,” and therefore, “the prohibition of Section

1611 on attaching those funds must apply.”

Fourth, the District Court rejected plaintiffs’ arguments that

there had been an explicit waiver of BCRA’s immunity of the

type that would be necessary to expose BCRA’s assets to

attachment under 28 U.S.C. § 1611(b)(1). The District Court

also implicitly denied EM’s discovery request by vacating the

Amended Restraining Notices without authorizing further

discovery.

(2) the purpose of the attachment is to secure satisfaction of a judgment

that has been or may ultimately be entered against the foreign state,

and not to obtain jurisdiction.

728 U.S.C. § 1611(b)(1) provides, in pertinent part:

Notwithstanding the provisions of section 1610 of this chapter, the

property of a foreign state shall be immune from attachment and irom

execution, if—

(1) the property is that of a foreign central bank or monetary authority

held for its own account, unless such bank or authority, or its parent

foreign government, has explicitly waived its immunity from attachment

in aid of execution, or from execution, notwithstanding any withdrawal

of the waiver which the bank, authority or government may purport to

effect except in accordance with the terms of the waiver... .

14a

On January 24, 2006, the District Court entered a written

order formally vacating the Amended Restraining Notices,

staying the order pending appeal, and certifying the order for

appeal pursuant to 28 U.S.C. § 1292(b).*

We expedited the appeal. The United States and the

FRBNY have appeared before us as amici in support of the

Republic and BCRA.

DISCUSSION

I. Appellate Jurisdiction

We have jurisdiction pursuant to 28 U.S.C. § 1292(b). The

appeal was certified by the District Court, and we agree that the

District Court’s ruling involves unresolved controlling questions

of law, and that an appeal would advance the termination of the

litigation.”

* 28 U.S.C. § 1292(b) provides, in pertinent part:

When a district judge, in making in a civil action an order not otherwise

appealable under this section, shal] be of the opinion that such order involves

a controlling question of law as to which there is substantial ground for

difference of opinion and that an immediate appeal from the order may

materially advance the ultimate termination of the litigation, he shall so state

in wniting in such order. The Court of Appeals which would have jurisdiction

of an appeal of such action may thereupon, in its discretion, permit an appeal

to be taken from such order, if application is made to it within ten days after

the entry of the order. . . .

” Consequently, we formally grant plaintiffs’ motion to hear the appeal

pursuant to 28 U.S.C. § 1292(b). Having accepted jurisdiction under

§ 1292(b), we need not consider whether jurisdiction would also be proper

under 28 U.S.C. § 1292(a)(1), which grants appellate courts jurisdiction over

orders “refusing or dissolving injunctions,” or under the collateral order

doctrine. See Karaha Bodas Co., L .L.C. v. Perusahaan Pertambangan

Minvak Dan Gas Bumi Negara, 313 F.3d 70, 81 & n.11 (2d Cir. 2002)

(considering appeal of orders related to attachment of asscts of Indonesian

national government and instrumentality under § 1292(b) without

determining whether jurisdiction would also be proper under collateral order

doctrine).

15a

Il. Standard of Review

We review a district court’s ruling on a request for an order

of attachment for abuse of discretion. See Capital Ventures Int’]

v. Republic of Argentina, 443 F.3d 214, 222 (2d Cir. 2006)

(addressing prejudgment attachment). We will find such an

abuse of discretion if the district court “applies legal standards

incorrectly or relies upon clearly erroneous findings of fact, or

proceed[s] on the basis of an erroneous view of the applicable

law.” Jd. (quoting Register.com, Inc. v. Verio, Inc., 356 F.3d

393, 398 (2d Cir. 2004)); see also Zervos v. Verizon N_Y., Inc.,

252 F.3d 163, 169 (2d Cir. 2001) (“error of law” constitutes

“abuse of discretion’).

In this case, we consider the legal conclusions that underlay

the District Court’s exercise of discretion to vacate the

attachments—namely, that the Republic had no attachable

interest in the FRBNY Funds, and that the funds were otherwise.

immune from attachment under the FSIA. Thus, the dispositive

issues here are ones of law, which we review de novo. See

Heerwagen v. Clear Channel Comme ’ns, 435 F.3d 219, 225 (2d

Cir. 2006) (noting that this Court “will find an abuse of

discretion whenever the district court commits an error of law,

which we review de novo’’).

If. Analysis

We agree with the decision of the District Court. We

conclude that the Decrees did not create an attachable interest

on the part of the Republic in the FRBNY Funds, and that

Section 1610’s provisions allowing attachment of property of a

foreign state “used for a commercial activity” would not permit

attachment of the FRBNY Funds even if they were attachable

assets of the Republic.

A. General Principles

The FSIA protects foreign states’ property from attachment

and execution, subject to existing international obligations,

except under the conditions set forth in two other provisions of

16a

the FSIA, 28 U.S.C. §§ 1610 and 1611. See 28 U.S.C. § 1609

(“Subject to existing international agreements to which the

United States 1s a party at the time of enactment of this Act the

property in the United States of a foreign state shall be immune

from attachment arrest and execution except as provided in

sections 1610 and 1611 of this chapter.”); Letelier v. Republic

of Chile, 748 F.2d 790, 793 (2d Cir. 1984) (“[U|nder [FSIA]

§ 1609 foreign states are immune from execution upon

judgments obtained against them, unless an exception set forth

in §§ 1610 or 1611 of the FSIA apphies.”).

The FSIA’s protections against attachment and execution

extend to the instrumentalities of a foreign state such as BCRA,

although the protections applicable to assets of instrumentalities

vary from those applicable to the assets of the foreign states

themselves. See Karaha Bodas, 313 F.3d at 82 (“Section 1610

provides different regimes for sovereign states on the one hand,

and their agencies and instrumentalities on the other.”); see a/so

S & S Machinery Co. v. Masinexportimport, 706 F.2d 411, 414

(2d Cir. 1983) (“State-owned central banks indisputably are

included in the [FSIA’s] definition of ‘agency or

instrumentality.””). Under subsections 1 610(a) and (d), assets of

a foreign state can be attached only if the assets sought to be

attached are “used for a commercial activity in the United

States.” But under subsection 1610(b), which concerns agencies

and instrumentalities of foreign states, creditors may attach “any

property in the United States of an agency or instrumentality of

a foreign state engaged in commercial activity in the United

States,” 28 U.S.C. § 1610(b) (emphasis added). As we explained

in Karaha Bodas, “[sjubsection (a) is generally thought to be

narrower than subsection (b). While subsection (b) applies to a//

property of the agencies and instrumentalities of foreign states,

subsection (a) applies only to the property of foreign states that

is ‘used in commercial activity.”” Karaha Bodas, 313 F.3d at 82

(quoting Conn. Bank of Commerce v. Republic of Congo, 309

F.3d 240, 253 (Sth Cir. 2002)).

17a

The FSIA provides additional protection to assets of foreign

central banks. See 28 U.S.C. § 161 1(b)(1), note 7, ante.

Congress developed 28 U.S.C. § 1611(b)(1) to shield from

attachment the U.S. assets of foreign central banks, many of

which might be engaged in commercial activity in the United

States while managing reserves and engaging in financial

transactions, and to provide an incentive for foreign central

banks to maintain their reserves in the United States:

Section 16] 1(b)(1) provides for the immunity of central

bank funds from attachment or execution. It applies to

funds of a foreign central bank or monetary authority which

are deposited in the United States and “held” for the bank’s

or authority’s “own account”—1.e., funds used or held in

connection with central banking activities, as distinguished

from funds used solely to finance the commercial

transactions of other entities or of foreign states. If

execution could be levied on such funds without an explicit

waiver, deposit of foreign funds in the United States might

be discouraged. Moreover, execution against the reserves

of foreign states could cause significant foreign relations

problems.

H.R. Rep. No. 94-1487 (“FSIA House Report”) at 31, as

reprinted in 1976 U.S.C.C.A.N. 6604, 6630; see also Paul L.

Lee, Central Banks and Sovereign Immunity, 41 Colum. J.

Transnat’! L. 327, 376 (2003) (noting that Section 1611(b)(1)

appears to have been developed in order to avoid the “potential

difficulties” that central banks would be faced with if their

assets were subject to attachment under the provisions of

Section 1610(b) applicable to other instrumentalities).

Plaintiffs’ reliance on the attachment provisions applicable

to foreign states—§ 1610(a) and its prejudgment counterpart,

§ 1610(d)—rather than on the attachment provisions applicable

to foreign agencies and instrumentalities set forth in § 1610(b),

makes clear that their arguments are premised on a threshold

determination that the FRBNY Funds are an attachable interest

of the Republic, not of BCRA.

18a

B. The Decrees Did Not Convert the FRBNY Funds

Into an Attachable Interest of the Republic

Although plaintiffs hold or seek judgments against the

Republic, the FRBNY Funds that plaintiffs seek to attach are

‘held in BCRA’s name. Plaintiffs have conceded that: (1) before

December 15, 2005, the date on which the Decrees were issued,

the FRBNY Funds were the property of BCRA; (2) plaintiffs

had no right to attach the FRBNY Funds before that date; and

(3) even after issuance of the Decrees, the FRBNY Funds were

held in BCRA’s name. Thus, under New York law, it is

presumed that the FRBNY Funds continue to be owned by

BCRA even after issuance of the Decrees.'’ See Karaha Bodas,

313 F.3d at 86 (“Under New York law, the party who possesses

property is presumed to be the party who owns it. When a party

holds funds 1n a bank account, possession 1s established, and the

presumption of ownership follows.” (citing Pollock v. Rapid

Indus. Plastics Co., 497 N.Y.S.2d 45, 49 (2d Dep’t 1985);

Kolodziejczyk v. Wing, 689 N.Y .S.2d 825, 825 (4th Dep’t 1999);

and Perkins v. Guar. Trust Co. of N.Y., 274 N.Y. 250, 261

(1937))).

Plaintiffs do not bring to our attention any contrary New

York or Argentine legal principles governing ownership of

funds in bank accounts, see Karaha Bodas, 313 F.3d at 85-86

(analyzing New York and Indonesian legal principles governing

rights of Indonesian government and Indonesian instrumentality

to funds held in New York bank accounts), nor do they point to

any order or other document explicitly transferring ownership

‘* Under the FSIA and the Federal Rules of Civil Procedure, New York

law governs the circumstances and manner of attachment and execution

proceedings. See Karaha Bodas, 3\3 F.3d at 83 (“The FSIA states that when

a foreign state is not protected by sovereign immunity, “the foreign state shall

be liable in the same manner and to the same extent as a private individual

under like circumstances.” 28 U.S.C. § 1606. In attachment actions involving

foreign states, federal courts thus apply Fed. R. Civ. P. 69(a), which requires

the application of local state procedures.”); Capital Ventures Int'l v. Republic

of Argentina, 443 F.3d 214, 218-19 (2d Cir. 2006).

19a

%

of the FRBNY Funds from BCRA to the Republic. Instead,

plaintiffs contend that the Decrees changed the legal status of

$8.4 billion of BCRA’s reserves—i.e., the funds that the

Decrees designated as Unrestricted Reserves—when it made

those funds available to pay the Republic’s debt to the IMF.

NML contends that the Decrees had the effect of making the

Unrestricted Reserves property of the Republic. See Br. of

Appellant NML 32-33. EM argues that it is immaterial whether

the “nominal” holding and ownership of the Unrestricted

Reserves changed, because under New York attachment law the

Unrestricted Reserves are attachable if the Republic has a night

to assign or transfer them. See Br. of Appellant EM 27-29

(citing N.Y. C.P.L.R. § 5201(b) (“A money judgment may be

enforced against any property which could be assigned or

transferred, whether it consists of a present or future right or

interest and whether or not it is vested .. . .”)). According to

EM, the Unrestricted Reserves must be subject to attachment

because the Decrees demonstrated the Republic’s power to

assign or transfer BCRA’s assets. See id. at 27-28 (Indeed, the

fact that it was even possible for President Kirchner, with the

stroke of a pen, to appropriate (or borrow) the Unrestricted

Reserves to pay Argentina’s debts and then direct when and

how the payment should be made proves beyond question that

the Argentine state controls not only the Unrestricted Reserves,

but a// of the Central Bank’s assets.”).

Plaintiffs also argue that the Decrees transformed all

reserves of BCRA, including the FRBNY Funds, into attachable

assets of the Republic because the Decrees did not specify

which of BCRA’s funds would be designated as Unrestricted

Reserves and used to repay the IMF. See Br. of Appellant EM

31 (“The consequence of Argentina’s deliberate decision to

preserve all of its options with respect to paying its creditors out

of its foreign exchange reserves, wherever located, is that all of

the funds garnished by the Restraining Notices [including the

FRBNY Funds] were Unrestricted Reserves.”); Br. of Appellant

NML 36 (arguing that the Decrees subjected to attachment “any

portion of the reserves held by the Central Bank anywhere in the

nas

20a

world .. . unless and until the attachments became so large that

they exceeded the Unrestricted Reserves”).'' According to

plaintiffs, the FRBNY Funds must be treated as attachable

Unrestricted Reserves because the Decrees failed to exclude the

FRBNY Funds from being so designated. See Br. of Appellant

EM 31-32 (“It makes no difference whether Argentina actually

intended to pay the IMF from those funds, since the Decrees do

not differentiate on that basis. To conclude otherwise would be

to allow Argentina to utilize a problem of its own creation to

evade its creditors.”).

It is important to distinguish arguments which assert that

the Decrees transferred to the Republic ownership or control

over the assets of BCRA, see, e.g., Karaha Bodas, 313 F.3d at

90-92 (analyzing foreign state’s ownership rights in assets

possessed by instrumentality), from arguments that turn on the

Republic’s control over BCRA itself. The legal principles

governing when a foreign state’s control over its instrumentality

permits attachment of the instrumentality’s assets to satisfy a

judgment against the state are well-established, see post, but

were not addressed by plaintiffs in their submissions to the

District Court or to this Court.

We conclude that (1) the Decrees did not alter property

rights with respect to the FRBNY Funds—the assets that are the

subject of the present appeal—but merely reflect the Republic’s

ability to exert control over BCRA itself, and (2) plaintiffs have

not availed themselves of any arguments that would allow

'' The scope of plaintiffs’ claimed authority to attach assets held by

BCRA would be vast. Even though only $8.4 billion in reserves were

reclassified as Unrestricted Reserves pursuant to the Decrees, under

plaintiffs’ theory, a// $26.8 billion in the various BCRA accounts around the

world would be subject to attachment (until the attached funds reach $8.4

billion) because all that money would be potentially designated as

Unrestncted Reserves—i.c., because it is unclear which $18.4 billion would

be classified as that necessary to back the monetary base and which $8.4

billion ($26 .8 billion minus $18.4 billion) would be classified as

“Unrestricted Reserves.”

2\la

attachment of the FRBNY Funds based on the Republic’s

control over BCRA.

1. Control Over the FRBNY Funds

Plaintiffs’ arguments concerning ownership of, and control

over, the FRBNY Funds are not supported by the Decrees. The

record is barren of any evidence that ownership or control over

the FRBNY Funds was transferred to the Republic upon

issuance of the Decrees, or that the Decrees required BCRA to

use the FRBNY Funds, as opposed to other reserves, to repay

the IMF. Rather than transferring funds to the Republic from

BCRA, the Decrees and Resolution No. 49 directed BCRA to

make reserves available to repay the IMF, and then to repay the

IMF using those funds, leaving the decision of which specific

funds would be used to BCRA’s discretion. See, e.g., Reply Br.

of Appellant NML 13-14 n.9 (acknowledging that “the Decrees

fail to specify particular assets as Unrestricted Reserves”).

While the Decrees may have manifested the Republic’s

ability and willingness to control BCRA, and to direct BCRA to

use its assets for the benefit of the Republic, they did not cause

control of BCRA’s assets to change from BCRA to the

Republic. To conclude otherwise would be to allow creditors of

a foreign state to attach all of the assets of the state’s central

bank any time the foreign state issues directives affecting the

central bank’s reserves.'° Corporate law principles, which apply

'? As the FRBNY points out, plaintiffs’ theory could expose to

attachment the assets of a majority of the world’s central banks because

national governments customarily retain the ability to direct their central

banks to take actions with respect to the central banks’ foreign exchange

reserves. See, e.g.. M.H. de Kock, Central Banking 34-37, 312-18 (4th ed.

1974). Under plaintiffs’ theory, for example, all of the assets of the United

States Federal Reserve system would be treated as attachable interests of the

United States (absent otherwise-applicable sovercign immunity protections)

because the United States has exercised the power to direct the Federal

Reserve Banks to transfer their “surplus funds” to the U.S. Treasury for use

by the federal government. See, e.g., 12 U.S.C. § 289(b)(1) (“The Federal

reserve banks shall transfer from the surplus funds of such banks to the Board

22a

by analogy to the relationship between the Republic and its

instrumentality BCRA, see, e.g., First Nat'l City Bank v. Banco

Para El Comercio Exterior de Cuba, 462 U.S. 611, 628-33

(1983) (“Bancec”) (applying corporate law principles to

determine circumstances under which separate juridical status

of government instrumentality must be disregarded), support

this conclusion. See Dole Food Co. v. Patrickson, 538 U.S. 468,

475-76 (2003) (holding that the FSIA did not affect underlying

corporate law principles, and stating that “[a] corporate parent

which owns the shares of a subsidiary does not, for that reasun

alone, own or have legal title to the assets of the subsidiary ....

The fact that the shareholder is a foreign state does not change

the analysis.” (citations omitted)); United States v. Wallach, 935

F.2d 445, 462 (2d Cir. 1991) (“[S]hareholders do not hold legal

title to any of the corporation’s assets. Instead, the

corporation—the entity itself—is vested with the title.”

(citations omitted)); see also 1 William Meade Fletcher,

Cyclopedia of the Law of Corporations § 31 at 78, 84 (rev. ed.

2006) (“Shareholders, even the controlling shareholder, cannot

transfer or assign the corporation’s properties and rights, nor

apply corporate funds to personal debts or objects . ¥%

(footnotes omitted)).'*

of Governors of the Federal Reserve System for transfer to the Secretary of

the Treasury for deposit in the general fund of the Treasury, a total amount

of $3.752,000,000 in fiscal year 2000.”).

'’ New York attachment law does not help plaintiffs. We noted in

Karaha Bodas that the scope of attachment authorized by N.Y. C.P.L.R.

§ 5201 was limited by the scope of the judgment debtor’s own interest in the

attached property: “In New York, then, a party secking to enforce a judgment

‘stand[s] in the shoes of the judgment debtor in relation to any debt owed him

or a property interest he may own.’ Nonetheless, a party cannot ‘reach. . .

assets in which the judgment debtor has no interest.“” Karaha Bodas, 313

F.3d at 83 (quoting Bass v. Bass, 528 N.Y.S.2d 558, 561 (1st Dep't 1988)).

Here, because plaintiffs have not demonstrated that the Republic obtained

any attachable interest in the FRBNY Funds as a result of the Decrees,

plainuffs have no right to attach the funds.

23a

2. Control over BCRA

To the extent that plaintiffs’ claim on the FRBNY Funds is

based on the Republic’s control over BCRA, as demonstrated by

the Decrees, see, e.g., Br. of Appellant EM 27-28 (arguing that

the Republic’s ability to appropriate BCRA’s assets “with the

stroke of a pen. . . proves beyond question that the Argentine

state controls not only the Unrestricted Reserves, but a// of the

Central Bank’s assets”), plaintiffs have failed to avail

themselves of well-established legal principles that might permit

attachment. In Bancec, the Supreme Court stated that

“government instrumentalities established as juridical entities

distinct and independent from their sovereign should normally

be treated as such.” 462 U.S. at 626-27. According to the Court,

[fjreely ignoring the separate status of government

instrumentalities would result in substantial uncertainty

over whether an instrumentality’s assets would be diverted

to satisfy a claim against the sovereign, and might thereby

cause third parties to hesitate before extending credit to a

government instrumentality without the government’s

guarantee. As a result, the efforts of sovereign nations to

structure their governmental activities in a manner deemed

necessary to promote economic development and efficient

administration would surely be frustrated.

Id. at 626 (footnote omitted).

The Court found support for this proposition in the

legislative history of 28 U.S.C. § 1610(b), see note 6, ante

(quoting § 1610(b)), the provision of the FSIA addressing the

circumstances under which a judgment creditor may execute

upon the assets of an instrumentality of a foreign government:

Section 1610(b) will not permit execution against the

property of one agency or instrumentality to satisfy a

judgment against another, unrelated agency or

instrumentality. There are compelling reasons for this. If

U.S. law did not respect the separate juridical identities of

different agencies or instrumentalities, it might encourage

24a

foreign jurisdictions to disregard the juridical divisions

between different U.S. corporations or between a US.

corporation and its independent subsidiary. However, a

court might find that property held by one agency is really

the property of another.

Bancec, 462 U.S. at 627-28 (quoting FSIA House Report at 29-

30, as reprinted in 1976 U.S.C.C.A.N. at 6628-29).

In Bancec, the Court held that the “presumption that a

foreign government’s determination that its instrumentality is to

be accorded separate legal status will be honored,” id. at 628,

could be overcome under certain circumstances, including

where the instrumentality is “so extensively controlled by its

owner that a relationship of principal and agent is created,” id.

at 629, and where recognizing the instrumentality’s separate

juridical status would “work fraud or injustice,” id. (quoting

Taylor v. Standard Gas Co., 306 U.S. 307, 322 (1939)) (internal

quotation mark omitted); see a/so Letelier v. Republic of Chile,

748 F.2d 790, 794 (2d Cir. 1984) (“The Bancec Court held that

a foreign state instrumentality is answerable just as its sovereign

parent would be if the foreign state has abused the corporate

form, or where- recognizing the instrumentality’s separate status

works a fraud or an injustice.”).

Our respect for the separate juridical status of government

instrumentalities led us to conclude in Lete/ier that the assets of

Chile’s state-owned airline, LAN, could not be executed upon

to satisfy a judgment obtained against the Republic of Chile. See

Letelier, 748 F.2d at 792, 799. We interpreted Bancec to

establish a presumption that assets of a foreign government

instrumentality could not be executed upon to satisfy a

judgment against a parent foreign government. That

presumption could be overcome only if the party seeking

attachment carried its burden of demonstrating that the

instrumentality’s scparate juridical status was not entitled to

recognition. See id. at 794-95.

25a

In Letelier, the district court had held that Chile’s “direct

control” of LAN’s “assets and facilities,” its power to use

LAN’s assets, its ability to “have decreed LAN’s dissolution

and taken over property interests held in LAN’s name,” and its

use of the instrumentality’s facilities and personnel to plan and

carry out an assassination that gave rise to the judgment at issue

in the case amounted to an abuse of corporate form justifying

disregard of the instrumentality’s separate juridical status. /d. at

794. We reversed, holding that

[p]laintiffs had the burden of proving that LAN was not

entitled to separate recognition. A creditor seeking

execution against an apparently separate entity must prove

the property to be attached is subject to execution. The

evidence submitted by the judgment creditors does not

reveal abuse of corporate form of the nature or degree that

Bancec found sufficient to overcome the presumption of

separate existence. As both Bancec and the FSIA legislative

history caution against too easily overcoming the

presumption of separateness, we decline to extend the

Bancec holding to do so in this case.

ld. at 795 (citations and internal quotation marks omitted).

In a recent case, LNC Invs., Inc. v. Republic of Nicaragua,

115 F. Supp. 2d 358 (S.D.N.Y. 2000), aff'd sub nom. LNC Invs.,

Inc. v. Banco Central de Nicaragua, 228 F.3d 423 (2d Cir.

2000), a district court applied Bancec to defeat the efforts of

LNC Investments (“LNC”), a judgment creditor of the Republic

of Nicaragua (“Nicaragua’’), to execute on assets of Nicaragua’s

central bank held in the FRBNY. In that case, LNC obtained a

judgment against Nicaragua based on its holdings of defaulted

debt instruments issued by Nicaragua. To satisfy the judgment,

LNC sought to execute on assets of Banco Central de

Nicaragua—Nicaragua’s central bank—held in the FRBNY,

contending that Nicaragua had waived immunity from

attachment of its central bank’s assets and, in the alternative,

that the central bank could be required to satisfy the judgment

against Nicaragua. See id. at 360-63.

26a

The district court rejected LNC’s waiver argument, see id.

at 361-63, and held that the central bank could be required to

satisfy the judgment against its parent sovereign government

only if LNC could overcome the Bancec presumption that the

central bank’s separate juridical status must be respected, see id.

at 363. It concluded that LNC failed to prove that Nicaragua

abused the central bank’s corporate form (i.e., that the central

bank was the “alter ego” of Nicaragua), or that respecting the

central bank’s separate juridical status would work a fraud or

injustice. See id. at 363-66.

We affirmed in a brief opinion in which we expressed our

agreement with the district court’s reasoning. See LNC Invs.,

228 F.3d at 423 (“The district court held that the ( ‘entral Bank's

assets could not be reached to satisfy the judgment against

Nicaragua. We agree and affirm for substantially the reasons

stated by the district court.”). This result has been described by

a commentator as “consistent with the outcome in a series of

prior appellate decisions that had shown a strong aversion to

overriding the presumption of independent status for separate

corporate agencies or instrumentalities.” Paul L. Lee, Central

Banks and Sovereign Immunity, 41 Colum. J. Transnat’! L. 327,

364 (2003).'* See also First City, Texas-Houston, N.A. v.

Rafidain Bank, 150 F.3d 172, 176 (2d Cir. 1998) (using Bancec

to analyze claim that central bank of Iraq should be held liable

' Lee cites Letelier and the following cases from the Fifth and Eleventh

Circuits in support of this proposition: A/ejandre v. Telefonica Larga

Distancia de Puerto Rico, Inc., 183 F.3d 1277, 1281 (11th Cir. 1999); Hester

Int'l Corp. v. Federal Republic of Nigeria, 879 F.2d 170, 178-81 (Sth Cir.

1989); and Hercaire Int'l, Inc. v. Argentina, 821 F.2d 559, 565 (1 1th Cir.

1987). See Lee, ante, at 362 n.137, 365 0.144.

We note that Banco Central de Reserva del Peru v. Riggs Nat'l Bank,

919 F. Supp. 13 (D.D.C. 1994), which plaintiffs relied upon in their briefs

and at oral argument, also applied Bancec to a claim against the assets of

Peru’s central bank by a creditor of Peru (in that case, a claim for sctoff). See

id. at 16 (“As a general rule, courts must give great deference to the intent of

foreign governments to establish separate entities.” (citing Bancec, 462 U.S.

at 626-27)).

27a

for Iraq-owned commercial bank’s repudiation of debts as

commercial bank’s “alter ego”); Olympic Chartering S.A. v.

Ministry of Indus. and Trade of Jordan, 134 F. Supp. 2d 528,

530 (S.D.N.Y. 2001) (rejecting claim by judgment creditor of

Jordan’s Ministry of Industry and Trade for jurisdictional

discovery concerning the Central Bank of Jordan (“CBJ”)

because “petitioner has made no ailegation that CBJ is an alter

ego of the judgment debtor nor of ‘fraud or injustice’ involving

CBJ” (quoting Bancec, 462 U.S. at 629)).

We see no reason why the presumption of separateness

required by Bancec and applied in Letelier and LNC Investments

should not apply here to shield the FRBNY Funds from

attachment. The separate juridical status of BCRA is not

disputed by plaintiffs,’° and plaintiffs expressly elected not to

'S “A typical government instrumentality . . . is created by an enabling

statute that prescribes the powers and duties of the instrumentality, and

specifies that it is to be managed by a board selected by the government in

a manner consistent with the enabling law.” Bancec, 462 U.S. at 624. BCRA

satisfies this description. Appellees submitted below an uncontradicted

affidavit stating that BCRA is an independent legal entity “charged by statute

with the power and responsibility of issuing and monitoring the stability of

the Argentine currency (the Argentine peso), establishing and implementing

monetary policy, and regulating the Argentine banking system and financial

sector.” Aff. of Juan Bosco § 3, J.A. 393. BCRA’s statutory charter, Law No.

24,144/92 (Oct. 22, 1992, as amended) (the “Charter”), indicates that BCRA

is a “self-administered institution of the [Republic}]” managed by an

independent Board of Directors appointed by the National Executive Power

with the consent of the national Senate. Charter arts. |, 6-7, J.A. 402-03. As

an independent legal entity, BCRA has the legal authority to purchase and

sell property in its own name, hold accounts in its own name, and sue and be

sued in a court of law in its own name. Charter arts. 18, 33, 55, J.A. 407-08,

411,414. In the District Court, plaintiffs did not dispute this characterization

of BCRA’s separate juridical status, and plaintiffs do not contest the

statements in BCRA’s appeal brief indicating that BCRA is a “‘self-

administered institution’ whose independence from the Republic’s executive

branch is mandated by the Argentine Constitution and Argentine law,” Br.

of Appellee BCRA 2 (quoting Charter art. |}—except to the extent that

plaintiffs argue BCRA’s formal independence is belied by the Republic’s

extensive control over the central bank.

28a

argue in support of attachment that BCRA’s separate juridical

status should be disregarded because BCRA is the alter ego of

the Republic. See, e.g., Jan. 12, 2006 Hr’g Tr. 8, Special

Appendix of Appellant EM 13 (counsel for EM acknowledging _

that the FRBNY Funds were “the central bank’s property before

the decree, subject to arguments which we think are legitimate

arguments of ours that the central bank 1s the alter ego of the

government. But that would still make it the central bank’s

property.”); NML Reply Br. 21-22:

The reason Central Bank assets were not available before

December 15, 2005, [the date on which the Decrees were

issued,] to be attached by Argentina's creditors is that the

relevant debts are Argentina’s and not the Central Bank’s.

Before President Kirchner decreed funds held by the

Central Bank available to pay a debt of Argentina,

appellants had no basis—other than an alter ego argument,

which they have not yet made in the District Court—to

argue that they were entitled to attach Central Bank funds

to pay a debt of Argentina.

(citation omitted) (second emphasis added). Nor have they

argued that the Bancec presumption should be overcome based

on a finding that disregarding BCRA’s separate juridical status

is necessary to prevent fraud or injustice.'® In fact, neither EM

nor NML even so much as mentions Bancec in its briefs.

Furthermore, if plaintiffs believed that BCRA was not entitled to

separate juridical status, they would not have needed to argue that the

Decrees caused ownership or control of the FRBNY Funds to change from

BCRA to the Republic upon issuance of the Decrees, because the FRBNY

Funds would have been attachable assets of the Repubiic even before the

Decrees were issued.

'* This Court w ill not consider plaintiff's potential alter ego arguments

in the first instance. See Mellon Bank, N.A. v. United Bank Corp. of N.Y., 31

F.3d 113, 116 (2d Cir. 1994) (declining to review an argument not raised

before the district court when the party “clearly had the opportunity to raise”

it below).

29a

We reject plaintiffs’ effort to circumvent Bancec and our

decisions in Letelier and LNC Investments by characterizing the

Republic’s ability and willingness to control BCRA as a transfer

of property rights sufficient to give the Republic an attachable

interest in the FRBNY Funds. Under Bancec and its progeny,

plaintiffs bear the burden of overcoming the presumption that

the FRBNY Funds are not available to satisfy a judgment

against the Republic. Bancec indicates two circumstances in

which the presumption may be overcome—if BCRA were

proven to be the alter ego of the Republic, or if disregarding

BCRA’s separate juridical status were necessary to avoid fraud

or injustice. Plaintiffs chose not to argue that either of these

circumstances existed here, even though the Republic’s alleged

misdeeds cited in plaintiffs’ briefs might have lent some

credence to these arguments.'’ Bancec forecloses any argument

that all of BCRA’s $26.8 billion in reserves are “attachable

interests” of the Republic merely because the Republic

hypothetically could have ordered (but in the Decrees did not

order) BCRA to assign or transfer the FRBNY Funds. See

Letelier, 748 F.2d at 794 (findings that assets and facilities of

Chile’s instrumentality LAN “were under the direct control of

Chile, which had the power to use them; [and that] Chile could

have decreed LAN’s dissolution and taken over property

interests held in LAN’s name” did not support allowing creditor

to attach LAN’s assets in order to satisfy judgment against

Chile).

'’ For example, the Republic’s alleged interference with BCRA’s affairs

and efforts to remove attachable assets from the United States arguably could

have supported arguments for disregarding BCRA’s separate juridical! status

in order to avoid fraud or injustice. This approach, rather than the legally

unsupported one advanced by plaintiffs, might provide a means by which

creditors could “avoid allowing Argentina to play a shell game to deprive

creditors of their legitimate remedics.” Br. of Appellant NML 36.

30a

C. Use of Funds To Repay the IMF Is Not a

“Commercial Activity”

Even if we agreed that the Decrees effectively converted all

of BCRA’s reserves—including the reserves held in the FRBNY

Account—into attachable assets of the Republic, we could not

authorize the pre- or postjudgment attachment of the FRBNY

Funds unless we found that the account had become property of

the Republic “used for a commercial activity in the United

States.”'* 28 U.S.C. §§ 1610(a) & (d); see note 6, ante (quoting

relevant portions of § 1610). Plaintiffs essentially concede as

much by arguing that the Unrestricted Reserves are attachable

because they were “used for a commercial activity.” See Br. of

Appellant EM 32-36 (arguing that Unrestricted Reserves are

attachable because they have been “used for a commercial

activity”); Br. of Appellant NML 37-47 (same).’”

'’ We note, however, that if we agreed with plaintiffs’ arguments

concerning the effect of the Decrees on ownership and control of the FRBNY

Funds, it would not be necessary to consider plaintiffs’ arguments regarding

the effect of the Republic’s waiver on BCRA, as the Republic indisputably

waived its assets’ immunity from attachment under 28 U.S.C. §§ 1610(a)(1)

and (d)(1). Cf. Rafidain Bank, 150 F.3d at 174 (noting that if central bank

were alter ego of other instrumentality, central bank would be subject “to

jurisdiction under the FS[A’s commercial activity exception to immunity to

the same extent as [the other instrumentality]”).

'* Plaintiff EM does argue in the alternative that the FRBNY Funds

should not be immune from attachment because the Republic “went beyond

merely waiving the immunity of those Reserves in the documents underlying

fits] bond; it affirmatively pledged not to assert such immunity in

proceedings to enforce the Judgment.” Br. of Appellant EM 46 (emphasis in

original). EM relies on Caribbean Trading and Fid. Corp. v. Nigerian Nat'l

Petroleum Corp., 948 F.2d 111 (2d Cir. 1991), in support of this argument.

EM’s argument is without merit. As stated earlier, the Republic

“irrevocably agreed not to claim and has irrevocably waived . . . immunity

to the fullest extent permitted by the laws of [the] jurisdiction . . . .” By its

explicit terms, the scope of the Republic’s agreement not to claim immunity

is coextensive with its waiver of immunity; both reach only to the “extent

permitted undcr the laws of [the] jurisdiction.” The FSIA explicitly protects

all “property in the United States of a foreign state . . . from attachment arrest

3la

Plaintiffs contend that the Republic’s use of the FRBNY

Funds constituted “a commercial activity in the United States”

under 28 U.S.C. § 1610(a) because the funds could have been

used to repay the Republic’s debt to the IMF. They rely on

Republic of Argentina v. Weltover, Inc., 504 U.S. 607 (1992), in

which. the Supreme Court held that Argentina’s issuance of

commercial bonds constituted “commercial activity” under the

FSIA, see id. at 615-17, to argue that a government’s repayment

of debt a/ways constitutes “commercial activity” within the

meaning of the FSIA. Under this reasoning, the Republic

and execution except as provided in” 28 U.S.C. §§ 1610 & 1611. 28 U.S.C.

§ 1609. Under the laws of this jurisdiction, courts may grant the remedies of

attachment, arrest and execution against a foreign state’s property only if the

property is eligible for attachment under a specific provision of the FSIA.

See, e.g., Conn. Bank of Commerce v. Republic of Congo, 309 F.3d 240, 247

(Sth Cir. 2002) (“[I]f a foreign sovereign waives its immunity from

execution, U.S. courts may execute against ‘property in the United States . . .

used for a commercial activity in the United States.’ 28 U.S.C. § 1610(a)(1).

Even when a foreign state completely waives its immunity from execution,

courts in the U.S. may execute only against property that meets these two

Statutory criteria.”); accord LNC Inves., Inc. v. Republic of Nicaragua, No.

96 Civ. 6360 (JFK), 2000 WL 745550, at *3 (S.D.N.Y. June 8, 2000). To

conclude otherwise would render meaningless the provisions of §§ 1610(a)

& (d), which subject to attachment property of a foreign state when the

property is “used for a commercial activity” and when the foreign state “has

waived its immunity from attachment,” 28 U.S.C. § 1610(a)(1); see also id.

§ 1610(d)(1) (permitting prejudgment attachment of a foreign state’s property

“used for a commercial activity” only where “the foreign state has explicitly

waived its immunity from attachment prior to judgment”).

Caribbean Trading does not support a contrary conclusion. In Carribean

Trading, we found that a foreign state instrumentality waived the right to

assert immunity from attachment provided by the FSIA by failing to timely

assert it in the litigation in accordance with procedural rules governing all

litigants. See Caribbean Trading, 948 F.2d at 115. We noted, however, that

“{t]his wholly procedural rule does not infringe on the prerogatives of a

foreign state under the FSIA. It merely imposes orderly procedures upon the

assertion of those prerogatives.” /d. We necd not consider here what remedy,

ifany, a judgment creditor might have against a foreign state that violated an

explicit promise not to assert any of the non-waivable protections of the FSIA

in attachment proceedings, because the Republic did noi make any such

promise to plaintiffs.

32a

engaged in “commercial activity’ when BCRA repaid the

Republic’s debt to the IMF.

We disagree with plaintiffs’ argument on two separate and

independent grounds. First, we hold that the Republic’s

relationship with the IMF is not “commercial” in nature; thus,

use of Unrestricted Reserves to repay the IMF did not constitute

“commercial activity.” Second, even if we assumed that the

Republic’s relationship with the IMF was “commercial” in

nature, plaintiffs have failed to show on the present record that

any of the FRBNY Funds were to be “used” to pay the IMF.

The FSIA’s definition of “commercial activity” states that

“(t]he commercial character of an activity shall be determined

by reference to the nature of the course of conduct or particular

transaction or act, rather than by reference to its purpose.” 28

U.S.C. § 1603(d). According to the Supreme Court in Weltover,

“(al foreign state engaging in ‘commercial’ activities ‘do[es] not

exercise powers peculiar to sovereigns’; rather, it ‘exercise[s]

only those powers that can also be exercised by private

citizens.’” 504 U.S. at 614 (second and third alterations in

original) (quoting A/fred Dunhill of London, Inc. v. Republic of

Cuba, 425 U.S. 682, 704 (1976) (plurality opinion)). This led

the Court to conclude that “when a foreign government acts, not

as regulator of a market, but in the manner of a private player

within it, the foreign sovereign’s actions are ‘commercial’

within the meaning of the FSIA. . . . [T]he issue is whether the

particular actions that the foreign state performs (whatever the

motive behind them) are the fype of actions by which a private

party engages in ‘trade and traffic or commerce.”” /d. (quoting

Black’s Law Dictionary 270 (6th ed. 1990)). The Court

concluded in Weltover that Argentina engaged in “commercial

activity” within the meaning of the FSIA when it issued

commercially-available debt instruments, because the

instruments were “in almost all respects garden-variety debt

instruments: They may be held by private parties; they are

negotiable and may be traded on the international market

33a

(except in Argentina); and they promise a future stream of cash

income.” /d. at 615.

The Republic’s borrowing relationship with the IMF, and

the repayment obligations assumed thereunder, are not similarly

“commercial” for several reasons. First, when the Republic

borrows from the IMF, it “exercise[s] powers peculiar to

sovereigns.” Jd. at 614. The IMF is a unique cooperative

international institution established by treaty—the Bretton

Woods Agreement—following the end of the Second World

War. See Articles of Agreement of the IMF, 60 Stat. 1401,

T.LA.S. 1501 (Dec. 27, 1945). The Bretton Woods Agreement

has since been amended twice, most recently in 1976, see

Second Amendment of Articles of Agreement of the

International Monetary Fund, Apr. 30, 1976, 29 U.S.T. 2203,

T.LA.S. No. 8937 (“IMF Agreement”), available at

http://www. imf.org/external/pubs/ft/aa/aa.pdf.”” Only sovereign

nation states can become members of the IMF, see IMF

Agreement art. II, 29 U.S.T. at 2205-06, and only members can

avail themselves of IMF financing, see id. arts. [V-V, 29 U.S.T.

at 2208-20. The Republic is one of 184 sovercign nations that

are members of the IMF. See IMF, Members’ Quota and

Voting Power, http://www.imf.org/external

/np/sec/memdir/members.htm.

Second, the IMF’s borrowing program is part of a larger

regulatory enterprise intended to preserve stability in the

international monetary system and foster orderly economic

growth. See IMF Agreement art. [IV § 1, 29 U.S.T. at 2208

(describing requirement that each member “undertakes to

collaborate with the Fund and other members to assure orderly

exchange arrangements and to promote a stable system of

*° The United States Governor of the IMF was given statutory authority

to accept the amendments by the Bretton Woods Agreements Act of 1976,

Pub. L. No. 94-5 64, 90 Stat. 2660. See Trans World Airlines, Inc. v. Franklin

Mint Corp., 466 U.S. 243, 249-50 (1984) (discussing 1976 amendments to

the Bretton Woods Agreement).

4

34a

exchange rates”); id. § 3, 29 U.S.T. at 2209 (granting the IMF

the power “to oversee the international monctary system in

order to ensure its effective operation” by “exercis[ing] firm

surveillance over the exchange rate policies of members”). The

Republic’s borrowing relationship with the IMF is regulatory in

nature because the IMF’s provision of foreign currency or IMF-

specific assets in exchange for domestic currency, see post

(discussing unique nature of IMF loan arrangements), generally

requires regulatory action by the Republic. See Fact

Sheet—IMF Lending, http://www.imf.org/external

/np/exr/facts/howlend.htm (“An IMF loan is usually provided

under an ‘arrangement,’ which stipulates the specific policies

and measures a country has agreed to implement to resolve its

balance of payments problem.’’); see also Sandra Blanco &

Enrique Carrasco, The Functions of the IMF and the World

Bank, 9 Transnat’] L. & Contemp. Probs. 67, 75 (1999)

(describing IMF loans beyond a minimum size as entailing “the

explicit commitment by the member country te implement

remedial measures in return for IMF assistance . . . . Those

measures typically have related to the domestic money supply,

budget deficits, international reserves, external debt, exchange

rates, and interest rates.”). The Republic agreed to many

economic policy and regulatory reform measures in exchange

for the IMF loans that were ultimately repaid in 2005. See IMF

Independent Evaluation Office, The IMF and Argentina,

199]-—2001 17-38 (2004) (describing and evaluating IMF’s

efforts to influence Argentina’s exchange rate and fiscal

policies, and to encourage structural reforms, in exchange for

providing Argentina access to IMF capital); see also Weltover,

504 U.S. at 614 (concluding that “a foreign government’s

issuance of regulations limiting foreign currency exchange is a

sovereign activity, because such authoritative control of

commerce cannot be exercised by a private party’’).”'

*! We do not mean to imply that a loan becomes non-“commercial” any

time a sovereign debtor agrees to take regulatory actions in connection with

the receipt of the loan—-for example, in order to become more attractive to

35a

Third, the terms and conditions of the Republic’s borrowing

relationship with the IMF are not governed by a “garden-variety

debt instrument| },” id. at 615, but instead by the Republic’s

treaty obligations to the international organization, as

supplemented by the terms and conditions contained in

agreements associated with individual loans. If the Republic

failed to comply with these obligations, it would be in breach of

the IMF Agreement and as a result could lose its rights to use

IMF borrowing facilities, participate in IMF governance, and

ultimately, remain a member of the IMF. See IMF Agreement

art. V § 5, 29 U.S.T. at 2213; id. art. XXVI § 2, 29 U.S.T. at

2254. The vehicle for enforcing the Republic’s obligations to

the IMF is diplomatic and thus sovereign, not commercial. See

MCI Telecommunications Corp. v. Alhadhood, 82 F .3d 658, 663

(Sth Cir. 1996) (“We find that alleged promises made through

diplomatic channels do not constitute commercial activity.”).

Fourth, IMF loans are structured in a manner unique to the

international organization, and are not available in _ the

commercial market. Instead of obtaining currency in exchange

for debt instruments, IMF debtors purchase “Special Drawing

Rights” (“SDRs’”) or other currency from the IMF in exchange

for their own currency. See IMF Agreement art. V § 2(a), 29

U.S.T. at 2210 (stating that, with certain exceptions,

“transactions on the account of the Fund shall be limited to

transactions for the purpose of supplying a member, on the

initiative of such member, with special drawing nights or the

currencies of other members from the general resources of the

Fund... in exchange for the currency of the member desiring

potential lenders, or in order to satisfy terms and conditions of the loan. Cf

Weltover, 504 U.S. at 616 (rejecting argument that Argentina’s issuance of

bonds was non-commercial because the bonds were created “under a foreign

exchange program designed to address a domestic credit crisis”). We merely

point out that the relationship between the Republic and the IMF, a

multilateral organization, is non-commercial in a way that the Republic’s

relationship with commercial lenders cannot be because of the unique role

that the IMF plays in regulating the international monetary system by

intervening in the economics of its members.

36a

to make the purchase”); id. art. XVII §§ 2-3, 29 U.S.T. at 2239-

40 (discussing who may hold SDRs); see also Blanco &

Carrasco, ante, at 74 (“Although the IMF’s assistance is usually

referred to as ‘lending’ or ‘loans,’ a member country actually

‘purchases’ SDRs or other currencies from the Fund in

exchange for its own currency and agrees to ‘repurchase’ (buy

back) its own currency at a later date.””). Because a nation state’s

borrowing relationship with the IMF takes place outside of the

commercial marketplace, it cannot be considered “commercial!”

in nature. Compare Weltover, 504 U.S. at 617 (holding that

Argentina “participated in the bond market in the manner of a

private actor” when it issued bonds).

Even if we were to regard repayment of IMF debts as

“commercial activity” within the meaning of §§ 1610(a) and (qd),

we would be required to hold that, on the present record, the

FRBNY Funds are not available for attachment under § 1610

because the FRBNY Funds were never “used for commercial

activity,” and plaintiffs presented no evidence to the District

Court that the Republic or BCRA intended the FRBNY Funds

to be so designated. See 28 U.S.C. § 1610(a) (requiring

attachable property to be “used for a commercial activity”

(emphasis added)); id. § 1610(d) (same as to prejudgment

attachment). We need not define the precise contours of “used

for” within the contemplation of § 1610 because there is no

evidence that either actual use or designation for use occurred

here with respect to the FRBNY Funds. The mere fact that the

FRBNY Funds could have been used to repay the Republic’s

debts to the IMF after the Decrees does not, standing alone,

render those funds attachable. See Conn. Bank of Commerce v.

Republic of Congo, 309 F.3d 240, 254 (Sth Cir. 2002) (noting

that the phrase “used for” in § 1610(a) “means what it says:

property of a foreign sovereign . . . may be executed against

only if it is ‘used for’ a commercial activity”). The plain

language of the statute suggests that the standard is actual, not

hypothetical, use. See Walker Int'l Holdings Ltd. v. Republic of

Congo, 395 F.3d 229, 236 (Sth Cir. 2004) (property not “used

for” re1mbursement of legal expenses where agreements never

37a

moved beyond negotiation stage). Even if actual use were not

required, at least specific designation for such use would be

necessary. Cf. Af-Cap Inc. v. Republic of Congo, 383 F.3d 361,

370 (Sth Cir. 2004) (“Although . . . contemplated use is not

actual use, it is strongly suggestive that the [funds at issue] were

not cordoned off for use of [the state] in its sovereign capacity.”

(footnote omitted)).

Here, though, the Decrees made a// BCRA funds potentially

available for the repayment of the Republic’s debts, and never

specified which funds would be used to back the monetary base

and which funds would be designated Unrestricted Reserves.

Accordingly, plaintiffs cannot demonstrate on the basis of the

Decrees alone that the FRBNY Funds were intended to be “used

for” repaying the IMF.

D. The FRBNY Funds Are Immune _ From

Attachment Even Without Reference to Section

1611(b)(1)

The parties have offered a variety of interpretations of 28

U.S.C. § 1611(b)(1)’s provision granting immunity from

attachment for property “of a foreign central bank . . . held for

its Own account,” provided that the central bank’s immunity is

not “explicitly waived.” 28 U.S.C. § 1611(b)(1). But because

the FRBNY Funds have remained assets of BCRA that cannot

be used to satisfy a judgment against the Republic, we need not

decide which interpretation of § 1611(b)(1)’s “held for its own

account” language is correct in order to resolve this appeal.

Section 1611{b)(1) provides a central bank with special

protections from a judgment creditor who would otherwise be

entitled to attach the central bank's funds under 28 U.S.C.

§ 1610. See 28 U.S.C. § 1611(b)(1) (protecting from attachment

assets of a central bank “[nJotwithstanding the provisions of

section 1610”). We have already held that plaintiffs have not

established their right to attach the FRBNY Funds. Thus, even

assuming arguendo that the FRBNY Funds were not “held for

[BCRA’s] own account,” or that the Republic explicitly waived

38a

BCRA’s immunity from attachment,” plaintiffs would remain

unable to attach the FRBNY Funds.

Our interpretation of Section 1611(b){1) 1s in accord with

the district court’s opinion in LNC /nvestments, which found

persuasive the Nicaraguan central bank’s argument that its

assets could not be attached to satisfy a judgment against

Nicaragua even if Nicaragua waived the central bank’s

immunity from attachment:

* Without reaching these issues, we note that there is little support for

plaintiffs* arguments that the FRBNY Funds were no longer held for BCRA’s

“own account” upon issuance of the Decrees, or that BCRA’s immunity from

attachment was explicitly waived. With respect to § 1611(b)(1)’s “held for

its own account” language, central banks regularly execute transactions with

the IMF on behalf of their parent governments; IMF members are required

to designate a fiscal agent for financial transactions with the IMF, and the

vast majority of members designate their respective central banks. See IMF

Agreement art. V, § 1, 29 U.S.T. at 2210; IMF Treasurer's Department,

Pamphlet No. 45, Financial Organization and Operations of the IMF, at 84

(6th ed. 2001) (noting that “most members of the IMF have designated their

central bank as . . . the fiscal agency”). Thus, the legislative history of

Section 1611(b)(1), discussed ante, would support the conclusion that even

if BCRA had decided to use the FRBNY Funds to repay the IMF, the funds

would continuc to be held for BCRA’s “own account,” 28 U.S.C. § 1611(b),

because the funds would be “used or held in connection with central banking

activities,” FSIA House Report at 31, as reprinted in 1976 U.S.C.C.A.N. at

6630.

Turning to plaintiff's waiver arguments, although the Republic’s waiver

of immunity from attachment is worded broadly, it does not appear to clearly

and unambiguously waive BCRA’s immunity from attachment, as it must do

in order to be effective. See Libra Bank Ltd. v. Banco Nacional de Costa

Rica, 676 F.2d 47, 49 (2d Cir. 1982) (requiring explicit waiver of immunity

from prejudgment attachment under 28 U.S.C. § 1610(d) to be “clear and

unambiguous”). The Republic’s waiver of immunity mentions certain

reserves that are held by BCRA, but it makes no mention of BCRA itself, and

docs not state that it is waiving BCRA’s immunity from attachment. See 28

U.S.C. § 1611(b)(1) (waiver only effective with respect to a “bank or

authority” if it, “or its parent foreign government, has explicitly waived its

immunity from attachment in aid of execution” (emphasis added)).

39a

[a]ithough a parent government may waive the immunity of

its central bank pursuant to § 1611, nothing in the clear

language of § 1611 remotely suggests that such a waiver

automatically renders a central bank liable for a judgment

entered against its parent government. Section 1611 simply

demonstrates that the assets of a foreign bank can be

attached and executed to satisfy a judgment entered against

that foreign central bank when, and only when, the central

bank or its parent government has made an explicit waiver

of the bank’s immunity.

LNC Invs., Inc. v. Republic of Nicaragua, 115 F. Supp. 2d 358,

362-63 (S.D.N.Y. 2000) (alteration and emphasis in original),

aff'd sub nom. LNC Invs., Inc. v. Banco Central de Nicaragua,

228 F.3d 423 (2d Cir. 2000); see also Paul L. Lee, Central

Banks and Sovereign Immunity, 41 Colum. J. Transnat’! L. 327,

395 (2003) (“[W]hether or not the central bank has explicitly

waived immunity and whether or not the funds constitute funds

held for the central bank’s own account, property of the central

bank will be subject to attachment or execution only for claims

against the central bank and not for claims that pertain only to

the government or its other agencies and instrumentalities.”’).

E. The District Court Properly Denied EM’s

Discovery Request

We are mindful that a federal trial court has wide latitude

over the management of discovery, see Wills v. Amerada Hess

Corp., 379 F.3d 32, 41 (2d Cir. 2004), but in the FSIA context,

“discovery should be ordered circumspectly and only to verify

allegations of specific facts crucial to an immunity

determination.” First City, Texas-Houston, N.A. v. Rafidain

Bank, 150 F.3d 172, 176 (2d Cir. 1998) (quoting Arriba Ltd. v.

Petroleos Mexicanos, 962 F.2d 528, 534 (Sth Cir. 1992)

(internal quotation marks omitted)); cf Kelly v. Syria Shell

Petroleum Dev. B.V.,213 F.3d 841, 849 (Sth Cir. 2000) (“FSIA

immunity is immunity not only from liability, but also from the

costs, in time and expense, and other disruptions attendant to

litigation.”). Because the record makes clear that the FRBNY

40a

Funds were never an attachable asset of the Republic and that

§ 1610’s “commercial activity” exception to immunity from

attachment does not apply, EM was “not entitled to any other

discovery,” as it has failed to “‘show[ ] a reasonable basis for

assuming jurisdiction” over BCRA. Rafidain Bank, 150 F.3d at

177 (quoting Filus v. Lot ?olish Airlines, 907 F.2d 1328, 1332

(2d Cir. 1990)). There is no indication on this record that the

District Court improperly calibrated the “delicate balancing

‘between permitting discovery to sulstantiate exceptions to

statutory foreign sovereign immunity and protecting a

sovereign’s or sovereign azency’s legitimate claim to immunity

from discovery.” /d. at 176 (quoting Arriba, 962 F.2d at 534).

CONCLUSION

For the reasons stated above, plaintiffs’ motion for

certification of the appeal pursuant to 28 U.S.C. § 1292(b) is

granted. The order of the District Court vacating the Amended

Restraining Notices is affirmed.

4la

APPENDIX B

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

Plaintiff, : 03 Civ. 2507 (TPG)

-against-

THE REPUBLIC OF ARGENTINA, :

Defendant.

NML CAPITAL, LTD., ;

. Plaintiff, : 03 Civ. 8845 (TPG)

-against- :

THE REPUBLIC OF ARGENTINA, :

Defendant.

NML CAPITAL, LTD.,

Plaintiff, > 05 Civ. 2434 (TPG)

-against- ;

THE REPUBLIC OF ARGENTINA, :

Defendant.

ORDER VACATING ATTACHMENTS AND

RESTRAINING NOTICES, CERTIFYING THE

VACATUR ORDER FOR APPEAL AND STAYING

VACATUR PENDING APPEAL

WHEREAS, on December 30, 2005, this Court (Honorable

Barbara S. Jones, USDJ) issued Ex Parte Orders of Attachment

and Temporary Restraining Orders (“Attachments”) in the

actions brought by Plaintiff NML Capital, Ltd. (*-NML”), and

42a

Restraining Notices in the action brought by Plaintiff EM Ltd.

(“EML,” together with NML, the “Plaintiffs”), which were

served on that same day on the New York branches or offices of

eight garnishee banking and/or financial institutions (such New

York branches or offices hereinafter referred to as the

“Garnishees”): The Federal Reserve Bank of New York

(“FRBNY”); Deutsche Bank Trust Company; Credit Suisse

First Boston; Citibank, N.A.; American Express Bank, Ltd.;

Bank of New York; Banco de la Nacion Argentina; and

JPMorgan Chase & Co.; and

WHEREAS, the Attachments and Restraining Notices

relate in part to property in accounts of third-party Banco

Central de la Republica Argentina (the “Central Bank”) in New

York held by or located at the Garnishees; and

WHEREAS, Defendant The Republic of Argentina

(“Argentina’”’) and the Central Bank moved on January 6, 2006,

by order to show cause, to vacate the Attachments and

Restraining Notices; and |

WHEREAS, the Court held a conference on January 6,

2006; and

WHEREAS, the Parties executed and the Court entered a

Stipulation and Consent Order on January 9, 2006, modifying

the scope of the Attachments and Restraining Notices as

requested by the Court during the January 6, 2006 conference;

and

WHEREAS, the Plaintiffs moved on January 10, 2006, by

order to show cause, to confirm the Attachments and

Restraining Notices as modified by the January 9, 2006

Stipulation and Consent Order; and

WHEREAS, on January 12, 2006, the Court heard

argument on Plaintiffs’ motions to confirm the Attaches and

Restraining Notices as modified by the January 9, 2006

Stipulation and Consent Order, and the motions of Argentina

43a

and the Central Bank to vacate the Attachments and Restraining

Notices; and

WHEREAS, the Court ruled that the Attachments and

Restraining Notices, as modified by the January 9, 2006

Stipulation and Consent Order, should be vacated for the

reasons stated on the record at the January 12, 2006 hearing (the

“Vacatur Order’); and

WHEREAS, at the end of the January 12, 2006 hearing, the

Plaintiffs moved orally (1) to stay the effect of the Vacatur

Order pending an appeal from that Order, and (2) to certify the

Vacatur Order for appeal pursuant to 28 U.S.C. § 1292(b), both

of which motions the Court granted orally at the January 12,

2006 hearing; it is therefore and hereby

ORDERED, that the motions of Argentina and the Central

Bank to vacate the Attachments and Restraining Notices are

GRANTED; the motions of the Plaintiff to confirm the

Attachments and Restraining Notices as modified by the

January 9, 2006 Stipulation and Consent Order are DENIED;

and the Attachments and Restraining Notices as modified by the

January 9, 2006 Stipulation and Consent Order are VACATED;

and it is further

ORDERED, that the Plaintiffs’ motion to stay the effect of

the Vacatur Order pending an appeal of that Order is

GRANTED on condition that Plaintiffs seek an expedited

appeal on a schedule agreed to with Argentina and the Central

Bank; and the effect of the Vacatur Order is hereby STAYED

pending the final disposition of such appeal; and it is further

ORDERED, that the Plaintiffs’ motion to certify the

Vacatur Order for appeal pursuant to 28 U.S.C. § 1292(b) is

GRANTED, and in the event the Court of Appeals concludes

that the Vacatur Order is not otherwise appealable under 28

U.S.C. § 1291 or 28 U.S.C. § 1292(a), this Court finds that the

criteria for appeal pursuant to 28 U.S.C. § 1292(b) are met; and

it is further

44a

ORDERED, that the Clerk of Court shall file all of the

following papers under seal, with the corresponding docket

entries setting forth only the date of the filing and the statement

“Document Filed Under Seal”:

l.

All papers submitted in connection with EML’s Ex

Parte Motion for Court-Issued Restraining Notices

Directed to Assets Held for Argentina By Its Central

Bank;

3.{sic] All papers submitted in connection with NML’s Ex

10.

Parte Motion for an Order of Attachment;

All Restraining Notices entered by Judge Jones in

EML’s lawsuit on December 30, 2005;

All Ex Parte Orders of Attachment and Temporary

Restraining Orders entered by Judge Jones in NML’s

lawsuits on December 30, 2005;

All garnishee statements filed by the Garnishees in

connection with these actions between December 30,

2005 and the date of this Order, and all garnishee

statements filed by the Garnishees in connection with

these actions between the date of this Order and the

final disposition of any appeal of the Vacatur Order;

The transcript of the hearing held in these actions at

4:00 p.m. on January 6, 2006;

The Stipulation and Consent Order entered by this

Court on January 9, 2006;

All papers filed in connection with Argentina’s

Motion, by Order to Show Cause, to Vacate Ex Parte

Restraining Notices and Orders of Attachment;

All papers filed in connection with the Central Bank’s

Motion, by Order to Show Cause, to Vacate Ex Parte

Restraining Notices and Orders of Attachment;

em

13

14

Dated:

45a

All papers filed in connection with the Plaintiffs’

Motion to Confirm Attachment and Restraining Orders

and in Opposition to Motions of the Republic of

Argentina and Banco Central de la Republica

Argentina to Vacate Those Orders;

. All submissions by any third party in connection with

the Attachments and Restraining Notices;

. The transcript of the hearing held in these actions at

4:00 p.m. on January 12, 2006; and

. This Order.

January 24 , 2006

SO ORDERED,

/s/

Thomas P. Griesa

U.S.D.J.

No —

23

46a

APPENDIX C

6lctemla Argument

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

x

EM LTD.,

Plaintiff,

v. 03 CV 2507 (TPG)

THE REPUBLIC OF ARGENTINA,

Defendant.

------------------ X

NML CAPITAL, LTD.,

Plaintiff,

Vv. | 03 CV 8845 (TPG)

THE REPUBLIC OF ARGENTINA,

Defendant.

PRO es eT AO On oR Re AE x

NML CAPITAL, LTD.,

Plaintiff, CORRECTED

v. 05 CV 2434 (TPG)

THE REPUBLIC OF ARGENTINA,

Defendant.

— — wn nnn X

New York, N.Y.

January 12, 2006

4:00 p.m.

Before:

HON. THOMAS P. GRIESA,

District Judge

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

10

1]

[2

13

i4

15

16

17

18

19

20

21

22

23

24

47a

61ctemla Argument

APPEARANCES

DEBEVOISE & PLIMPTON

Attorneys for Plaintiff EM Ltd.

BY: DAVID W. RIVKIN

DENNIS HRANITZKY

VICKY FULOP

DECHERT

Attorneys for Plaintiff NML Capital, Ltd.

BY: ROBERT A. COHEN

CLEARY GOTTLIEB STEEN & HAMILTON, LLP

Attorneys for Defendant

BY: JONATHAN I. BLACKMAN

CARMINE D. BOCCUZZI, JR.

MICHAEL J. BYARS

SULLIVAN & CROMWELL, LLP

Attorneys for Banco Central de la Republica Argentina

BY: JOSEPH E. NEUHAUS

LAURENT STEPHAN WIESEL

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

48a

61ctemla Argument

1 (In open court)

2 THE COURT: What we have today is a motion by the

3 Republic of Argentina to vacate an order of attachment signed

4 by the partnering judge on December 30, that is Judge Jones,

an

5 order of attachment in favor of NLM Capital and restraining

6 notice which Judge Jones approved for service, and she

entered

7 that order in favor of EM Limited against the Republic of

8 Argentina. And there have been proceedings since then, and

9 they’re on the record and there’s no reason to take time to

10 summarize all that.

11 So we come right to the issue about -

12. MR. RIVKIN: Your Honor, I apologize for interrupting.

13 David Rivkin representing EM Limited.

14 You also have before you our motion to confirm the

15 attachment and restraining orders that was put onto the same

16 timetabie, so both motions are pending.

17 THE COURT: Exactly.

18 MR. RIVKIN: Since you were setting up the record I

19 wanted to make that clear.

20 THE COURT: Now look, extensive papers have been filed

21 and so it’s really up to the lawyers what you think ought to

be

22 discussed in the arguments, and I'll really leave that to you,

23 and if | feel that it’s redundant with what | have read or

24 considered, I'll step in, but who wants to Icad off?

25 MR. RIVKIN: Since it’s our attachment.

SOUTHERN DISTRICT REPORTERS, P.C.

212) 805-0300

—-OoerynA NbBWN —

49a

61ctemla Argument

MR. NEUHAUS: It’s our motion.

THE COURT: We have two motions. Let’s hear the

affirmative in favor of the attachment.

MR. RIVKIN: Thank you, your Honor. I'll speak from

here if that’s okay.

THE COURT: As long as you speak loudly.

MR. RIVKIN: I think you can hear me. I have done it

before. If you need me to speak up, let me know.

Your Honor, I appreciate that you read the papers and

that they are voluminous and they go through our arguments

in

some detail, so I will not repeat everything that is there. We

have been before you on other issues in this case and you’re

well aware of the importance of this particular proceeding.

Your Honor, there is no question here that if what you

had was a regular deadbeat debtor who owed many creditors

money

and that creditor gave instructions to a bank to pay off — if

that debtor gave instructions to a bank to pay off one of its

creditors in a few days and we served, representing another

creditor, papers on that bank attaching the property of that

deadbeat debtor, there is no question that an attachment in

those circumstances would be a valid, effective attachment,

and

that the money to be paid to another creditor would instead

be

the proper subject of the attachment and therefore properly

payable to the creditors who served the attachment. That is

straightforward Hornbook Law under New York Law.

There’s no

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

OomenrAAUNBWN

10

1]

12

13

14

15

16

17

18

19

20

21

22

23

24

25

50a

6lctemla Argument

question about that. And I don’t think Argentina or the

central bank can raise any question about that.

All they can do and have donc in their papers is say:

Wait, this is different, because the deadbeat debtor is

Argentina, and the bank that they happen to be using to make

this payment is the central bank. And your Honor, for the

reasons we have briefed to you, those facts don’t make a

difference. This payment was not —

THE COURT: Well, in all fairness, they’re not quite

as simplistic.

MR. RIVKIN: Well, they are. They say — the only

difference between the situation I described and this one is

that they say the money was paid pursuant to an ordinary

central bank activity and that is covered by immunity under

the

Foreign Sovereign Immunity Act.

And your Honor, there is a very simple answer to that.

And that is if this were an ordinary central bank activity and

a routine activity that is covered by that immunity, then why

did they need an executive decree in order to implement that?

If this were an ordinary activity, they could have

gone about and paid. But they didn’t, your Honor, they

needed

an executive decree by the president, a stroke of the pen.

You

have heard, your Honor, for years from Mr. Blackman about

how .

poor they are, about how they can’t pay off all their debts.

But Argentina chose in December to pay off one very large

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

CONN N WN —

10

1]

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Sla

61 ctemla Argument

creditor, the IMF, and they chose to pay them more than $9

billion, and they did that with the stroke of a pen. The

president issued a decree, signed it, and lo and behold, the

funds were there at the central bank to be paid to the IMF.

And that stroke of the pen showed both that Argentina has the

money to pay other creditors —

THE COURT: Let’s focus on the specific language of

the decree, and that is quoted — just refresh my memory, Is it

in your memorandum?

MR. RIVKIN: It is Attachment Number | of the

declaration of Mr. Hranitzky.

THE COURT: Is it quoted in your memorandum?

MR. RIVKIN: Yes. I tell you the best description of

it is actually in the brief by the central bank where they say

that the executive decree modified the convertibility law to

allow the application

THE COURT: Where are you reading from”?

MR. RIVKIN: [am reading from their brief at page

six, their first brief. The decree itself is Exhibit | to the

original Hranitzky declaration as well.

THE COURT: Where is the language? What was the

status before the decree? And I’m talking about property, but

whose property was the money in the central bank? Whose

property was it?

Because I mean obviously there are foreign sovereign

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

52a

61 ctemla Argument

1 immunity questions, but you don’t even get to them until you

2 -get past property questions. And the only thing that can be

3 attached or restrained is property or assets of the Republic,

4 Republic is the debtor. So what was the status before the

5 decree?

6 MR. RIVKIN: Your Honor, the status, the money held by

7 the central bank before the decree was either the central

8 bank’s or Argentina’s. But you don’t need to decide which,

9 we -

10 THE COURT: Yes, I do need to decide, I want to know

11 what it was before.

12. MR. RIVKIN: We believe it was Argentina’s. We

13 believe —

14 THE COURT: You think it was Argentina’s all along.

15 MR. RIVKIN: We believe it was Argentina’s all along.

16 THE COURT: Then the decree didn’t make a change.

17 MR. RIVKIN: It made a critical change. That is why I

18 say you don’t have to decide what the status —

19 THE COURT: Please don’t tell me what I have to

20 decide. I want to have that firmly in mind to see whether

21 there was a change by the decree. Because you are relying

on

22 that a lot. The decree didn’t change anything. That is a very

23 important circumstance.

24 MR. RIVKIN: I understand. Your Honor, the moncy held

25 by the central bank before the decree was used to support its

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

53a

61ctemla Argument

monetary functions.

THE COURT: Whose property was it?

MR. RIVKIN: The money - it was the central bank’s

property before the decree, subject to arguments which we

think

are legitimate arguments of ours that the central bank is the

alter ego of the government. But that would still make it the {

central bank’s property.

THE COURT: The central bank’s property before the

decree. What is the language in the decree that changed that,

10 if it did?

11 MR. RIVKIN: What the decree did — I’m reading from

12 page four of the bank’s brief on the bottom paragraph.

13) THE COURT: What article of the decree? 4

14 MR. RIVKIN: Well, the decree is very short. It’s the

15 article — it’s the paragraph on the first page of the decree,

16 the second paragraph from the bottom, your Honor, where it

17 says: It is deemed appropriate to provide that the reserves in

18 excess of the percentage that may be allocated for payment of

19 obligations undertaken with international monctary

rR WN —

Coens nmN

authorities

20 as long as those transactions result in a neutral monetary

21 effect.

22 Then the decree says that — sorry, Article I of the

23 decree on page two, by the president, with his stroke of the

24 pen, says changes the convertibility law by making the

reserves

25 of the central bank up to 100 percent of the monetary base,

and

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

54a

61ctemla Argument

| the assets that constitute the reserves, in addition to those,

2 that amount needed to support the monetary base, became the

3 property of Argentina so that Argentina could pay.

4 THE COURT: Where are you reading now?

5 MR. RIVKIN: I’m reading that from the bottom of

6 Article VI on the second page of the decree and the top.

7 THE COURT: Where does it say this becomes the

8 property of the Republic?

9 MR.RIVKIN: It says as long as the monetary effect is

10 neutral -- I’m reading at the top of page three — as long as

11 the monctary effect is neutral, the unrestricted reserves,

12 meaning the reserves that are not held for the monetary

13 function, may be used for payment of obligations undertaken

14 with international monetary authorities.

15 Your Honor, those obligations undertaken with

16 international monetary authorities are the government’s

17 obligations, they are not the central bank’s obligations. So

18 what the decree said, and now I’m quoting, because it’s a

19 simple way of describing it, but it’s not my words, it’s

20 Mr. Neuhaus’s words: What the decree did was modify the

21 convertibility law to allow the application of the bank’s

22 reserves in excess of the monctary base to pay debts owed to

23 international financial bodies such as the IMF, as long as the

24 monetary payment of such payment was ncutral.

25 So what the decree did is took that excess and

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

55a

10

61ctemla Argument

Argentina said: That’s ours, that’s not the central bank’s.

And they used about $8 billion of that to pay off the IMF, I

might add after our attachment served on the central bank, but

on the Fed and garnishcees, and they borrowed the extra billion

dollars from Hugo Chavez, but they paid off the $9 billion by

appropriating that money.

Now they don’t dispute that’s what happened. As I

said, that’s what they described here. What they then try to

9 say is: Well, there was a loan, it was actually a loan to the

10 government of that $8 billion that was taken out of the central

11 bank’s reserves. Well, if it’s a loan, your Honor, it’s still

12 Argentina’s money if it’s a loan to the government.

13 So one way or the other the Argentina — all the money

14 that the central bank held in excess of its monetary

15 obligations became the property of the government of

Argentina,

16 and we attached that validly on December 30th, and your

Honor

17 we attached it then --

18 THE COURT: Now look, I want to be - you’re on the

19 decree, it’s page one, that paragraph beginning consequently.

20 MR. RIVKIN: Right, and it says then —

21 THE COURT: Just a minute.

22 MR. RIVKIN: That’s the whereas clause, right.

23 Then Article I of the decree has in its paragraphs

24 first says that the reserves of the bank shall be what it needs

25 to support the monetary base, and it defines that — it says

CnynAUNRWN —

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

56a

1]

61ctemla Argument

| that in Article IV and it defines that in Article VI. And then

2 the last paragraph of Article I, which is on the top of page

3 three, appropriates the unrestricted reserves, the reserves

4 they don’t need for the monetary base, to pay obligations

5 undertaken with international monetary authorities. And those

6 obligations are only the government’s obligations.

7 Mr. Neuhaus has admitted that the debt that was paid

8 off was Argentina’s debt against the IMF. That’s also in their

9 papers. They say in their brief: These borrowings are

10 ultimately the Republic’s vis-a-vis the IMF. So they admit

the

[1 purpose of the decree was to makc it possible for them to pay

12 the debt to IMF from the reserves.

13 And in light of these admissions, your Honor, the

14 argument that the funds were somchow held by the central

bank

15 for its own account defies logic. And as I said —

16 THE COURT: Wait a minute. The new Article V says

17 reserves in excess of the percentage established in Article IV,

18 that is to cover the monetary base, reserves in excess of the

19 percentage established in Article IV shall be known as

20 unrestricted reserves. And then in Article VI it says the .

21 assets that constitute the reserves mentioned in the preceding

22 articles are not subject to attachment. What is meant by that?

23. MR. RIVKIN: It’s a rather self-serving statement by

24 the government that it docsn’t want the unrestricted reserves,

25 which is defined in Article V, to be attached. But the rest of

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

57a

12

6lctemla Argument

Article VI makes clear that can’t be, they can’t simply declare

it not subject to attachment.

THE COURT: When it says the assets that constitute

the reserves mentioned in the preceding article, I guess it’s

referring to the unrestricted reserves.

MR. RIVKIN: Well, it probably refers to both reserves

because it talks about the preceding articles. It probably

talks about both the restricted reserves described in Article

IV and the unrestricted reserves described in Article V. But

10 you look to US law, not Argentinian law about whether it is

11 subject to attachment.

12 THE COURT: Then the concluding part of that article

13 is what you are mainly referring to, and it says: As long as

14 the monetary effect is neutral, the unrestricted reserves may

15 be used for payment of obligations undertaken with

16 international monetary authorities.

17 What’s meant by as long as the monetary effect is

18 neutral?

19 MR. RIVKIN: Means they have to protect the

20 monetary — they have to protect the value of the currency

with

21 the restricted reserves, the amount that is necessary with the

22 restricted reserves, but the other reserves that they don’t

23 need to support the pesos.

24 THE COURT: Is that what is meant by monetary effect,

25 do you think?

OMmAARDUNHWN —

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

10

|

12

13

14

15

16

17

18

19

20

21

22

23

24

25

58a

13

61ctemla Argument

MR. RIVKIN: Yes, your Honor. They clearly divided

reserves into two pieces; one was for the ordinary central

banking function of protecting the monetary base, and the

other

was to pay off the government’s debts. And that’s not an

ordinary central bank function. Surely they may sometimes

act

as a paying agent, but if they are acting as a paying agent

it’s the government’s money they are paying. And the

government here must take this unrestricted portion of the

reserves and then they issued payment instructions to the

central bank, just like any other debtor, and said pay off this

creditor. This creditor happens to be a very big one, the IMF

and they paid them $9 billion.

THE COURT: Billion.

MR. RIVKIN: Billion. They could have, by the same

stroke of the pen, said pay off the other creditors, like those

of us that are at the table, but they chose not to do that.

THE COURT: And there was a second decree; right?

MR. RIVKIN: Yes, there was a second decree the same

day saying effectively the same thing.

Sorry, the second decree said pay the IMF, that’s Tab

2 behind —

THE COURT: Decree 16\01\2005?

MR. RIVKIN: Yes.

THE COURT: What docs that say?

MR. RIVKIN: It says, if you look at the third

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

59a

14

, 61ctemla Argument

paragraph from the end — actually if you look at the fourth

paragraph from the end, again it says what we were talking

about a minute ago, use of part of the reserves to address

commitments to international monetary authorities, those are

only the government’s obligations, doesn’t affect the

maintenance of an appropriate level of liquidity. Then it says

given these circumstances, it is necessary and appropriate to

order the implementation of the mechanisms for payment of

the

9 debt to IMF. So those are the payment instructions from the

10 government to the central bank.

11 And then the next to last paragraph says the minister

12 of economy is instructed to take the pertinent steps. So

13 that’s the government making the payment through the

central

14 bank, again, just like any other deadbeat debtor, as I ;

15 described.

16 And if you look at the first paragraph under the

17 whereas at the top of this second decree, again it simply — it

18 provides that, in accordance with the first decree, the

19 reserves of the central bank that are in excess of the monetary

20 base, in other words the unrestricted reserves, may be used to

21 pay obligations, the government’s obligations, not the bank’s,

22 undertaken with international monetary authoritics.

23 So they divided the pic in half, they appropriated the

24 half or the two-thirds, one-third, but they took the picce of

25 the pie that they wanted to pay off the IMF because they

made a

COnNUN Bh WN =

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

60a

15

61ctemla Argument

1 decision that’s what they wanted to do by the year end and

they

used this money to do it. And payment of — so there’s no

question that this money that was sct up at the central bank as

unrestricted reserves, became, if it wasn’t already, the

property of Argentina.

And it’s also clear, your Honor, that payment of

sovereign debt is a textbook example of commercial activity.

THE COURT: Why is that a textbook example?

MR. RIVKIN: Because the Supreme Court said so in the

10 Weltover case.

11 THE COURT: Really?

12 MR. RIVKIN: Yes, it was Argentina v Weltover. And

13 that’s why we’re here, your Honor.

14 THE COURT: It says that if it was doing this that

15 private people would do —

16 MR. RIVKIN: It says it’s the same character, your

17 Honor, is the word that it used. That’s the operative word.

18 And what they are doing, they borrow and they pay back.

That’s

19 what a private person does and that’s what a government can

do.

20 But that payment of debt is commercial activity. You have

21 already ruled that effectively by granting our judgment

because

22 the commercial ~ under the commercial activity exception as

23 well.

24 THE COURT: What do you mean I ruled that? I haven’t

25 ruled any such thing.

OWMmrANHDU Hh WwW NO

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

6la

16

61ctemla Argument

MR. RIVKIN: There’s no difference, your Honor,

between the debt which they, Argentina, owed to us and the

debt

which Argentina owed to the IMF. In both case they

borrowed

money, which is the same that a private person can do, and

they

5 have to repay the money. That is of the same character and

6 that’s the test under the Weltover case, and the legislative

7 history makes that clear.

8

9

l

ww No

>

And if Congress They argue that somehow payment to

an international monetary authority is different, but Section

0 1611 of the FSIA makes that clear, because if Congress

intended

11 to immunize payments to multilaterals like the IMF, they

would

12 have done so in that section, because that section immunizes

13 payments from multilaterals to the United States but doesn’t

14 immunize payments in the other direction. Clearly Congress

15 also viewed payment by the government to the IMF as being

an

16 ordinary commercial activity.

17 So your Honor, for these reasons we think we have

18 properly attached funds which are the government of

19 Argentina’s. We don’t think any basis for immunity applies

to

20 the funds we have attached, and we would ask you to confirm

the

21 attachment in place.

22 There is one additional argument, your Honor, which is

23 that we believe that Argentina has waived any immunity over

24 those funds, and Mr. Cohen can address that to your Honor.

25 But then finally let me say that we pointed out in our

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

62a

17

6lctemla Argument

brief that, should you feel that there are — that you can’t

confirm it now, perhaps because there are some factual issues

about some of the statements made by Argentina, then we

should

4 be entitled to discovery to learn more about the effect of the

5 decree, the central bank functions, what Argentina plans to do

6 with additional freely available reserves as they come up, the

-

8

9

WN —

purposes of the funds.

There are a lot of issues, your Honor. They have made

certain factual statements in their declarations with which we

10 completely disagree, and there is no urgency to lift this at

11 this point in time because of the stipulation which is entered

12 into which allows them to continue what they ordinarily need

to

13 do. If you would like to later, we can talk about the specific

14 discovery issues, but we don’t think discovery is needed in

15 order to confirm the attachments at this time.

16 THE COURT: Look, the $105 million in the Federal

17 Reserve Bank here deposited by the central bank was not

18 actually used to pay the IMF; right?

19 MR. RIVKIN: That is what they say. That is their

20 assertion.

21 THE COURT: I am going to assume that. I mean it’s

22 there and —

23. MR. RIVKIN: But we don’t know what else might have

24 been there on December 30th. But assume that is true for

now,

25 that’s right.

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

63a

18

61ctemla Argument

1 THE COURT: Let’s assume it.

2 MR. RIVKIN: That’s fine.

3 THE COURT: Now! would think that your argument, if

4 that assumption is correct, your argument would have to be

5 based on the first decree, because the second decree would not

6 really particularly come into play, but I assume you’re really

7 relying on the first decree. And you certainly emphasize that

8 this afternoon; right?

9 MR. RIVKIN: Yes, your Honor. I think the framework,

10 the way I would put it is that the first decree made clear that

1] the unrestricted reserves, the reserves in excess of the

12 monetary amount, were the government’s.

13 What the second decree showed, I’m not relying on it

14 for that purpose, but what the second decree showed is that

15 first decree ts true, because they were able in the second

16 decree to say: Now that money is ours and you pay it. And

the

17 fact that they didn’t need all of it doesn’t mean the rest of

18 the money isn’t theirs, it only means that they only instructed

19 the central bank to pay that amount of the unrestricted

20 reserves, but the rest of it has still been defined, what is

21 left behind, including this $105 million, is still in the

22 unrestricted reserves pool, which is Argentina’s, and they —

23 THE COURT: How do we know that the 105 million is in

24 the unrestricted part of the reserves?

25 MR. RIVKIN: Well, the decree didn’t discriminate it,

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

vi &

a

oe

64a

19

61ctemla Argument

it simply created different accounts, but there’s no — there

was no label attached to one dollar or another. In any event,

money is fungible, your Honor, and in fact they are not

arguing — they have not argued that this $100 million is

necessary for the monetary function of the government.

THE COURT: Well, I’m a little puzzled how that would

work, because there’s a lot of bond indebtedness, and I think

8 there are billions of dollars’ worth of bonds represented by

9 the lawsuit. The lawsuit is before me; isn’t that right?

10 MR. RIVKIN: That’s right. Our judgment alone is

11 about $750 million, your Honor.

12 THE COURT: Let’s take a hypothetical case. Let’s

13 suppose the amount of the — what do they call it, the

14 unrestricted reserves?

iS MR. RIVKIN: Yes, your Honor.

16 THE COURT: Let’s suppose that it is $15 billion, and

17 let’s suppose that — Ict’s put the IMF out of the picture, and

18 let’s suppose that — my figures may be totally cockeyed, I'm

19 talking hypothetically.

20 MR. RIVKIN: I understand.

21 THE COURT: Let’s suppose there is private bond

22 indebtedness out there that hasn’t been taken care of by the

23 settlement of say $20 billion.

24 MR.RIVKIN: Yes, your Honor.

25 THE COURT: Unrestricted 15 billion, bond indebtedness

SHAN WN —

SOUTHERN DISTRICT REPORTERS, P.C

(212) 805-0300

65a

20

61ctemla Argument

1 20 billion, and let’s suppose that all those — there’s

2 judgments entered totaling 20 billion.

3. Now the judgment creditors start in, and my hypothetical

4 has to assume that they can go around and attach or execute

5 anywhere they can find the money; Bank of England, French

6 banks, Italian banks.

7 Now this may be unrealistic, but I still have a point

8 that I would like to ask you about. They go to somebody with

a

9 judgment for a billion dollars, comes to the Federal Reserve

10 Bank in New York and said well, there’s this decree, and

these

11 unrestricted funds belong to the Republic and we have a

12 judgment against the Republic and we are serving a writ of

13 execution for a billion dollars. And the Federal Reserve

Bank

14 says we don’t know whether it’s restricted or unrestricted, we

15 haven’t been told.

16 And so the judgment creditor says well, look, we know

17 that the amount of the unrestricted is 15 billion, and so we’re

18 only taking one billion here, so freeze it. And then somebody

19 else goes to the Bank of England, and let’s suppose under the

20 law they could execute, and they have got a judgment for 3

21 billion. They go to the bank of England, and the Bank of

22 England they say we’re attaching unrestricted reserves, and

the

23 Bank of England says we don’t know whether they’re

restricted

24 or unrestricted. And the judgment creditor says well — and

25 the Bank of England says what’s going on all over the world.

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

66a

21

61 ctemla Argument

And the guy says I don’t know, we haven’t been told, they’re

an

ex-parte, people can get ex-parte attachments, there isn’t a

schedule that is‘:posted every day. So they say well, it’s only

3 billion and there’s 15 billion of unrestricted so we have a

right to attach, and let’s suppose some English judge agrees,

so attachment of a total of 4 billion.

But it seems to me that without some designation, this

could be — and I don’t think my hypothet is too wild — it

seems to me that if we can simply go in, if some judgment

creditor could go in to seize assets and those assets are not

clearly designated as property of the Republic, what’s the

basis for seizing the assets?

And if we say we don’t care about that, then it seems

to me potentially absolute chaos.

MR. RIVKIN: Your Honor, let me answer that question

in a number of different ways. First of all, while the central

bank and the government have each made various untested

declarations to you in this particular proceeding, in none of

those declarations did Argentina argue that the moncy held at

the Fed is part of the so-called restricted reserves which are

necessary in order to protect the value of the currency.

THE COURT: I don’t read that in the papers as

—e one thing or the other. What’s the central bank

say?

MR. RIVKIN: They don’t say that, your Honor, and |

think -

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

67a

22

6lctemla Argument

1 ©THE COURT: Maybe I’m making up a problem that

doesn’t

2 exist. If so, I’m very sorry.

3 MR. RIVKIN: I believe, your Honor, it’s not a problem

4 that exists. To make it clear, the restricted reserves are the

5 amount they need to match the amount of pesos in circulation.

6 That is the monetary function of the central bank. That’s an

7 ordinary central bank function. That’s a calculable amount.

8 You can calculate that amount.

9 Everything in excess of the value of those pesos in

10 circulation was defined by the decree we were looking at as

the

11 unrestricted reserves. And nowhere in Argentina’s or the

12 central bank’s papers to you did they arguc that this $100

13 million of the Fed is necessary to be part of the unrestricted

14 reserves. So that’s answer number one.

15 THE COURT: It may be so, but what they’re arguing is

16 that the reserves never became the property of the Republic.

17 And it seems to me, although my hypothet may be a little far

18 afield of what people have talked about, in my own mind —

and

19 maybe it’s misguided, but in my own mind it scems to me to

20 it causes me some considerable caution in saying that there is

21 something called the unrestricted reserves which has

suddenly

22 changed hands.

23 MR.RIVKIN: Your Honor, Ict me —

24 THE COURT: As far as property is concerned.

25 MR.RIVKIN: I understand. Let me make two points in

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

25

68a

23

6lctemla Argument

response which I think should answer your concern.

In addition to the fact that this is not a ~ this was

not part of their declaration, so I think they didn’t say it,

but the fact is, look at the chronology of the events. On

December 15 the government said: Those unrestricted

reserves,

everything in excess of the amount of pesos in circulation,

those unrestricted reserves are ours. That was true on

December 15. That was true at the central bank where —

THE COURT: The date of the first one?

MR. RIVKIN: Yes. That was true at central bank’s

funds wherever they were held anywhere in the world.

On December 30 we received an — we obtained an order

of attachment and served it on the Fed. On December 30 -

there’s no question that if they had chosen to pay the IMF on

December 29, they could have paid the IMF out of this $105

million that was at the Fed. They could have. They hadn’t.

On December 30 we put an order of attachment on.

THE COURT: When did they pay the IMF?

MR. RIVKIN: They paid the IMF on January 3rd out of

other funds. That’s why I know they made a big point about

how

we didn’t wait to see you. You weren’t around that week, we

knew they would make the payment any day. We had to

serve the

order of attachment before they made the payment. Once we

served the order of attachment, those funds became ours.

The other way you could be become comfortable, if

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

69a

24

61ctemla Argument

those arguments don’t make you feel comfortable, is that the

amount of the central bank’s reserves, total reserves,

restricted and unrestricted, is a matter that could be subject

to discovery along with the amount that is restricted, because

the value of pesos in circulation are certainly clear. And so

it would be very easy to make you comfortable that by

continuing the attachment and then agreeing for us to execute

on the attachment, it’s not going to dent the amount of the

restricted reserves.

0 THE COURT: Look, aside from some supertechnical

1 question of property law, which I think frankly a person

could

argue about either way, your argument is certainly a perfectly

good argument. If somebody becomes entitled to direct the

usage of money, that’s a pretty good indication of property

right. It’s not a bad argument at all.

But it’s not a bad argument for the central bank and

the Republic to say that merely because of those decrees the

property situation, the title situation didn’t change, it’s

simply the Republic has always had the right to issue certain

directions to the central bank and so nothing changed.

In other words, a technical property argument it seems

to me both sides have things that you can say. But the one

thing that it seems to me, getting past that, is from a

practical standpoint you have got central bank functions, and

the central bank functions, which are actually pretty well

—eK OOtIA UN RWN —

ne el ell eel

CSCO OND PWN

Nm Nw hb

WN —

Nm N

On

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

HNHOnhwnd —

20

70a

25

6lctemla Argument

listed in an affidavit from the Federal Reserve Bank just

saying what are typical central bank functions, and the bank’s

own papers, those functions, with respect to the money on

deposit at the Federal Reserve, were going on, as far as I

know, prior to the time of the first decree, after the first

decree, after the payment to the IMF, and the whole exercise

of

working out this stipulation was undertaken because of the

necessity to keep the central bank functions going.

So to me that is pretty obvious, plain-in-the-face

10 practical fact, and | think that that is of considerable

11 importance, despite the fact that two reasonable people could

come to completely different conclusions if you’re just

looking

to some question of property or title. And I find it very

difficult to get around the fact that the central bank

functions was going on. And what do you say about that?

16 MR. RIVKIN: Your Honor, I have a few responses to

that. First of all, if this was an ordinary central bank

function, then they wouldn’t have needed the first decrec.

Why

did they necd to appropriate that amount of unrestricted

reserves and say: Central Bank, you may have been holding

that

moncy and you may have thought it was yours, but now it’s

ours

and we arc going to instruct you to pay the IMF with that

amount.

THE COURT: It may not really mean it is ours, ina

sense, it may mean - well, it means what it means. It mcans

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

Tla

26

6lctemla Argument

that, to me, one very good interpretation is that they’re

saying that, among the other central bank functions that can be

performed, is payment to international lending agencies, but it

doesn’t say that the whole central bank function is to be set

aside.

MR. RIVKIN: No, we’re not saying the central bank

function should be set aside, we’re saying that they needed

that first decree because the money and the function wasn’t

there otherwise. And your Honor, | think Argentina would be

0 very hard pressed to say that nothing changed by the decree.

1 Because if they were to say that, they would have to admit

that

they had the right to make payments to creditors, whether to

the IMF or anybody else, out of the central bank money

before

the decree. And if they were to tell you that today, your

Honor, that would be in direct contradiction to what they told

you last February and March when we raised an issue about

the

central bank clause.

THE COURT: I agree with you, but the question is:

What changed and how much of a change was there? That’s

the

issue before me.

MR. RIVKIN: Clearly they did not believe — if they

belicved that the moncy that the central bank was holding in

the United States before the decree was Argentina’s, then

they

would have been in violation of your order not to move any

of

Argentina’s funds out of the country by moving $2 billion

out

—mem OOnnIA MN hwWwWN —

— — et oe

Nn W hd

—

‘Oo co ~)

tN

So

NNN

Wh —

bo

a

tN

oA)

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

72a

27

61 ctemla Argument

of the country just since last spring. Those are admitted

facts by Argentina. So if Argentina believed that the money

held by the central bank was its own, and therefore —

THE COURT: That doesn’t help.

MR. RIVKIN: It goes to the —

THE COURT: They don’t contend the mortfey has always

belonged to the Republic of Argentina, they have done exactly

the opposite.

MR. RIVKIN: That’s right, it was changed by the

10 decree. So what the decree did was appropriate that central

11 bank moncy to Argentina, and that’s why we had a right to

12 attach it.

13. THE COURT: Listen, I think I have got your argument.

14 Anybody else at your table want to add anything? Then

15 we'll go to the defense.

16 MR. RIVKIN: Thank you, your Honor.

17 THE COURT: Thank you.

18 MR.COHEN: Your Honor, Robert Cohen for NML.

19 [would like to take a minute to show your Honor why |

20 think there is in fact a waiver, a specific waiver in the

21 governing documents as to the very assets we’re talking

about

22 here. And I should start with the Foreign Sovereignty

23 Immunities Act.

24 In Section 1611 of the Foreign Sovereign Immunities

25 Act it’s provided that the property of a central bank or

Oo eA ANANARWDN —

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

73a

28

61ctemla Argument

1 monetary authority held for its own account 1s immune unless

2 such bank or authority or its parent foreign government has

3 explicitly waived its immunity.

4 Now! would like to take your Honor to the place in

5 the documents where that immunity is waived.

6 THE COURT: Where are you reading from?

7 | MR. COHEN: I was reading from Section 1611 of the

8 Foreign Sovereign Immunities Act at Section (b)(1).

9 THE COURT: Ihave it. And I just somehow my eye

10 didn’t get to the right place.

11 MR. COHEN: It’s Section (b)(1), your Honor.

12 THE COURT: Okay. And just go over that again.

13. MR. COHEN: It says that notwithstanding the

14 limitations in Section 1610 which immunizes certain assets,

it

15 says in (b)(1) that the central bank assets in effect —

16 THE COURT: What’s the exact language?

17 MR. COHEN: The property — I’m reading from

18 1611(b)(1), the property is that of a foreign central bank.

19 THE COURT: Well, the property of a foreign state

20 shall be immune from attachment and from exccution if; am |

21 right?

22 MR. COHEN: That’s correct. If the property is of a

23 foreign central bank or monctary authority held for its own

24 account, unicss such bank or authority or its parent forcign

25 government has explicitly waived its immunity from

attachment

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

= 253

Pe

ta

i

ag

OmOnAA MN PWN —

10

—

ae

12

13

14

15

16

17

18

19

20

21

22

23

24

25

74a

29

6lctemla Argument

or from execution. So that says if in fact the parent

government has waived it, it would be available for attachment

and execution.

And your Honor, in my declaration in support of the

ex-parte motion, Exhibit 19 is the declaration of Paul Singer

from my client, and attached to that as Exhibit A is the fiscal

agency agreement that governs our bonds. So that’s

Exhibit 19A, your Honor, and it’s captioned fiscal agency

agreement.

THE COURT: Okay.

MR. COHEN: And if you turn to the back, your Honor,

there’s a page in manuscript 52, it’s also A18 in typescript.

THE COURT: Okay.

MR. COHEN: And the second paragraph begins: To the

extent that the Republic or any of its revenues, assets or

property shall be entitled, then talks about immunity, if you

skip down to the underlined phrase down there, your Honor,

it

says: Immunity. The Republic has irrevocably agreed not to

claim and has irrevocably waived such immunity to the

fullest

extent permitted by the laws of such jurisdiction and consents

generally for the purposes of the Foreign Sovereign

Immunities

Act to the giving of any relief or the issuance in any process

in any proceeding or related judgment. And here’s the key

phrase, your Honor, provided that such waiver, that’s the

waiver of the Republic’s assets, immunity of the Republic’s

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

75a

30

61ctemla Argument

assets, shall not be effective, one, with respect to the

assets, and those are the waived asscts, the government’s

assets, which constitute freely available reserves pursuant to

Article V1 of the convertibility law.

Now we have talked about freely available reserves,

your Honor. That phrase, as used in this document, relates to

the reserves necessary to support the monetary base. And

what

8 this is saying is there is no waiver with respect to reserves

9 that are supporting the monctary base, but there is a waiver

10 with respect to the other reserves that are reflected on the

11 balance sheet and the accounting statement of Banco Central.

12 That’s the central bank.

13 What this says, your Honor, is that they have waived

14 immunity with respect to the assets of the central bank other

15 than those necessary to support the monetary base. And

16 Mr. Rivkin has showed you that by decree they have freed up

17 assets not necessary for use in the monetary base. So we

18 believe there is a waiver that is effective and that our

19 attachments reach those assets.

20 THE COURT: Well, go back to the let’s look at that

21 long paragraph just a little more. Can you paraphrase the

very —

22 beginning part? I'll have to confess to you | haven’t focused

23 so much on this waiver point. | apologize for that, but that’s

24 the fact of life, so help me out.

25. MR. COHEN: I'll try, and I note very similar language

SAU DBWN —

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

s™

¢

76a

31

61ctemla Argument

| appears in the terms and conditions of the bonds.

2 THE COURT: Why don’t you paraphrase that first part

3 of that long paragraph.

4 MR.COHEN: What it says is that Argentina, to the

5 extent it is entitled to immunities in any jurisdiction, in

6 which a specified court, and | don’t think there’s any dispute

7 that this Court is a specified Court, over any of its assets

8 the extent that —

9 THE COURT: Doesn’t talk about immunity, it talks

10 about -

11 MR. COHEN: To the extent assets are entitled to, then

12 it has where it might be entitled to something.

13. THE COURT: Well, it talks about in any jurisdiction

14 where any specified court is located in which any related

15 proceeding may at any time be brought against it, or in any

16 jurisdiction in which any specified court or other court is

17 located in which any suit, action or proceeding may at any

time

18 be brought for the purpose of enforcing or executing any

19 related judgment. .

20 Isee what you mean. You’re entitled to immunity from

21 suit in the jurisdiction of such court from attachment prior to

22 judgment, from attachment in aid or execution of judgment,

from

23 execution of a judgment or any other legal or judicial process

24 or remedy.

25 And to the extent that there would be normally

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

ave

sic Ries

8

9

10

il

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Tla

32

6lctemla Argument

immunity, the Republic has irrevocably agreed and waived

such ;

immunity to the fullest extent permitted by the law. So what

you’re saying is there is specific reference here to possible

immunity from attachment from execution, and you’re saying

that

what this instrument does is to waive the sovereign immunity,

waive immunity except what’s provided in the exceptions

down

here.

MR. COHEN: That’s exactly right. Shall not be

effective with respect to reserves that affect the monetary

base, other reserves are specifically waived. We think that’s

the intended and only reading of that provision.

THE COURT: Let’s go down with respect to the assets

which constitute freely available reserves pursuant to Article

VI of the convertibility law. Is that an Argentine law?

MR. COHEN: That’s an Argentine law, your Honor, and

there’s a declaration attached to Mr. Hranitzky’s declaration

from the Argentine lawyer who was involved in the

preparation

of the convertibility law. And that declaration confirms that

the term freely available reserves as used in this document

was

intended to mean reserves supporting the monctary base.

Coincidentally, your Honor, that same phrase is used

in the later law to mean just the reverse. In the decree in

2005 they used the phrase freely available reserves to mean

not

the reserves necded to support the monetary base but the

reserves in excess. We don’t think that was accidental, your

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

78a

33

61ctemla Argument

| Honor, we think that was intended to confuse the issue and try

2 to suggest that the now-called frecly available reserves, the

3 reserves not needed to support the monctary base were

somehow

4 covered by this limitation. And the declaration of Mr. Liendo

5 makes that very clear that the phrase freely available reserves

6 as used in this document meant the reserves supporting the

7 monetary base.

8 As we have heard from Mr. Rivkin, it was

9 THE COURT: Well, it says -- | mean this ts a

10 translation, of course, I guess all the originals of all these

11 are in Spanish, but the language in the first decree ts

12 unrestricted reserves, so it isn’t exactly ~ at least the

13 English isn’t exactly what is here.

14. MR. COHEN: Right.

15 THE COURT: Now if there has been a waiver, what's the

16 effect of all that?

17 MR. COHEN: Your Honor, it’s our view that the warver

18 entitles judgment creditors and those who are entitled to

19 attachment to reach those assets, if there’s a specific warver

20 in the jurisdiction over which the waiver applics. And thes

21 waiver applies to assets in New York. NML has a judgment.

we

22 have a motion pending, we hope we'll have judgment soon,

but we

23 think that we’re entitled to prejudgment attachment, and the

24 waiver specifically covers attachments prior to judgment. Se

25 we think we’re entitled to attach assets in New York that fix

SOUTHERN DISTRICT REPORTERS, PC

(212) 805-0300

79a

34

61ctemla Argument

1 the characteristic of being held at the central bank but not

2 supporting the monetary base, and we know from the decree

that

3 they have freed up $15 billion not needed to support -

4 THE COURT: Whatever the amount is.

5 MR. COHEN: Correct.

6 MR.RIVKIN: Your Honor —

7 THE COURT: What about the — what is this, when it

8 says assets, whose assets?

9 MR. COHEN: We think that means the assets of the

10 Republic, your Honor, and we think that what this also

confirms

1] is that they intended the assets held by the central bank to be

12 deemed Argentina’s assets, otherwise the phrase "the assets"

13 wouldn’t have any meaning.

14 Argentina is waiving immunity to its assets, it talks

15 about the assets at the central bank, and it waives as to some

16 of them. We think we have attached that portion that they

have

17 waived. So while we have heard a lot of argument about the

18 distinction about whose asscts are they, Banco Central’s

19 independently or do they belong to Argentina, we think the

fair

20 reading of this waiver is that Argentina considered the central

21 bank assets its to waive, and that is why we think they moved

22 those assets out of New York because thcy knew that this

23 argument was available.

24 THE COURT: Okay. Anybody else on the plaintiff's

25 side?

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

80a

35

6I1ctemla Argument

Who wants to speak on defense?

MR. BLACKMAN: Your Honor, I was not planning on

taking the floor because the attachment as to the Republic as

opposed to Central Bank ts really gone, but I am going to take

it because what Mr. Cohen just said is so radically wrong as to

almost be beyond belief. And he’s talking -

THE COURT: Mr. Cohen, you’re beyond belief.

MR. BLACKMAN: And the reason I say that, your Honor,

9 and I try not to indulge in hyperbole, is this is the

10 Republic’s waiver and the Republic’s bond. It’s not a waiver

11 of the central bank’s immunity, it’s a waiver of the —

12 THE COURT: Mr. Cohen recognized that issue. What he

13 said is this waiver would be meaningless if it did not apply to

14 funds in the central bank, and obviously the Republic and the

15 central bank are not completely divorced entities.

16 MR.BLACKMAN: Yes, your Honor, but let me make a

17 couple of points. Mr. Cohen read from the general form of

the

18 bond, if 1 could direct your attention to, I believe it’s —

19 THE COURT: He’s reading from one of these fiscal

20 agency agreements.

21 MR.BLACKMAN: But if you look at the terms of the

22 bond that his client bought, which | think is Exhibit 17 to his

23 declaration, it says something that’s very important. What it

24 says is, in that language that provided that clause that he

25 talked about, it makes much clearer what the intent is, and the

cot NM hWDN —

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

8la

36

6lctemla Argument

intent is —

THE COURT: Where are you reading? Is that an exhibit

l

2

3 before me?

4 MR. BLACKMAN: Yes, page Al3, Exhibit 17—I’m sorry,

5 page Al3 of Exhibit 17 of Mr. Cohen’s declaration.

6 THE COURT: Exhibit 17. Where in the Exhibit 17?

7 MR. BLACKMAN: In the last paragraph, which is comes

8 from the form language that Mr. Cohen was reading to you, it

9 says and the Republic, to the extent the Republic is entitled

10 to immunity, it waives its immunity to the fullest extent

11 permitted by law, then about five lines up from the bottom,

12 provided that attachment prior to judgment or attachment in

aid

13 of execution shall not be ordered by the Republic’s courts

with

14 respect to assets which constitute freely available reserves.

1S Now why is that there? The reason it’s there is

16 explained in Mr. Molina’s declaration, which I urge your

Honor

17 to read, and Mr. Molina’s declaration - and he is involved

18 with Mr. Liendo in preparing these bond terms in 1994, he

says

19 that the reason we have this here, and discussed in paragraphs

20 seven and eight, Mr. Liendo and others insisted on putting

this

21 in because they wanted to eliminate any possibility that an

22 Argentine court may view the Republic’s waiver as somehow

23 implicating BCRA’s reserves. And the purpose of this clause

is

24 to say that any such inference would be erroncous. The

25 exception from the Republic’s waiver therefore refers

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

82a

37

6ictemla . Argument

specifically to attachment or execution by the Republic’s

courts.

But they didn’t want to have Argentine courts think

that a waiver of the Republic’s immunity somehow affected

the

reserves of the central bank. This provision has no

application whatever in the United States or under the FSIA

where it is clear under Section 1611(b)(1) that a waiver of

central bank immunity, as opposed to the Republic’s

immunity,

which was covered by Section 1610(a), the waiver of the

central

10 bank’s immunity must be explicit either by the central bank

11 itself or explicitly by the Republic on behalf of the central

12 bank.

13 Well, there’s no piece of paper in which the Republic

14 says I hereby waive the central bank’s immunity. There is

15 certainly no piece of paper by the central bank that says we

16 waive our immunity. And this exception to the Republic’s

17 waiver is purely for Argentine Icgal, and as the declaration

18 says, to some extent political purposes to makc it clear that

19 when Argentina was waiving its immunity it was not an

Argentine

20 court’s intending to waive their immunity.

21 It’s an issue that doesn’t arise in the US because

22 under the FSIA no onc but Mr. Cohen today would ever

suggest

23 that a waiver by the Republic was a specific waiver of the

24 immunity of the central bank. And if he thought that was

true,

25 your Honor, he would have been in this Court years ago.

This

on NN hwWwnN —

xo

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

83a

38

61ctemla Argument

| clause is in his box. Even these folks, who are constantly,

2 quote, discovering new things and running in, certainly know

3 the terms of their bonds.

4 Under his theory, as he enunciated to you, which has

5 nothing whatever to do with the decree of December 15, he

says

6 all the reserves of the central bank were at all times, or at

7 least the freely available reserves, were somchow available for

8 execution.

9 THE COURT: No, no, no, I don’t agree with that. |

10 think that what we call the first decree is quite important to

11 Mr. Cohen’s argument, because it expressly states that there

12 are reserves that are not necessary to back the currency.

13 Right, Mr. Cohen?

14. MR. COHEN: Yes, your Honor.

15 THE COURT: So let’s not waste time. He is relying on

16 that decree and saying that’s a new development.

17 MR. BLACKMAN: He is, but his Argentine law argument,

18 because the whole point of the discussion is about this clause

19 that refers only to the Argentine courts, up until the

20 December 15 decree, all reserves, as set forth in Mr. Ribaso’s

21 declaration, were freely available. So it can’t be the case —

22 THECOURT: Well, apparently we have got somewhat of

a

23 problem with interpretation about what is meant by frecly

24 available. I thought that prior to the first decree all the

25 asscts in the central bank belonging to Argentina had to be

¢

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

84a

39

6lctemla Argument

| preserved there for the currency.

2 MR.BLACKMAN: That’s right.

3 THE COURT: So --

4 MR. BLACKMAN: Even if they were higher than the

5 monetary base.

6 THE COURT: They had to be preserved for the currency,

7 and maybe that’s a little confusing in terms of this wording

freely available, but I think that that piece of confusion we

9 can get by and we understand that all those reserves were

10 preserved for the currency. And that was indeed changed,

11 whether it’s a big change or little change, that was some

12 change by that first decree.

13 MR. BLACKMAN: I don’t deny there was that change, but

14 I don’t think that change affects his argument, which is when

15 these bonds were issued years and years and years ago,

somehow

16 this was a waiver of the central bank’s immunity. It wasn’t.

17 THE COURT: The bulk of the central bank’s assets are

18 where, in Argentina or in foreign banks?

19 MR. BLACKMAN: [ll turn the floor over to

20 Mr. Neuhaus, but my understanding is the bulk of the central

21 bank’s foreign currency reserves by definition have to be

22 somewhere else, are all over the world; a large number of

them

23 at the BIS, as the Court heard last February, and other places

24 as well.

25 Before I turn the floor over to Mr. Neuhaus —

(oo)

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

l

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

ee

be hs

8Sa

40

61 ctemla Argument

THE COURT: Then why is it so significant to do what

you talk about as occurring in the bond, and that is make it

clear that the reserves in Argentina are not involved in any

waiver? Why was that so important if all the reserves were in

foreign countries?

MR. BLACKMAN: Because there are some reserves in

Argentina, and the concern was that Argentina was waiving its

immunity and wanted to make it clear to whatever Argentine

read

this this was not going to affect the inviolability in

Argentina of the reserves.

THE COURT: Where does it say in Argentina?

MR. BLACKMAN: That’s what this clause that I read on

page A13 of Exhibit 17 says. It says attachment shall not be

ordered by the Republic’s courts. It only deals with as

actually enacted as opposed to in the form.

THE COURT: Beginning with the word provided that?

MR. BLACKMAN: Yeah, three lines down, as ordered in

the Republic’s courts.

THE COURT: What comes before provided?

MR. BLACKMAN: That is the same type of language, that

the Republic waiving its immunity to the fullest extent

permitted by law.

THE COURT: Just a minute, please. That’s comparable

to the provided for clause in the fiscal agreement.

MR. BLACKMAN: With the exception of this language

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

86a

41

61ctemla Argument

1 ordered by the Republic’s courts.

2 THE COURT: But you have got a waiver and then you

3 have got a qualification of the waiver.

4 MR. BLACKMAN: Correct.

5 THE COURT: And the qualification to the waiver, let

6 me read that, in the bond.

7 Well, it’s odd, you certainly have a much more limited

8 qualification there, you can say that because the bond does say

9 there will be no attachment ordered by a Republic Court, and

10 the limitation of the Republic Court is not in the fiscal

1] agency agreement. So what controls?

12. MR. BLACKMAN: I think clearly the terms of the bond

13 control over the form of the bond in the fiscal agency

14 agreement. But the point really is, your Honor, is this is a

15 red herring.

16 THE COURT: Please, I don’t think it’s a red herring.

17 I think that you may be right and Mr. Cohen may be right. It

18 seems to me that the ultimate question is how you interpret,

19 how you apply 1611.

20 MR. BLACKMAN: That’s right.

21 THE COURT: Which requires an expressed waiver by the

22 bank or for the bank.

23 MR.BLACKMAN: Correct. And we don’t believe this

24 does that.

25. And I'll add one more 1611 point then [71l sit down,

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

OOnDHNNHhWN—

—-_ a fe et et fee

SAO P WN — ©

NO — —

Oo Oo co

NN No

WN —

NN

an &

87a

42

61ctemla Argument

which Is that it is absolutely clear, held by Judge Sweet and

every other Court that considered it, that 161 1(b)(1) only

applies, as its language indicates, to post-judgement

execution. A foreign central bank even explicitly can’t waive

its immunity to prejudgment attachment. So Mr. Cohen loses

just on that point; not, admittedly, Mr. Rivkin, whose client

does have a judgment.

The case law under 1611, the Court is exactly nght,

says that you have to have an explicit waiver by the central

bank. And I don’t think that the Court could find that the

language that we are reading is an explicit waiver of the

central bank’s immunity. If it is slightly confusing, whatever

it is, it’s not an explicit waiver.

And I turn the floor over.

THE COURT: Let me ask you this: Is there anything,

or is this just my own dream, is there anything to the issue

about how to identify what has been freed up and what

hasn’t?

I don’t think anybody brought it up, and I brought it

up because it just occurred to me sitting here, but maybe

there’s nothing to that issue. But if we’re talking about

specific legal rules that apply to these assets that are now

called unrestricted reserves. If you go to the Federal Reserve

Bank, you don’t find such a designation, whether it’s

restricted or unrestricted. And I guess nobody raised that,

but it does occur to me that maybe it’s at least a little

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

88a

43

61ctemla Argument

1 problem.

2 MR.BLACKMAN: I think it’s a great problem, and I

3 just say briefly that what is clear on this record is that

4 there was no intention to use the money at the Fed for this

5 payment for the IMF, nor was it used. And that money, as the

6 Court noted, has been used, the amount has obviously ebbed

and

7 flowed over the years for central banking activities, buying

8 and selling currencies, receiving reserve deposits of Argentine

9 banks. And the Fed has no way of knowing, because under

this

10 authorizing legislation, the central bank was unable to use

11 certain portion of its reserves to pay the government debt to

12 the IMF, which is itself a classic central banking function

13 because the central bank is the banker to the state.

14 The Fed has no way of knowing that. All it knows is

15 that this account is, as the Fed explained in its declaration,

16 reserves of the central bank. The Fed treats them as reserves

17 of the central bank. They have been used consistently for

18 central banking purposes. And under Section 1611(b)(1),

that

19 is what property of a foreign central bank held for its own

20 account means, means asscts used for central banking. These

21 assets that have been attached, which is what is in New York,

22 the only thing that can be attached have been used for central

23 banking, if unfrozen will continuc to be used for central

24 banking.

25 THE COURT: Lect me ask you, I imagine that everybody

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

89a

44

6Ictemla Argument

1 here has some experience in this kind of litigation, have you

ever seen any kind of situation where there was an explicit

waiver with regard to the assets lodged in a central bank?

Have you ever heard of such an instance?

MR. BLACKMAN: Mr. Neuhaus read the cases more

recently than I have. In the cases in the Southern District,

most of them find there is not a waiver and most of them

protect, if not all. )

THE COURT: Have you have had experience in

10 transactions? The thing is that there is a requirement of an

1] explicit waiver, but I suppose if some bond agreement were

12 negotiated and there was a desire to provide some security or

a

13 remedy, I suppose what could be done, in addition to waiving

14 the sovereign immunity and allowing suit, | suppose it could

be

15 that there could be an explicit waiver with regard to assets in

16 a central bank account.

17 And it seems to me that if that is done, it should be

18 quite clear the type of assets covered should be defined, and

19 it could be that some bond, some people interested in buying

20 bonds might demand that and the government might grant it.

But

21 it seems to me that it’s a little difficult to sec how there is

22 an explicit waiver, and I must say that ] think that it

23 contributes to the problem that there’s no definition of that

24 kind of assct at the bank.

25 __Let’s hear from Mr. Neuhaus.

OCOrAHDN HW WN

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

90a

45

6lctemla Argument

] MR. NEUHAUS: On that last point, your Honor, |

2 believe the cases do show — have examples of expressed central

3 bank waivers of immunity. And I’m afraid I’m working from

4 memory here, and | hadn’t put this in mind, but I believe the

5 Weltover case, a Supreme Court case, involved a central bank

6 that had given expressed waiver of immunity sometimes in

other

7 situations, and it may be true for other cases as well. So 1

8 think you can find examples in the case law of central bank

9 waivers of immunity.

10 THE COURT: You can or cannot?

11 MR.NEUHAUS: You absolutely can. If, for example,

12 the central bank guarantces the bonds, and as a condition of

13 this guarantee the central bank may waive its immunity. So

it

14 does exist in the law. I don’t — I’m not certain of Weltover,

15 but I think so, as I recall the case.

16 THE COURT: What do you have to add?

17 MR. NEUHAUS: I think the two points that I raised in

18 discussion with Mr. Rivkin are of paramount importance.

One Is

19 the difficulty of attaching, administering the system that

20 Mr. Rivkin envisions with his view of how to determine what

is

21 attachable; and the other is the central bank functions, which

22 are of paramount importance of protecting central bank

23 functions, which is what Section 1611 is all about.

24 Bricfly, because you already talked about this on the

25 first point, it is an absolutely a real life concern how a

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

ue

91a

46

6lctemla Argument

| garnishee like the Fed could possibly know when a

garnishment

comes in, a restraining notice comes in, what is being — how

much of the reserves the central bank has around the world.

They know what they have in their account, but they have to

know how much they have around the world at that very

moment,

6 then they have to know how big is the monetary base. That

7 monetary base is all the pesos in circulation in Argentina plus

8 amounts in certain special accounts. That’s the definition

9

1

On Rm WN

under the law. So you have to have all these little pieces.

0 There’s no way the Fed could know about that, no way one

bank ;

11 could know about that.

12 Then you do this calculation. In Mr. Rivkin’s world

13 the numerator is the amount used for the monetary base, the

14 denominator is the entire reserves, and you get a percentage.

15 And he says you take that percentage and look at what’s in

the

16 Fed, $105 million, and say okay, this moncy is freely

17 convertible. That’s not how garnishment works. That’s not

how

18 attachment works in New York law.

19 In New York law you can only attach what is here. And

20 as your Honor knows, the separate entity doctrine, you only

21 attach what is in that very branch. The branches don’t even

22 have to call around to the branch in the next borough to find

23 out whether there’s been a -- whether a check is coming in or

24 anything like that.

25 And certainly if you serve a r

This text is long and has been trimmed here. Open the source document for the complete record.