Petition for Writ of Certiorari — Republic of Argentina v. Capital Ventures International (No. 09-36)
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Supreme Court, U.S.
rite
D
oka Y No._- 09-36 JUL7- 2009
OFFICE OF THE CLERK
Supreme Court of the Gnited States
op ae
THE REPUBLIC OF ARGENTINA,
Petitioner,
U.
CAPITAL VENTURES INTERNATIONAL,
Respondent.
On Petition for a Writ of Certiorari
to the United States Court of Appeals
for the Second Circuit
AND APPENDIX
Carmine D. Boccuzzi
Counsel of Record
Jonathan I. Blackman
CLEARY GOTTLIEB STEEN & HAMILTON LLP
One Liberty Plaza
New York, New York 10006
(212) 225-2000
Attorneys for Petitioner
July 7, 2009 The Republic of Argentina
1
QUESTION PRESENTED
Whether federal subject-matter jurisdiction
exists under Section 1605(a)(1) of the Foreign Sov-
ereign Immunities Act of 1976, 28 U.S.C. §§ 1602-
1611 (the “FSIA”), where a foreign state agreed in
7 ass : a ee ee
bond documentation to the jurisdiction of specified
foreign (i.e., non-U.S.) courts and its contractual
waiver of immunity did not refer to the United
States in any way.
il
TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES..................... lV
OPINIONS BELOW
JURISDICTION
STATUTORY PROVISION INVOLVED
STATEMENT OF THE CASE .................
A. Background
EE EE,
C. Respondent Capital Ventures
International (“CVI”)
D. The District Court’s Dismissal
of the German Bond Claims..........
EF. The Court of Appeals’ Reversal
REASONS FOR GRANTING
THE PETITION
CONCLUSION
APPENDIX
Opinion of the United States Court
of Appeals for the Second Circuit,
@avea wanuary 13, Z009..................006.
Order Denying the Petition for Rehearing,
dated April 9, 2009
Transcript of Oral Argument,
dated February 15, 2007
Notice of Motion to Dismiss Pursuant to
Rule 12(b)(1) and 12(b)(6),
dated July 28, 2005 (Memo Endorsed)...
8% Deutsche Mark Bonds of 1997/2009,
Offering Circular, dated October 30,
1997 (Redacted)
Excerpt from the Fiscal Agency Agreement,
dated as of October 19, 1994
lV
TABLE OF AUTHORITIES
Page(s)
Rules and Statutes:
28 U.S.C. § 1254(1)
I Bo oascic oss ticncsickavescricss
28 U.S.C
28 U.S.C. §
Cases:
Aquamar S.A. v. Del Monte Fresh Produce
N.A., 179 F.3d 1279 (11th Cir. 1999)
Argentine Republic v.
Amerada Hess Shipping Corp.,
488 U.S. 428 (1989)
Asahi Metal Indus. Co. v. Super. Ct.,
480 U.S. 102 (1987)
Can-Am Int'l, LLC v. Republic of Trinidad
& Tobago, 169 Fed. Appx. 396 (5th Cir.),
cert. denied, 549 U.S. 881 (2006)
EM Lid. v. Republic of Argentina,
131 Fed. Appx. 745 (2d Cir. 2005)
[.T. Consultants, Inc. v. Islamic Republic
of Pakistan,
351 F.3d 1184 (D.C. Cir. 2003)
Page(s)
Marra v. Papandreou,
216 F.3d 1119 (D.C. Cir. 2000)
Nat'l City Bank of N.Y. v. Republic of China,
348 U.S. 356 (1955)
Republic of Argentina v. Weltover, Inc.,
BS | ern re me rerrnee
Republic of Austria v. Altmann,
541 U.S. 677 (2004)
Republic of Iraq v. Beaty,
129 S. Ct. 2183 (2009)
Saudi Arabia v. Nelson,
507 U.S. 349 (1993)
Verlinden B.V. v. Cent. Bank of Nigeria,
461 U.S. 480 (1983)
World Wide Minerals, Ltd. v. Republic
of Kazakhstan, 296 F.3d 1154
(D.C. Cir. 2002), cert. denied,
537 U.S. 1187 (2003)
World-Wide Volkswagen Corp. v. Woodson,
444 U.S. 286 (1980)
Other Authorities:
H.R. Rep. No. 94-1487 (1976), reprinted in
1976 U.S.C.C.A.N. 6604
Paul Blustein, AND THE MONEY KEPT ROLLING
IN (AND OUT): WALL STREET, THE IMF, AND
THE BANKRUPTING OF ARGENTINA (2005)
Vi
Page(s)
Panel of Independent Advisors, Economic
and Financial Issues Facing Argentina,
IMF News Brief No. 02/80, July 29, 2002,
available at http://www.imf.org/
external/np/sec/nb/2002/nb0280.htm ........ 5
World Bank, ARGENTINA: FROM INSOLVENCY
TO GROWTH (1993)
PETITION FOR A WRIT OF CERTIORARI
TO THE
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
OPINIONS BELOW
The opinion of the court of appeals (App. at la-
18a) is reported at 552 F.3d 289. The district court
granted the motion to dismiss for reasons stated on
the record after oral argument and did not issue a
written opinion. See App. at 59a-60a.
JURISDICTION
The judgment of the court of appeals was entered
on January 13, 2009. The court of appeals denied
panel rehearing and rehearing en banc on April 9,
2009. See App. at 19a-20a. This Court’s jurisdiction
is invoked under 28 U.S.C. § 1254(1).
STATUTORY PROVISION INVOLVED
The relevant statutory provision is 28 U.S.C.
§ 1605(a)(1):
§ 1605. General exceptions to the jurisdic-
tional immunity of a foreign state
(a) A foreign state shall not be immune
from the jurisdiction of courts of the Unit-
ed States or of the States in any case-—
9)
(1) in which the foreign state has waived
its immunity either explicitly or by impli-
cation, notwithstanding any withdrawal of
the waiver which the foreign state may
purport to effect except in accordance with
the terms of the waiver.
STATEMENT OF THE CASE
This petition presents an important question of
federal law involving a foreign state that has been
haled into a U.S. court against its will: does a for-
eign state’s submission to the jurisdiction of speci-
fied courts, not including those of the United
States, create subject-matter jurisdiction under the
FSIA when it is coupled with a waiver of sovereign
immunity by the state?
The district court held that it did not, because
these linked provisions could not be read as a waiv-
er of immunity to suit in the United States, as the
waiver provision of the FSIA, 28 U.S.C. § 1605(a)(1),
requires.
The court of appeals reversed, reasoning that
because the waiver of immunity was not limited to
a specific court, it went beyond the specific courts
where the stai« submitted to jurisdiction, and
applied across the board to create jurisdiction in
the United States (or, presumably, anywhere else
in the world) as well. This question is important to
both the foreign relations of the United States, and
the large (and growing) number of foreign states
that raise funds outside their own borders.
Like many countries, petitioner the Republic of
Argentina (the “Republic” or “Argentina”) has issued
bonds in international capital markets. These
bonds were denominated in various currencies,
including the U.S. dollar, the Austrian schilling,
the British pound sterling, the Deutsche mark, the
Italian lira, the Japanese yen, the Spanish peseta,
and the Swiss franc. In many cases, bonds issued in
a particular market and denominated in local cur-
rency were governed by the relevant local law, with
a submission to the jurisdiction of the local courts
and a waiver of immunity from the jurisdiction of
those courts. For example, Argentine bonds issued
in the United States were denominated in U.S. dol-
lars and governed by New York law, expressly
accepted the jurisdiction of New York courts (as
well as courts in Buenos Aires), and waived juris
dictional immunity in those courts; bonds issued in
other countries had comparable provisions choos-
ing the law, and submitting to the courts, of that
state.
Whether these common provisions also create
jurisdiction in the United States for bonds nol
issued or payable in the United States, and not pro
viding for a submission to U.S. jurisdiction, is
therefore a question of recurring significance that
deserves a definitive answer from the Court. In
Republic of Argentina v. Weltover, Inc., 504 U.S
607 (1992), the Court identified a significant feder
al question and granted certiorari to determine
whether, in the absence of a contractual submis-
sion to jurisdiction, federal subject-matter jurisdic
tion existed for suits on sovereign bonds payable in
the United States under the “commercial activity”
exception to sovereign immunity in Section 1605(a)(2)
of the FSIA, which creates jurisdiction over actions
arising from commercial activity of the foreign
state bearing specified connection with the U.S.
forum. Id. at 609-10. Here, it is equally important
for the Court to resolve whether, under Section
1605(a)(1) of the FSIA, the other most frequently
invoked section of the statute, a foreign state can
be sued in U.S. courts on bonds containing a gener-
al waiver of sovereign immunity but not providing
for payment in, or other contacts with, the United
States by the foreign issuer, and on the contrary
providing explicitly for submission to foreign
courts’ jurisdiction. A ruling on this question will
provide guidance to all sovereign issuers regarding
the specificity and effect of any waivers of immuni-
ty that they may decide to include in their bonds or
other transactional documents, including whether
faivers may expose them to liability in the United
States when they contain no reference to the Unit-
ed States.
A. Background
The present case concerns bonds issued by the
Republic in Germany (the “German Bonds”). The
Republic issued the German Bonds and other for-
eign debt instruments during the 1990s, when it
“enacted a series of structural reforms” that suc-
cessfully “recast the basis of public finance” and
were widely praised as a model for free market
reforms in developing countries. World Bank,
ARGENTINA: FROM INSOLVENCY TO GROWTH 12 (1993).
Following the international financial crisis of 1998,
however, the Republic fell into a deep recession and
experienced the worst economic catastrophe of its
modern history. See generally Pau) Blustein, AND
THE MONEY KEPT ROLLING IN (AND OUT): WALL
STREET, THE IMF, AND THE BANKRUPTING OF
ARGENTINA (2005).
By the end of 2001, this crisis made it impossible
for the Republic to service its overwhelming debt
burden—some $80 billion in public external debt
alone—while maintaining basic governmental serv-
ices necessary for the health, welfare, and safety of
the Argentine populace.
66
(U]nable to service its
debt,” the Republic was forced to defer interest and
principal payments to its bondholders, and seek a
voluntary restructuring of its crippling debt bur-
den. Panel of Independent Advisors, Economic and
Financial Issues Facing Argentina, IMF News Brief
No. 02/80, July 29, 2002, 41, available at
http://www.imf.org/external/np/sec/nb/2002/nb0280
htm.
B. The German Bonds
The German Bonds, which were denominated in
Deutsche marks, are entirely German instruments
governed by German law. See, e.g., 8% Deutsche
Mark Bonds of 1997/2009, Offering Circular § 13(1),
App. at 94a. Their terms are in German, and they
designate the place of performance as Frankfurt
am Main, Germany. See id. § 13(2), App. at 94a.
The German Bonds provide that payments be made
*
6
in Deutsche marks or euros (which replaced the
Deutsche mark as the legal tender in Germany)
See id. § 5(1), App. at 83a. All notices concerning
the bonds must be published in German newspa
pers. See id. § 12, App. at 94a. The German Bonds
prohibit the appointment of a U.S. paying agent
and otherwise lack any connection to the United
States. See id. § 5(3), App. at 83a-84a
Not surprisingly, the terms and conditions of the
German Bonds contain a submission to the juris
diction of the courts of Frankfurt am Main, as well
as the City of Buenos Aires, for any suits arising
out of or relating to the bonds:
The Republic hereby trrevocably submits to
the non-exclusive jurisdiction of the Dis-
trict Court (Landgericht) in Frankfurt am
Main and any federal court sitting in the
City of Buenos Aires as well as any appel-
late court of any thereof, in any suit, action
or proceeding against it arising out of or
relating to these Bonds. The Republic here-
by irrevocably waives—to the fullest
extent it may effectively do so—the defense
of an inconvenient forum to the mainte
nance of such suit or action or such pro
ceeding and any present or future objection
to such suit, action or proceeding whether
on the grounds of venue, residence or domi-
cile. The Republic agrees that a final judg
ment in any such suit, action or proceeding
in the courts mentioned above shall be con-
clusive and may be enforced in other juris-
7
dictions by suit on the judgment or any
other method provided by law.
Offering Circular § 13(3) (“Section 13(3)”), App.
at 94a-95a (emphasis added).
Immediately after the submission to the jurisdic-
tion of Frankfurt and Buenos Aires courts in Sec-
tion 13(3), the German Bonds provide as follows:
To the extent that the Republic has or
hereafter may acquire any immunity (sov-
ereign or otherwise) from jurisdiction of any
court or from any legal process (whether
through service or notice, attachment prior
to judgment, attachment in aid of execu-
tion, execution or otherwise), with respect
to itself or its revenues, assets or proper-
ties, the Republic hereby irrevocably
waives such immunity in respect of its obli-
gations under the Bonds to the extent it is
permitted to do so under applicable law.
Offering Circular § 13(4) (“Section 13(4)”), App. at
95a.
The German Bonds make no reference whatsoev-
er to suit, or to a waiver of immunity from suit, in
the United States (or, indeed, to any jurisdiction
other than Frankfurt and Buenos Aires). By con-
trast, the Fiscal Agency Agreement (the “FAA”)
that governs bonds issued by the Republic in the
United States, which were denominated in U.S.
dollars and are entirely U.S. instruments, explicit-
ly waived the Republic’s immunity from suit in
New York and Buenos Aires:
g
The Republic hereby appoints Banco de la
Nacion Argentina ... as its authorized
agent ... upon whom process may be
served in any action arising out of or based
on the Securities or this Agreement by the
holder of any Security which may be insti-
tuted in any state or federal court in The
City of New York, and expressly accepts
the jurisdiction of any such court in respect
of such action.
Notwithstanding the foregoing, any action
arising out of or based on the Securities
may be instituted by the holder of any
Security in any competent court in the
Republic of Argentina.
The Republic hereby irrevocably waives
and agrees not to plead any immunity from
the jurisdiction of any such court [l.e., any
state or federal court in The City of New
York and any competent court in the
Republic] to which it might otherwise be
entitled in any action arising out of or
based on the Securities or this Agreement
by the holder of any Security.
FAA § 22 (emphasis added), App. at 97a-99a.
9
C. Respondent Capital Ventures Interna-
tional (“CVI”)
CVI is a Cayman Islands hedge fund that pur-
chased the German Bonds (as well as bonds issued
under the FAA and other governing documents) as
a litigation investment years after the collanse of
the Argentine economy, when those bonds were
trading for less than a third of their face value.
Like Argentina’s other creditors, CVI had the
opportunity to participate in the Republic’s global
exchange offer in 2005—a voluntary debt restruc-
turing in which the beneficial owners of approxi-
mately $62.5 billion in principal amount, or over
76% of the aggregate eligible debt, tendered their
old, nonperforming bonds for new, performing
bonds with lower interest rates, reduced principal,
and/or longer maturities. See EM Ltd. v. Republic
of Argentina, 131 Fed. Appx. 745, 747 (2d Cir.
2005) (affirming vacatur of attachments of bonds
tendered in exchange offer to protect “the economic
health of a nation”). CVI chose to reject the Repub-
lic’s offer and has pursued litigation instead, suing
on the German Bonds both in New York, and in a
separate lawsuit on bonds of the same series in
Germany, the contractually selected forum. See
Reply Decl. of Eric S. Meyer, dated Oct. 27, 2006
“4 2-3, Capital Ventures Intl v. Republic of
Argentina, 05 Civ. 4085 (TPG) (S.D.N.Y.).
10
D. The District Court’s Dismissal of the
German Bond Claims
On July 28, 2005, the Republic moved to dismiss
CVI’s Amended Complaint. On February 15, 2007,
the district court granted this motion for claims
based on the German Bonds. App. at 59a-60a. Ana-
lyzing the plain language of the document, includ-
ing Section 13(3), the district court concluded that
the “sensible effeci” of this provision was as a lim-
ited submission to the jurisdiction of the courts of
Frankfurt and Buenos Aires. Jd. at 42a-43a. The
district court understood Section 13(4) to have
“some very broad language” but ruled that “what-
ever it means it should not be read as reading out
of this instrument the reference to Frankfurt and
the city of Buenos Aires.” /d. at 44a. The district
court also relied on “case law which would support
the idea that where there is an expressed grant of
jurisdiction in specific places ...a general waiver
of sovereign immunity does not mean that... suit
can be brought any place in the world.” Id.
Because the Republic explicitly waived its sover-
eign immunity to suit in Frankfurt and Buenos
Aires courts—but not U.S. courts—the district
court dismissed the German Bond claims.
E. The Court of Appeals’ Reversal
The court of appeals disagreed with the district
court’s interpretation of Sections 13(3) and 13(4).
Focusing on the broad language of Section 13(4) in
isolation from the jurisdictional submission in Sec:
tion 13(3), the court of appeals held that “[t]his pro-
11
vision clearly and unambiguously waives Argenti-
na’s ‘immunity (sovereign or otherwise) in ‘any
court” and was “an ‘explicit’ waiver” of immunity
for purposes of the FSIA. App. at 9a (emphasis in
original). The court of appeals rejected the Repub-
lics argument that reading Section 13(4) in this
way would “render{ |] subsection 3 superfiuous’ and
further determined that “[t}here can be explicit
waivers without a reference to the United States.”
Id. at 10a-1la. Based on this reasoning, the court
of appeals reversed the district court’s dismissal of
the German Bond claims and vacated its denial of
CVI’s motion for summary judgment on those
claims. /d. at 14a.
REASONS FOR GRANTING THE PETITION
“Under the venerable principle of foreign sover-
eign immunity,” Republic of Iraq v. Beaty, 129
S. Ct. 2183, 2186 (2009), foreign sovereigns enjoy
“freedom ... from being haled into court as a
defendant” unless an exception to immunity applies.
Nat’l City Bank of N.Y. v. Republic of China,
348 U.S. 356, 358 (1955). Under the FSIA, which
provides the sole source of subject-matter and
personal jurisdiction over a foreign state, see
28 U.S.C. §§ 1330, 1604; Argentine Republic ov.
Amerada Hess Shipping Corp., 488 U.S. 428, 434-
35 (1989), foreign states such as the Republic are
“presumptively immune from the jurisdiction of
United States courts; unless a specified exception
applies, a federal court lacks subject-matter juris-
diction over a claim against a foreign state.”
12
Saudi Arabia v. Nelson, 507 U.S. 349, 355 (1993).
Therefore, to bring suit on the German Bonds,
CVI was required to demonstrate the applicability
of a specific exception to the Republic’s sovereign
immunity under Section 1605 of the FSJA.
The courts below considered the applicability of
Section 1605(a)(1) of the FSIA, which provides:
A foreign state shall not be immune from
the jurisdiction of courts of the United
States or of the States in any case in which
the foreign state has waived its immunity
either explicitly or by implication, notwith-
standing any withdrawal of the waiver
which the foreign state may purport to
effect except in accordance with the terms
of the waiver.
Id. Under this particular provision, subject-matter
jurisdiction is based on a foreign state’s waiver of
immunity; there is no subject-matter jurisdiction if
there is no waiver. It is the plaintiff that must
plead and prove the foreign state’s waiver of immu-
nity, for purposes of establishing subject-matter (as
well as personal) jurisdiction.! See Can-Am Int'l,
| Personal jurisdiction over a forcign state exists where
there is subject-matter jurisdiction and service has been
made under Section 1608 of the FSIA. 28 U.S.C. § 1330(b).
The Court has never decided whether, besides this statutory
personal jurisdiction, due process also requires minimum
contacts between the foreign state and the United States.
Compare Verlinden B. V v. Cent. Bank of Nigeria, 461 U.S.
480, 488 (1983), with 1.7. Consultants, Inc. v. Islamic Repub-
lic of Pakistan, 351 F.3d 1184, 1191 (D.C. Cir. 2003); World
13
LLC v. Republic of Trinidad & Tobago, 169 Fed.
Appx. 396, 402 (5th Cir.), cert. denied, 549 U.S.
881 (2006). Section 1605(a)({1) is therefore func-
tionally an exception to the general rule that “sov-
ereign immunity is an affirmative defense which
must be specially pleaded.” H.R. Rep. No. 94-1487,
at 17 (1976), reprinted tn 1976 U.S.C.C.A.N. 6604,
6616.
This Court has had occasion to consider Section
1605(a){1) of the FSIA only once, in a case twenty
years ago coincidentally also involving the Repub-
lic. Amerada Hess arose after the Argentine mili-
tary attacked a Liberian oil tanker during the
Malvinas War, more commonly known as the Falk-
lands War. See 488 U.S. at 432. The owner of the
tanker, as well as the Liberian corporation that
had chartered the tanker to transport fuel from
Alaska to the U.S. Virgin Islands, sued the Repub-
lic in New York for damages. See id. at 431. The
district court dismissed the action for lack of sub-
ject-matter jurisdiction but was reversed by a
divided panel of the court of appeals that was in
turn reversed by this Court. See id. at 433. In hold-
ing that none of the FSIA’s exceptions to immunity
was applicable, the Court stated that it did not “see
how a foreign state can waive its immunity under
§ 1605(a)(1) by signing an international agreement
that contains no mention of a waiver of immunity
Wide Minerals, Ltd. v. Republic of Kazakhstan, 296 F.3d
1154, 1159 n.5 (D.C. Cir. 2002), cert. denied, 537 U.S. 1187
(2003). The court of appeals here noted this issue but did not
decide it. App. at 8a n.3.
14
to suit in United States courts or even the avail-
ability of a cause of action in the United States.” Id.
at 442-43.
Here, the German Bonds likewise contain no
mention of a waiver of immunity to suit in the
United States or the availability of a cause of
action in the United States. The only jurisdictions
that they mention are Frankfurt, where the bonds
were issued and to be paid, and the Republic’s
capital of Buenos Aires. See Offering Circular
§§ 13(2)-(3), App. at 94a-95a. The Republic “has
clearly and unambiguously” waived its immunity
in only these two jurisdictions, the logical and nat-
ural fora for disputes concerning German Bonds
issued by Argentina. World Wide Minerals, Ltd. v.
Republic of Kazakhstan, 296 F.3d 1154, 1162
(D.C. Cir. 2002), cert. denied, 537 U.S. 1187 (2003);
see Aquamar S.A. v. Del Monte Fresh Produce N.A.,
179 F.3d 1279, 1292 (11th Cir. 1999) (“An express
waiver under section 1605(a)(1) must give a clear,
complete, unambiguous, and unmistakable manifes-
tation of the sovereign’s intent to waive its immuni-
ty.”) (quotation omitted). As the district court
recognized, Section 13(3)’s specific waiver would be
“read[ ] out of” the German Bonds under the court
of appeals’ reading of Section 13(4), App. at 44a,
which treated Section 13(4) as an explicit waiver of
immunity to suit in the United States for purposes
of Section 1605(a)(1) of the FSIA, despite the lack
of any connection between the German Bonds and
the United States and the absence of any evidence
in the record that the Republic was even thinking
~
}
lo
about the United States or the FSIA when it issued
the German Bonds in Germany, and submitted to
jurisdiction in Germany and Argentina for suit on
those bonds. Instead of treating Section 13(4) as a
“belt and suspenders” provision to insure a waiver
of immunity in the courts where the Republic
ayreed to be sued in Section 13(3), the court of
appeals treated it as an independent basis for fed-
eral subject-matter jurisdiction in the United
States, divorced from the Republic’s jurisdictional
submission and forum selection.
The fact that the Republic did not consent to be
sued in the United States on German Bond claims
is ail the more clear when one compares the Ger-
man Bonds with the FAA bonds, which were issued
by the Republic in the United States. These bonds
contain an express waiver for lawsuits in New York
courts in the first instance; they do not waive the
Republic’s immunity to suit in any other court in
the United States or elsewhere prior to a New York
court's final judgment in a particular case, thus
waiving immunity outside New York only for pur-
poses of post-judgment execution. See FAA § 22,
App. at 97a; NML Capital, Ltd. v. Republic of
Argentina, No. 04-0197 (CKK), slip op. at 20-23
(D.D.C. Aug. 3, 2005); cf. Marra v. Papandreou, 216
F.3d 1119, 1123 (D.C. Cir. 2000) (“If the Greek gov-
ernment were sued by Marra for breach of two dif-
ferent contracts, it certainly would have the
prerogative to waive a sovereign immunity defense
with respect to one of the contracts and invoke that
defense for the other.”). It is counterintuitive that
16
the German Bonds, which have no connection with
the United States whatsoever, would subject the
Republic to suit anywhere in the United States (not
to mention the world) when the FAA bonds, which
are entirely U.S. instruments, would subject the
Republic to suit only in New York.
The question whether a non-specific waiver of
sovereign immunity, with no specific mention of
the United States, linked with a specific submis-
sion to jurisdiction in specific courts outside the
United States, operates to create federal subject-
matter jurisdiction over the state that gives such a
waiver is an important question of federal law that
this Court has not settled, but should. Six years
before Amerada Hess the Court expressly declined
to “decide whether, by waiving its immunity, a for-
eign state could consent to suit based on activities
wholly unrelated to the United States.” Verlinden
B.V. v. Cent. Bank of Nigeria, 461 U.S. 480, 490
n.15 (1983). That question is now presented by the
facts of this case, in which claims on German
Bonds having nothing to do with the United States
are sought to be brought in U.S. courts through a
waiver of sovereign immunity that does not refer to
the United States in any way. Substantial comity
issues and the foreign relations concerns behind
them counsel a reading of the FSIA in a manner
that does not, in the absence of a clear Congres-
sional command, extend the reach of U.S. judicial
jurisdiction over wholly foreign activities of foreign
countries, when those countries, in ordering their
affairs with private persons, have specifically des-
17
ignated courts other than those of the United
States as the forum for adjudicating disputes. Com-
pare Asahi Metal Indus. Co. v. Super. Ct., 480 U.S.
102, 116 (1987) (recognizing potential due process
concerns where exercise of personal jurisdiction
over private foreign party in case lacking meaning-
ful connection with United States “would be unrea-
sonable and unfair” given “the international
context, the heavy burden on the alien defendant,
and the slight interests of the plaintiff and the
forum State”).
Although the absolute theory of sovereign immu-
nity no longer protects foreign states from all liti-
gation in U.S. courts, it remains the case that
“foreign sovereign immunity ... aims to give for-
eign states and their instrumentalities some pres-
ent protection from the inconvenience of suit as a
gesture of comity.” Republic of Austria v. Altmann,
541 U.S. 677, 696 (2004) (original emphasis and
quotation omitted). The court of appeals’ holding
that the Republic is subject to suit in the United
States on the German Bonds—when the Republic
had no connection whatsoever with the United
States concerning these bonds, and accordingly did
not “reasonably ant.cipate being haled into court
[here],” World-Wide Volkswagen Corp. v. Woodson,
444 U.S. 286, 297 (1980)——seriously weakens that
protection.
The obvious contrast between the Republic's
waivers of sovereign immunity for the German
Bonds and bonds issued in the United States under
New York law makes this case an optimal vehicle
13
for deciding the waiver question presented. There
is a clean record on which the Court may defini-
tively decide the question left open in Amerada
Hess: whether a foreign state explicitly waives
jurisdictional immunity in the United States by
signing a contract “that contains no mention of a
waiver of immunity to suit in United States courts
or even the availability of a cause of action in the
United States,” 1488 U.S. at 442-43, because the
contract links a submission to the jurisdiction of
other nations’ courts with a waiver of sovereign
immunity. The answer to this question—contrary
to the court of appeals decision—should be “no,”
and the Court should grant certiorari to give it
19
CONCLUSION
The petition for a writ of certiorari should be
granted.
Dated: New York, New York
July 7. 2009
Respectfully submitted,
/s/
Carmine D. Boccuzzi
Counsel of Record
Jonathan [. Blackman
CLEARY GOTTLIEB STEEN & HAMILTON LLP
One Liberty Plaza
New York, New York 10006
(212) 225-2000
Attorneys for Petitioner
The Republic of Argentina
APPENDIX
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term 2008
(Argued: November 10, 2008
Decided: January 13, 2009)
Docket No. 07-1551-cev
Capital Ventures International,
Plaintiff-Appellant,
Republic of Argentina,
Defendant-Appellee.
Before: SOTOMAYOR, KATZMANN, and HALL,
Circuit Judges.
OPINION
Appeal from a judgment of the United States Dis-
trict Court for the Southern District of New York
(Griesa, J.) dismissing, for lack of subject matter
jurisdiction, those claims of plaintiff-appellant
Capital Ventures International that relate to bonds
issued by defendant-appellee Republic of Argentina
2a
under German law, and denying Capital Ventures
International’s request for statutory prejudgment
interest on unpaid interest payments that would
have come due on United States dollar denominat-
ed bonds issued by the Republic after the accelera-
tion of those bonds. We affirm in part and vacate in
part, finding that there is subject matter jurisdic-
tion over the claims relating to the German bonds
because Argentina explicitly waived its sovereign
immunity to suit in United States courts on those
claims, and that the district court correctly deter-
mined that no interest payments became due on
the United States bonds after they had been accel-
erated.
Counsel for Plaintiff-Appellant:
M. NORMAN GOLDBERGER, Hangley Aron-
chick Segai & Pudlin, Philadelphia,
P.A.
Kenneth G. Roberts, Jennifer F.
Beltrami (of counsel), Wolf, Block,
Schorr and Solis-Cohen LLP, New York,
N.Y.
Counsel for Defendant-Appellee:
CARMINE D. BoccuZziI (Jonathan I. Black-
man, of counsel), Cleary Gottlieb Steen
& Hamilton LLP, New York, N.Y
3a
KATZMANN, Circuit Judge:
This case calls upon us 1n principal part to deter-
mine whether the Republic of Argentina explicitly
waived its sovereign immunity from suit in the
United States as to claims relating to bonds issued
by Argentina under German law.
Plaintiff-appellant Capital Ventures Internation-
al (“CVI”) appeals from a judgment of the United
States District Court for the Southern District of
New York ((riesa, J.) dismissing, for lack of sub-
ject matter jurisdiction, those of CVI’s claims that
relate to bonds issued by defendant-appellee
Republic of Argentina (“Argentina” or “the Repub-
lic’) under German law, and denying CVI’s request
for statutory prejudgment interest on unpaid inter-
est payments that would have come due on United
States dollar denominated bonds issued by the
Republic after the acceleration of those bonds. We
find that there is subject matter jurisdiction over
the claims relating to the German bonds because
Argentina explicitly waived its sovereign immunity
to suit in United States courts on those claims, and
that the district court correctly determined that no
interest payments became due on the United
States bonds after they had been accelerated.
Accordingly, we affirm in part and vacate in part.
FACTUAL BACKGROUND
CVI is the beneficial owner of certain bonds
issued by the Republic of Argentina. One group of
the bonds owned by CVI is governed by German
law, and these bonds are denominated in Deutsche
4a
Marks and Euros (“the German bonds”). Each Ger-
man bond was issued pursuant to its own offering
circular. Section 13 of the offering circulars pro-
vides in part:
(3) The Republic hereby irrevocably submits to
the non-exclusive jurisdiction of the District
Court (Landgericht) in Frankfurt am Main and
any federal court sitting in the City of Buenos
Aires as well as any appellate court of any
thereof, in any suit, action or proceeding
against it arising out of or relating to these
Bonds. The Republic hereby irrevocably
waives—to the fullest extent it may effectively
do so—the defense of an inconvenient forum to
the maintenance of such suit or action or such
proceeding and any present or future objection
to such suit, action or proceeding whether on
the grounds of venue, residence or domicile.
The Republic agrees that a final judgment in
any such suit, action or proceeding in the
courts mentioned above shall be conclusive and
may be enforced in other jurisdictions by suit
on the judgment or any other method provided
by law.
(4) To the extent that the Republic has or here-
after may acquire any immunity (sovereign or
otherwise) from jurisdiction of any court or
from any legal process (whether through serv-
ice or notice, attachment prior to judgment,
attachment in aid of execution, execution or
otherwise), with respect to itself or its rev-
enues, assets or properties, the Republic here-
~
va
by irrevocably waives such immunity in
respect of its obligations under the Bonds to
the extent it is permitted to do so under appli-
cable law.!
denominated the
The remainder of the bonds owned by CVI are
: ‘*
bonds”) and were issued pursuant to a Fiscal
Agency Agreement (“FAA”). The FAA provides that
Argentina will “pay interest” on the principal of the
U.S. bonds “until the principal... is paid.” It also
sets forth periodic dates on which interest is due.
The FAA contains an acceleration provision, which
does not specify whether or not interest is due on
the periodic dates after any acceleration.?
In December 2001, Argentina declared a morato-
rium on the payment of principal and interest on
its foreign debt and stopped paying principal and
interest on the bonds at issue here. In response to
the default, on various dates in 2005 and 2006, CVI
accelerated the bonds it owned, making the princi-
pal immediately due.
The instant lawsuit was filed in the Southern
District on April 25, 2005. After various prelimi-
nary proceedings, the district court granted sum-
mary judgment in favor of CVI on the claims
| This language is taken from the Offering Circular gov-
erning the 8% Deutsche Mark Bonds of 1997/2009. The par-
ties agree that every offering circular contains substantially
identical provisions, insofar as is relevant to this appeal.
¢ This provision governs the acceleration of the payment
of principal upon certain events of default.
6a
related to the U.S. bonds on May 17, 2006. Subse-
quently, on February 15, 2007, the district court
held an oral argument on various open issues,
including Argentina’s motion to dismiss the claims
related to the German bonds for lack of subject
matter jurisdiction and CVI’s request for statutory
prejudgment interest on certain interest payments
it claimed were due after acceleration of the U.S.
bonds.
At the oral argument, the district court ruled
that it lacked subject matter jurisdiction over the
claims relating to CVI’s German bonds because
Argentina was entitled to sovereign immunity with
respect to those claims; the district court accord-
ingly dismissed the German bond claims. Constru-
ing section 13(3) and (4) of the offering circulars,
the district court concluded that Argentina had not
explicttly waived its sovereign immunity in U.S.
courts in section 13. Instead, it held that subsec-
tion 3 was a limited submission to the jurisdiction
of courts in Frankfurt and Buenos Aires. The dis-
trict court reasoned that “whatever [subsection 4]
means it should not be read as reading out of this
instrument the reference to Frankfurt and the city
of Buenos Aires.” Accordingly, while acknowledg-
ing that the language of subsection 4 was “very
broad,” the district court ultimately held that
“where there is an expressed grant of jurisdiction
in specific places ...a general waiver of sovereign
immunity [such as in subsection 4] does not mean
that ... suit can be brought any place in the
world.” Having found that Argentina did not waive
its sovereign immunity to suit in U.S. courts, the
7a
district court dismissed the German bond claims
and concomitantly denied CVI’s motion for summa-
ry judgment on those claims.
As to CVI’s request for prejudgment interest, the
district court found that the FAA did not require
the continued payment of interest after the princi-
pai was accelerated, because the act of accelerating
the principal so that “[i]t is due now” is inconsis-
tent with interest that “continue[s] to accrue quar-
terly” where the contract does not specifically
provide that contractual interest continues to
accrue. Accordingly, the district court only award-
ed prejudgment interest, at the contractual rate,
for the entire amount of the principal after the date
of acceleration and for interest payments that were
due but unpaid prior to acceleration.
On March 16, 2007, the district court entered
final judgment reflecting its rulings at the Febru-
ary 15, 2007 oral argument. This appeal followed.
DISCUSSION
On appeal, CVI challenges both the dismissal of
the claims related to the German bonds and the
denial of prejudgment interest on interest pay-
ments that would have come due after acceleration
of the U.S. bonds.
A. Sovereign Immunity
1. Background Law and Standard of Review
The Foreign Sovereign Immunities Act (“FSIA”)
‘is the sole source for subject matter jurisdiction
over any action against a foreign state.” Kensington
8a
Int’l Ltd. v. Itoua, 505 F.3d 147, 153 (2d Cir. 2007)
(internal quotation marks omitted); see 28 U.S.C.
§§ 1330(a), 1604. The FSIA provides that foreign
sovereigns are immune from suit unless a specific
exception to sovereign immunity applies. Id.
§ 1604. One such exception is that a foreign state is
not immune from suit “in any case... in which the
foreign state has waived its immunity either
explicitly or by implication.”? Jd. § 1605(a)(1). The
term “explicit,” in this context, takes its normal
meaning of “clear and unambiguous.” Libra Bank
Ltd. v. Banco Nacional de Costa Rica, S.A., 676
F.2d 47, 49 (2d Cir. 1982) (interpreting 28 U.S.C.
§ 1610(d)). The purpose of an “explicit” waiver
requirement “is to preclude inadvertent, implied,
or constructive waiver in cases where the intent of
the foreign state is equivocal or ambiguous.” Jd.
3 Congress has provided that personal jurisdiction over a
foreign state exists when the FSIA permits a suit against that
state and the service of process requirements set forth in 28
U.S.C. § 1608 have been satisfied, see 28 U.S.C. § 1330(b),
although even in the FSIA context the requirements of due
process must be satisfied before a court may exercise person-
al jurisdiction. See Texas Trading & Mill. Corp. v. Federal
Republic of Nigeria, 647 F.2d 300, 308 (2d Cir. 1981). It
should be noted, however, that this Court recently heard oral
argument on the question of whether Texas Trading remains
good law. See Frontera Res. Azer. Corp. v. State Oil Co. of the
Azer. Republic, No. 07-1815-cv (2d Cir. argued Oct. 27, 2008).
We need not address the issue of personal jurisdiction here,
as Argentina has not raised it before us and the district court
did not consider it. We express no opinion as to whether
Argentina may raise the issue on remand or whether Argenti-
na has waived any objection to personal jurisdiction by failing
to raise it before the district court.
9a
“On appeal from a dismissal for lack of subject
matter jurisdiction, we review the district court’s
legal conclusions de novo... .” Correspondent Servs.
Corp. v. First Equities Corp. of Fla., 442 F.3d 767,
769 (2d Cir. 2006) (per curiam). The interpretation
of a contract is a legal question which is also
F.3d 378, 384 (2d Cir. 2007).
2. Discussion
In the offering circulars, Argentina explicitly
waived its sovereign immunity to suit in U.S.
courts on claims related to the German bonds. Sec-
tion 13(4) of the offering circulars provides that,
“Itlo the extent that the Republic has or hereafter
may acquire any immunity (sovereign or otherwise)
from jurisdiction of any court or from any legal
process ..., the Republic hereby irrevocably
waives such immunity in respect of its obligations
under the Bonds to the extent it is permitted to do
so under applicable law.” This provision clearly and
unambiguously waives Argentina’s “immunity
(sovereign or otherwise)” in “any court.” This clear
language satisfies the FSIA’s requirement of an
“explicit” waiver.
Argentina advances the argument that section
13(4), read in conjunction with section 13(3), mere-
ly allows for judgments obtained pursuant to sec-
tion 13(3) to be enforced in other courts. However,
the language of subsection 4 is not so limited. Sub-
section 4 refers to “any legal process (whether
through service or notice, attachment prior to judg-
ment, attachment in aid of execution, execution or
10a
otherwise),” language that contemplates actions
other than those to enforce judgments. Further,
subsection 3 ends with the provision that “a final
judgment in any such suit... in the courts men-
tioned above... may be enforced in other jurisdic-
tions by suit on the judgment or any other method
provided by law.” If the Republic’s interpretation of
subsection 4 were adopted, this last sentence in
subsection 3 would render subsection 4 superflu-
ous, a result that should be avoided.*4 See United
States v. Hamdi, 432 F.3d 115, 123 (2d Cir. 2005).
Further, if subsection 4 were intended to discuss
enforcement in other jurisdictions, we would expect
that the same terms in the last sentence of sub-
section 3 would be repeated in subsection 4—but
they are not. Accordingly, we do not read section
13(4) as applying only to the enforcement of judg-
ments.
Argentina also argues that reading section 13(4)
as a waiver of sovereign immunity in any court ren-
ders subsection 3 superfluous, a result which, as
just discussed, is disfavored. See id. According to
Argentina, under such a reading Argentina has
“agree[d] to jurisdiction in Germany and Argenti-
na” in subsection 3 and also “agree[d] to jurisdic-
tion everywhere” in subsection 4. Of course, such
an interpretation of section 13(4) would render
subsection 3 superfluous—-but that is not what sub-
4
“
We note that the offering circulars are governed by
German law. The parties have not presented us with any-
thing to suggest that German law would alter the essential!
analysis. Indeed, they have not cited any German law with
respect to any aspect of this case.
lla
section 4 says. Subsection 4 is a waiver of Argenti-
na’s “immunity (sovereign or otherwise), but it
does not waive other objections to suit that
Argentina might have, such as objections based on
lack of personal jurisdiction, improper venue, or
forum non conveniens. Section 13(3), on the other
hand, provides that Argentina “submits to the non-
exclusive jurisdiction” of the courts in Frankfurt
and Buenos Aires as well as “waives... the defense
of an inconvenient forum... and any... objection
.. on the grounds of venue, residence or domicile.”
It is thus clear that reading subsection 4 as a waiv-
er of sovereign immunity in any court does not ren-
der subsection 3 superfluous.
Argentina also presses the argument that the
case law reveals a requirement that, to be explicit,
a waiver must contain a reference to the United
States or a specific jurisdiction within the United
States. We do not find such a requirement in the
cases. Of course, a specific reference to the United
States can be helpful in determining that a waiver
meets the FSIA’s requirement of explicitness, see,
e.g., Proyecfin de Venez., S.A. v. Banco Indus. de
Venez., S.A., 760 F.2d 390, 393 (2d Cir. 1985) (find-
ing an explicit waiver obvious where the waiver
mentioned New York courts), but the statutory
requirement is only that the waiver be “explicit.”
There can be explicit waivers without a reference
to the United States, as the waiver of immunity in
“any court” in this case illustrates. See also Walker
Intl Holdings Ltd. v. Republic of Congo, 395 F.3d
229, 234 (5th Cir. 2004) (finding an explicit waiver
under the FSIA where a contract read “[t]he Congo
L2a
hereby irrevocably renounces to claim any immunl-
ty during any procedure relating to any arbitration
decision handed down by an Arbitration Court”);
World Wide Minerals, Ltd. v. Republic of Kazak
stan, 296 F.3d 1154, 1162 & n.13 (D.C. Cir. 2002)
(finding an “express waiver|] of sovereign immun}-
ty” where the waiver said “[i]n respect of any arbi-
tration or legal action or proceedings arising out of
or in connection with this Agreement,... [the
Kazakhstan State Committee] hereby irrevocably
agrees not to claim and hereby irrevocably waives
. immunity for itself and the assets of the Repub-
lic of Kazakstan to the full extent permitted by the
laws of such jurisdiction”). Any other result would
stray from the plain meaning of the statutory lan-
guage. See United States v. Santos, 541 F.3d 63, 67
(2d Cir. 2008) (“Statutory interpretation always
begins with the plain language of the statute,
assuming the statute is unambiguous.” (internal
quotation marks omitted)).
Despite Argentina’s argument, Argentine Repub-
lic v. Amerada Hess Shipping Corp., 488 U.S. 428
(1989), does not require a contrary result. In Amer-
ada Hess, the Supreme Court stated that it did not
“see how a foreign state can waive its immunity
under § 1605(a)(1) by signing an international
agreement that contains no mention of a waiver of
immunity to suit in United States courts or even
the availability of a cause of action in the United
States.” Jd. at 442-43. Argentina would have us
read this language as a requirement that, for a
waiver to satisfy the FSIA’s explicitness require-
ment, it must mention the United States in some
L3a
way. That is not the holding of Amerada Hess. The
international agreements at issue in Amerada Hess
were the Geneva Convention on the High Scas,
Apr. 29, 1958, 13 U.S.T. 2312, and the Pan Ameri-
can Maritime Neutrality Convention, Feb. 20,
1928, 47 Stat. 1989—neither of which mentions
WalVily sovereign immunity at ail, iet alone in the
United States. The offering circulars at issue here,
which are contracts between Argentina and the
bondholders, are far removed from multi-party
international agreements and do discuss waiver of
sovereign immunity to suit in any court, thereby
indicating “waiver of immunity to suit in United
States courts.” Amerada Hess, 488 U.S. at 442-43.
Accordingly, Amerada Hess does not control the
outcome here.
There is lhkewise no support in our cases for
Argentina’s suggestion that the mention of specific,
non-United States jurisdictions in subsection 3 of
the offering circulars precludes a finding that
Argentina waived its sovereign immunity to suit in
the United States. Of course it is true that there
will be cases in which, when a document mentions
a non-U.S. jurisdiction, there will be no explicit
waiver for FSIA purposes because it will be clear
that there is no intent to waive sovereign immun}l-
ty in United States courts. See, e.g., Eaglet Corp. v.
Banco Cent. De Nicar., 839 F. Supp. 232, 234
(S.D.N.Y. 1993) (finding no explicit waiver where
jurisdictional clause stated “[t]his Agreement is
governed by English law and therefore BCN sub
mits to the nonexclusive jurisdiction of the English
High Court of Justice”); Atl. Tele-Network Inc. v.
l4a
Inter-Am. Dev. Bank, 251 F. Supp. 2d 126, 133
(D.D.C. 2003) (finding that a broad, nongeographi-
cally limited waiver of immunity, when “juxta-
pos|ed] immediately below a choice-of-law selection
clause (specifying the law of Guyana) and above a
forum-selection clause (specifying the courts of
Guyana),” does not waive immunity in the United
States). It is not true, however, that the mere men
tion of a non-U.S. jurisdiction will preclude a find-
ing of waiver, because the statute requires only
that the waiver be “explicit.” As the waiver at issue
here demonstrates, a waiver of sovereign immunity
can be explicit even when other provisions of the
document are applicable only to specific, non-Unit
ed States jurisdictions.
Accordingly, because we find that Argentina
explicitly waived its sovereign immunity to suits in
the United States relating to the German bonds,
we reverse the district court’s dismissal of CVI’s
German bond claims.’ In addition, because it is
clear from the transcript of the proceeding before
the district court that CVI’s motion for summary
judgment on the German bond-related claims was
denied only because the district court dismissed
those claims, we vacate the denial of CVI’s summa
ry judgment motion, so that the district court can
consider, in the first instance, whether or not sum-
mary judgment would be appropriate on those
claims.
» Because we find an explicit waiver of immunity, we do
not reach CVI’'s arguments that other FSIA exceptions to sov
ereign immunity apply as well
15a
B. Prejudgment Interest
Under New York C.P.L.R. § 5001, a creditor is
entitled to prejudgment interest on all sums due,
as of the date they became due. N.Y. C.P.L.R.
§ 5001; see also Spodek v. Park Prop. Dev. Assocs..,
759 N.E.2d 760, 762 (N.Y. 2001) (holding that
“CPLR 5001(a) permits a creditor to recover pre-
judgment interest on unpaid interest and principal
payments awarded from the date each payment
became due”). While awards of interest are gener-
ally discretionary, “New York law does not permit
the trial court to exercise any discretion where a
party is entitled to [prejudgment interest] as a
matter of right.” New Eng. Ins. Co. v. Healthcare
Underwriters Mut. Ins. Co., 352 F.3d 599, 602-03
(2d Cir. 2003). We review the interpretation of a
contract, which is a legal question, de novo.
Phillips v. Audio Active Ltd., 494 F.3d 378, 384 (2d
Cir. 2007).
The parties agree that the district court correct-
ly awarded CVI statutory prejudgment interest on
the contractual interest payments that Argentina
failed to make prior to acceleration of the principal
of CVIl’s U.S. bonds, as well as on the entire
amount of the principal starting on the date of
acceleration. However, CVI argues that contractu-
al interest payments continued to come due after
acceleration, and therefore that the district court
should have awarded CVI statutory prejudgment
interest on the post-acceleration, unpaid interest
payments.
16a
The normal consequence of acceleration is that
interest payments that would have been due in the
future are no longer due, because, after accelera-
tion, the entire principal is immediately due and
owing; in other words, future interest payments
are “unearned” because the creditor is no longer
loaning the debtor the principal. See, e.g., Aard-
woolf Corp. v. Neison Capital Corp., 861 F.2d 46, 47
(2d Cir. 1988) (“New York legislation and judicial
pronouncements demonstrate a consistent intent to
deny a creditor the right to charge or retain inter-
est that 1s unearned.”); Atlas Fin. Corp. v. Ezrine,
345 N.Y.S.2d 36, 38-39 (App. Div. 1973) (stating
the “equitable principle that the unearned part of
the interest must be deducted [from the amount
due] upon acceleration,” and reasoning in part that
“by acceleration of payments upon default the prin-
cipal sum ceased to be at risk some ‘ears prior to
the time contemplated by the contract” (internal
quotation marks omitted)); Bostwick-Westbury
Corp. v. Commercial Trading Co., 404 N.Y.S.2d
968, 973 (Civ. Ct. 1978) (stating that at accelera-
tion, “indebtedness encompassed the unpaid bal-
ance of the principal and the matured interest at
the time of default and does not include any
unearned future interest”); see also In re LHD
Realty Corp., 726 F.2d 327, 331 (7th Cir. 1984)
(“[A] lender may abandon or waive its claim to
interest payable over a period of years .... [T]he
lender, by its acts, may establish that it prefers
accelerated payment to the opportunity to earn
interest over a period of years. ... [The lender] has
voluntarily waived the unpaid interest in the
17a
expectation of accelerated payment of the remain-
ing principal.”).
The FAA that governs the U.S. bonds at issue
here contains nothing to demonstrate that the par-
ties intended to displace the normal meaning of
acceleration with a concept of acceleration that
alluws interest to continue to come due after the
principal is accelerated. CVI argues that the FAA
does mandate that interest payments continue to
be due after acceleration because the FAA provides
that Argentina will “pay interest” on the principal
“until the principal... is paid.” That, however, is
merely a truism that is not specific enough to alter
the traditional concept of acceleration. In the
absence of ambiguity or a provision in the FAA
specifying otherwise, acceleration should be given
its normal meaning. Alexander & Alexander Serus.,
Inc. v. These Certain Underwriters at Lloyd’s, Lon-
don, 136 F.3d 82, 86 (2d Cir. 1998) (“If the court
finds that the contract is not ambiguous it should
assign the plain and ordinary meaning to each
term ....”). To hold otherwise would allow CVI to
recover interest twice on the same principal—once
as statutory prejudgment interest after the date of
acceleration and once as interest payments that
came due after acceleration. Such an unusual
result should not be inferred in the absence of clear
intent in the FAA.
18a
CONCLUSION
For the foregoing reasons, we VACATE the portion
of the judgment of the district court dismissing the
claims related to the German bonds and denying
summary judgment on those claims, AFFIRM the
remainder of the judgment, and REMAND for fur-
ther proceedings consistent with this opinion.
19a
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
At a stated Term of the United States Court of
Appeals for the Second Circuit, held at the Daniel
Patrick Moynihan United States Courthouse, 500
Pearl Street, in the City of New York, on the ___
day of April, two thousand and nine,
Docket No. 07-1551-cv
FILED APRIL 9, 2009
[OVAL STAMP]
Capital Ventures International,
Plaintiff-Appellant,
Repubiic of Argentina,
Defendant-Appellee.
ORDER
Appellant Capital Ventures International having
filed a petition for panel rehearing, or, in the alter-
native, for rehearing en banc, and the panel that
determined the appeal having considered the
request for panel rehearing, and the active mem-
20a
bers of the Court having considered the request for
rehearing en banc,
IT Is HEREBY ORDERED that the petition is denied.
For the Court:
Catherine O’Hagan Wolfe, Clerk
By: /s/ FRANK PEREZ
Frank Perez, Deputy Clerk
Zla
[Cover]
In The Matter Of:
CAPITAL VENTURES uv.
REPUBLIC OF ARGENTINA
February 15, 2007
ARGUMENT
Original File 72f6capa.txt, Pages 1-39
Word Index included with this Min-U-Script®
{Page 1]
72f6capa
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
06 CIV 207 (TPG)
New York, N.Y.
February 15, 2007
5:00 p.m.
CAPITAL VENTURES INTERNATIONAL,
Plaintiff,
V.
REPUBLIC OF ARGENTINA,
Defendant.
Before:
HON. THOMAS P. GRIESA,
District Judge
APPEARANCES
WOLF BLOCK
Attorneys for Plaintiff CVI
By: KENNETH G. RORERTS
JENNIFER F.. BELTRAMI
23a
CLEARY GOTTLIEB STEEN & HAMILTON, LLP
Attorneys for Defendant
Republic of Argentin[a]
By: CARMINE D. BOCCUZZI
AMY CHUNG
CHRISTOPHER MOORE
[Page 2]
(In open court; case called)
THE COURT: What do we need to cover today,
please?
MR. ROBERTS: Thank you, your Honor. Kenneth
Roberts for CVI Taking things one at a time, the
first thing we would like to address is the discovery
issue regarding the historical collateral reports.
We have tried and made some progress with coun-
sel as your Honor directed to try and resolve the
issue, but we are still stuck.
THE COURT: What is the sticking?
MR. ROBERTS: The sticking is we need the reports
back from inception of the binding issuance
because we believe that the historical reports—
THE CourRT: That would go back to how far?
MR. ROBERTS: To 1993 So far they are willing to
give us most of the reports to 2001. There were sev-
eral exchange offers between ‘93 and ‘01 which will
affect the calculation Mr Meyer can explain to your
Honor exactly why we believe that these historical
reports will show further corrections
THE COURT: Now, the historical reports from the
Federal Reserve?
MR. ROBERTS: Correct.
THE CoOuRT: What do you mean by historical
reports?
24a
MR. ROBERTS: They have issued monthly reports.
THE COURT: They issued them to whom?
[Page 3]
Mr. ROBERTS: Argentina.
THE COURT: Republic?
MR. ROBERTS: Yes.
THE CouRT: What do they show?
MR. ROBERTS: Each month they show the amount
of collateral in the interest collateral account. They
show any disbursements from those accounts, they
show the secured interest obligations and the max-
imum level for each month.
There is something that has happened since the
last time we met just in the last month or so, actu-
ally in the last week. Some Brady bondholders
have now requested payment from the interest col-
lateral accounts of whatever they are entitled to.
So it is no longer an academic issue where the
secured interest obligations are because there is no
dispute between the two parties that if the Brady
bondholders are entitled to anything, they are only
entitled up to the secured interested obligation.
That is not disputed. But we do dispute, A, they are
entitled to anything, and B, the parties are in dis-
pute as to what the secured interest obligation is,
where does it lie. That’s why we need these reports
because otherwise if your Honor were to allow the
Brady bondholders to take the interest collateral
out
THE COURT: The money is frozen right now.
MR. ROBERTS: The moneys are frozen night now.
It would take a further order of your Honor to
release these
[Page 4]
moneys to these people. So it is not something that
is an emergency. It is something that brings it into
reality as opposed to an academic issue, what is the
secured interest obligation. It is now real life issue.
THE COURT: Go back. Start again. What do the
monthiy reports show?
MR. ROBERTS: Jhey will show what the New York
Fed believed were the secured interest obligations
for each of those months. They have already cor-
rected themselves once recently and we believe
that the nature of that mistake that they corrected
indicates that they made that same mistake histor-
ically. Conceptually I can tell you—the details are
very difficult, but the concept is when there is a
redemption of bonds do you decrease the collateral
dollar for dollar—the secured interest obligation
dollar for dollar as to what was paid out or do you
decrease it proportionately on a percentage basis.
The mistake that they corrected already, they had
seen that they had done it on a proportionate per-
centage basis as opposed to dollar for dollar and
they have corrected that from about—
THE CourRT: They saw what?
MR. ROBERTS: They saw that in—was it 2005?
that saw in August 2005 that they wrongly calcu-
lated the secured interest obligation because they
used a percentage formula rather than a dollar for
dollar formula to calculate the
[Page 5]
amount. That is exactly the kind of mistake that
we think they have made in 1993 to date which
would further affect the secured interest obligation
26a
today. These are reports that at a touch of a com-
puter button can be printed and we are willing to
do all the work. All we need to do is see the month-
ly reports that have already been created and then
we will be able to present the exact accurate figure
for today.
THE COURT: Refresh my memory, you have an
attachment on what?
Mr. ROBERTS: We have an attachment on the
entire account. Of course, your Honor has ruled noth-
ing can be released or seized without your further
order.
THE COURT: What account is this?
Mk. ROBERTS: Today we are talking about the
interest collateral account, which has about five
million dollars in it today. Argentina and the New
York Fed say that about three and a half million of
that is below the secured interest obligation, which
could be conceivably released, but we believe—
THE COURT: It is below”?
MR. ROBERTS: Their figures today, the secured
interest obligation is at about three and a half mil-
lion of the five. So that according to their figures
three and a half million could be accessible by an
Argentina on behalf of the Brady bondholders.
[Page 6]
THE COURT: Dol read you right that three and a
half million dollars is security?
MR. ROBERTS: The entire five million is security,
yes.
THE COURT: Three and a half is this secured
interest obligation?
Z2/a
~~
MR. ROBERTS: It is the highest amount possible
of the secured interest obligation.
THE CouRT: The secured interest obligation,
I don’t remember this very well. I am sorry. Is that
something that you claim is or is not subject to your
attachment, the secured interest obligation.
MR. ROBERTS: it is subject to our attachment but
to the extent it might be available to the Brady
bondholders, we would be junior.
THE COURT: Now, anything above that you say
you are entitled to”
MR. ROBERTS: Yes. But your Honor ruled that
this moment because Argentina is in default and
Argentina cannot get the access, your Honor ruled
that this moment we cannot get it either. It is
there. The access is there and it is definitely not
available to the Brady bondholders.
THE COURT: What is your objective?
MR. ROBERTS: Our objective is to show that the
secured interest obligation rather than being at
three and a
[Page 7]
half million today with think could actually be zero
to the entire amount, the entire five million dollars
would not be available to the Brady bondholders. If
the secured interest obligation
“HE COURT: Is this the case that went to up the
Court of Appeals and then came back
MR. ROBERTS: Yes
THE COURT: Is this the one that you won in the
Court of Appeals?
MR. ROBERTS: Well, we won on one particular
issue, which was simply to get the attachment.
28a
THE CourRT: I had vacated it and the Court of
Appeals reversed me; is that right?
MR. ROBERTS: Yes. And said that we were enti-
tled to the attachment that now exists
THE COURT: Okay. There are many cases.
MR. ROBERTS: I know.
THE COURT: What is wrong with giving them the
records they want, Mr. Boccuzzi?
Mr. BoccuZZ!i: Your Honor, | am surprised we
started with this one. There are four other motions
in this case pending before your Honor. On this dis-
covery question you had asked us to work together
and I had thought we made progress. Mr. Roberts
started off asking for 14 years of reports. We had
offered him to go back four years and in addition to
give
[Page 8]
reports for two months of 2001 around the time
when there was a redemption of collateral and that
would let him test his theory.
Ultimately this is irrelevant because what is in
the reports is put ~— [there] by the Fed and it is
there at their discretion. The reports say what they
say. So it seems like a lot of ancient history and it
is unnecessary and legally irrelevant. We were pre
pared and we were working with each other and
sent them an offer this morning and | frankly
thought we had made progress and if he gets the
reports and he wants more, we can talk about that.
[ thought we were here to talk about actual live
motions as opposed to what was being worked out
with the parties
29a
THE COURT: Look, I have no knowledge really of
what use these can be, but I don’t see any reason to
have more negotiation. If the reports are available
and can be produced, produce them or get the Fed
to produce them. | wouldn’t negotiate anymore and
I] wouldn’t have anymore discussion with the Court
and that is the Court’s order.
Let’s go to the next motion. What is the next
motion?
MR. BOcCUZZI: The next motion is our motion to
dismiss the complaint to the extent it is seeking
recovery on German bonds.
THE COURT: To what?
MR. Boccu2ZI: Seek recovery on German bonds.
[Page 9]
THE COURT: Your motion is what?
Mr. Boccu2Z!I: To dismiss.
THE COURT: Why don’t we have the argument on
that.
MR. BoccuZZI: Ms. Chung will be presenting the
arguments on that.
THE COURT: Very good.
Ms. CHUNG: May it please the Court, Amy Chung
for the Republic of Argentina. The Republic has
moved to dismissed the German bond claims
because CVI has brought suit in the wrong court.
The German bonds are entirely German instru-
ments. Their terms are in German. They are gov-
erned by German law. The place of performance for
the bonds is in Germany. The Republic therefore
waived its immunity to sue in Germany.
THE COURT: Does the Republic have an expressed
waiver of suit in Germany.
eg So a es a
30a
Ms. CHUNG: Yes. The Re[p]ublic has waived its
immunity to sue in certain jurisdictions, usually
correlated with where the bonds are issued. For
example, the German bonds were issued in Ger-
many and the Republic waived its sovereign immu-
nity to sue in Germany.
THE COURT: It didn’t provide any waivers as far
as New York, right?
Ms. CHUNG: No These bonds have nothing to do
with
THE CouRT: Mr. Roberts, what about that?
[Page 10]
MR. ROBERTS: Is it just wrong, your Honor. I can
read it to you. It says to the extent that the
Re[p|ublic has or hereafter may acquire any immu-
nity from jurisdiction of any court or from any legal
process with respect to itself or its revenues, the
Republic hereby irrevocably waives such immunity.
There is no geographic limitation. What she is talk-
ing about, the geographic limitation was a non-
exclusive. It says, The Re|p]ublic hereby submits to
the non-exclusive jurisdiction of Germany and
Buenos Aires. Submitting to non-exclusive jurisdic-
tion has nothing to do with the general broad waiv-
er of immunity wherever. We are here properly.
They are not moving to dismiss for lack of jurisdic-
tion. The immunity is not limited geographically. It
is Exhibit B to the declaration of Eric Meyer dated
September 15, 2006.
THE COURT: What page on that?
MR. ROBERTS: Page 14 of Exhibit B.
gla
THE CoOukRT: I have it. That is what I thought.
I thought it was a very broad waiver and not limit-
ed to Germany.
Ms. CHUNG: Your Honor, Mr. Roberts is putting
the cart before the horse. You have to look at the
first waiver and then look at the second waiver.
The situation is very simular, 1t is aimost identical
to the Lavaggi action where your Honor dismissed
claims based on a Swiss bond that had identical
provisions, where the Reb[p]ublic waives immunity
to jurisdiction in Geneva and in Buenos Aires and
then it provided
[Page 11]
after that that should a judgment be entered in
those actions that the Re[p]ublic’s immuntty would
be waived in other jurisdictions.
THE COURT: Ju[s]t a minute. [ am sorry I don’t
remember the Swiss case, but I don’t understand
how get around the adjective non-exclusive and
I don’t understand how you get around the second
sentence. The second sentence is not talking about
enforcement of a judgment. The second sentence is
talking about maintenance of such suit or action or
such proceeding and the antecedent of such that
such action or proceeding is in the first sentence.
The second sentence, The Re[p]ublic hereby irrev-
ocably waives to the fullest extent it may effective-
ly do so the defense of an inconvenient forum to the
maintenance of such suit or action or such proceed-
ing and any present or future objection to such suit,
action or proceeding whether on the grounds of
venue, residence or domicile.
Mk. BoccuzzI: Your Honor, that simply means
that in a suit that occurs either in Buenos Aires or
Frankfurt the Ref{p]ublic has contractually bound
itself not to argue inconvenient forum and all the
other points.
THE COURT: That is not what the second sentence
says.
MR. BOCCUZZI: Yes, it does, your Honor.
THE COURT: Does it?
MR. Boccuzzi: Yes. It says the Re[p]ublic hereby
[Page 12]
irrevocably waives to the fullest extent and may
effectively do so the defense—and it goes—of an
inconvenient forum to the maintenance of such suit
or action or such proceeding. So “such” goes back to
the proceedings that would be picked up in the first
sentence, submission or waiver of immunity, which
is to Buenos Aires or to Frankfurt court.
THE COURT: Okay.
MR. BoccuZZI: This does follow the language
that was in tue Swiss bond that was deal with b
your Honor in the Lavaggi case. You need a specif-
ic submission to jurisdiction to New York court for
us to be here that isn’t here.
THE CourT: Maybe I didn’t read the second sen-
tence carefully enough.
Why is the language adjective non-exclusive?
Mr. BoccuZZI: Because, your Honor, if it said
exclusive jurisdiction then that means that’s the
only place it could be sued. Here it says non-exclu-
sive that means there is some other grounds under
which they had given up their immunity in some
other jurisdiction, none of which exist here, you can
Sua
take them into another court. There is no commer-
cial activity going on in connection with these
bonds which are entirely German instruments and
that is what Lavaggi plaintiff argued as well, that
under 1605(a)(2) you would be able to bring them.
Under 1605(a)(1) where the question is did they
submit to the jurisdiction of this court, this is nota
submission to
[Page 13]
jurisdiction in this court. The non-exclusive lan-
guage does not help the plaintiffs here because
there is no commercial activity in connection with
these bonds.
Here is an example of the bond. | would add, your
Honor, these plaintiffs are actually suing on some
of these German bonds in Germany so that just
shows the right place to bring these lawsuits. This
one for example, is a bear bond just like the old
days. It is all in German and there are coupons on
the back that you would clip for your interest. So
just like in the Lavaggi case where you had a Swiss
instrument and your Honor said no subject matter
jurisdiction, the same analysis ayplies here.
I] can hand up the Lavaggi decision to your Honor
if you want it.
THE COURT: Sure.
MR. BOcCU2Z21: | think it is a pretty straightfor-
ward issue. | would like you to look at Lavaggi
because in Lavaggi there was no waiver of immun1i-
ty. Your Honor said the Re|[p]ublic has not explicit-
ly waived its immunity. Here, if you look at
Subsection 4, the Re[p]Jublic specifically expressly
waived its immunity from any court.
34a
Ms. CHUNG: I have copies of the bond.
THE COURT: Does it or does it not have the same
language?
Ms. CHUNG: It has the same language.
[Page 14]
MR. ROBERTS: May I see it. Where is it?
Ms. CHUNG: Page 11.
THE COURT: Can I see the bond?
MR. BOcCUZZI: I will bring it up your Honor.
THE COURT: It is exactly the same.
Ms. CHUNG: Your Honor, you held the Lavaggi
that there was no explicit waiver The language is
the same for the German bond «re. There is no
jurisdiction in this court.
MR. ROBERTS: Your Honor, | wasn’t part of the
Lavaggi case. It is certainly was not in the report-
ed decision.
THE CourT: I agree with you.
MR. ROBERTS: The fact is, your Honor, if you look
at Subsection 4 whether it is in Lavaggi or not, and
[I don’t think your Honor relied on that provision in
that section, but this Subsection 4 could not be
more plain. It is an absolute expressed unlimited
immunity waiver. This non-exclusive, it has noth-
ing to do with it.
Ms. CHUNG: Your Honor—
MR. ROBERTS: Why is there no waiver of immu-
nity in Subsection 3? It doesn’t talk about immun1i-
ty in 3. If it wanted to limit the waiver to Germany
and Buenos Aires, it would have done it. It says,
Any court. How can you get around that, any court.
Ms. CHUNG: Your Honor, in terms—
35a
THE COURT: Wait a minute. You are talking
about
[Page 15]
Subsection 4?
MR. ROBERTS: Yes, your Honor.
THE Court: Not Subsection 3.
MR. ROBERTS: Lxactiy. That is the Waiver. Sub-
section 3 is not even the immunity waiver section.
MR. Boccu2Zz!: Of course it is. It is submission to
jurisdiction.
MR. ROBERTS: But it doesn’t talk about immuni-
ty. When you talk about immunity, they use the
word any—any court.
Ms. CHUNG: Your Honor, may I?
THE COURT: Yes.
Ms. CIIUNG: Subsection 3 submits the Re|p]ublic
to jurisdiction. That is a waiver of immunity. The
last sentence of that subsection says that once a
final judgment has been entered any court in
Frankfurt or in Buenos Aires that that judgment
may then be enforced in other jurisdictions. Sub-
section 4 follows Subsection 3 and says where else
the Re[p]ublic has waived immunity. This is not
unusual.
The same thing happened, your Honor, may
recall in the context of the MNL action where the
Re[p]ublic will waive its immunity for the initial
suit in certain junisdictions. The jurisdictions
where it can control where it is sued. It will inten-
tionally submit to jurisdiction in Germany for Ger-
man bonds and in New York for New York bonds.
36a
[Page 16]
Once a plaintiff has received a judgment, it can
then try to execute that judgment anywhere
around the world. That is what the Subsection 4 is
related to.
MR. ROBERTS: Is that why it says attachment
prior to judgment in Subsection 4?
Ms. CHUNG: Your Honor, a foreign judgment
must be recognized by a court before any attach-
ment can happen. You can’t walk into a New York
court with a German judgment and say attach the
property that is in New York. You first have to
have that judgment recognized.
THE COURT: Wait a minute.
MR. ROBERTS: Your Honor, I just saw something
in your decision in the Lavaggi decision that is very
relevant.
THE COURT: Okay.
MR. ROBERTS: In the record before your Honor,
you didn't have this prospectus. You didn’t even
have it before you. That is why it wasn’t part of
your decision. Your decision says, he current record
does not contain any details about the Euro bonds
prospectus.
Ms. CHUNG: Your Honor, that was about the Ger-
man Euro bond not the Swiss bond. It is attached
to the Boccuzzi declaration that was submitted.
Mk. BoccuzzI: Your Honor, I would lke to
defend your Honor’s decision. [I thought I had a
great precedent walking in here. Of course, your
Honor had the relevant documents
[Page 17]
relating to the Swiss bond and the bonds that you
decided on. There is a dispute over what specific
German bond, I think was being discussed which is
another bond; but the point was in the end you set-
tled on the language we put before you that is
exactly the Ssaine language as the bond the lan-
guage of the bond that Mr Roberts has here, and
your Honor decided there is no submission to juris-
diction And | would add, your Honor was not mak-
ing new law, you were not going out on a limb.
Other cases in this district, which were cited in the
briefs and the Supreme Court case of—
Ms. CHUNG: Argentine Republic v. Amerada
Hess.
Mr. Boccuzzl: —Argentine Republic vy. Amerada
Hess, which requires that submissions to jurisdic-
tion someone is going to hail the sovereign into a
port in New York at least reference New York,
which this doesn’t do.
The general language they keep citing to, which
talks about enforcement, has nothing to do with a
1605(a)(1) submission to jurisdiction under the for-
elgn sovereign immunity act. They are trying to
make these distinctions between this case and your
decision in Lavaggi, and there are just no such dis-
tinctions that can be made to support a different
outcome here.
Ms. CHUNG: Your Honor, I would also like to add
that under the case law you cannot have a global
waiver. Explicit waivers of sovereign immunity are
construed very narrowly in
38a
[Page 18]
favor of the sovereign. The courts have held that
you need the words in the United States or some
indication that the sovereign intended to be sued in
the United States.
I would refer the Court to the Commercial Cor-
poration Sovrybflot case and also the Eaglet Corpo-
ration Limited case. Those are Southern District
cases that state that there was no waiver because
the words in the United States were not in that
waiver. I would also refer the Court to the
Proyecfin de Venezuela case where the Second Cir-
cuit held that a waiver that mentioned both the
words “New York” and “submission to jurisdiction”
under the Foreign Sovereign Immunities Act was
enough to waive immunity.
In this case we do not have either of those There
is no reference to New York. There is no reference
to the FSIA. All we have is an explicit waiver in
Frankfurt and in Buenos Aires.
MR. ROBERTS: I can address those cases, your
Honor. We did in our reply brief. They are not
applicable in this situation I think it is determina-
tive. The third paragraph is non-exclusive. [t has a
plain meaning. That means you can bring it any-
where
Ms. CHUNG: Your Honor
MR. ROBERTS: Excuse me.
And the fourth paragraph says any court. There
is a plain meaning there. There is no limitation.
[Page 19]
THE COURT: It seems to me that in the Lavaggi
case | certainly mentioned this language. It is a
39a
very similar language about jurisdiction And I say
that the prospectus states that the Re[p]ublic sub-
mits to the non-exclusive jurisdiction of the above
mentioned Swiss courts and any federal court sit-
ting in the city of Buenos Aires.
I really don’t rely on that in dealing with the
Swiss bonds. i hoid that there really isn't any waiv-
er of sovereign immunity. Isn't that what I did?
I don’t rely on that particular phrase about Swiss
courts in Buenos Aires. Look at page 7 of the deci-
310n.
Ms. CHUNG: Your Honor, but on page 6 you
specifically held the Re|p]ublic has not explicitly
waived its immunity for claims involving the Euro
bond or the Swiss bond.
THE COURT: It is a question of the ground on
which I held that. What was the ground?
MR. BoccuZZ!I: The ground | think, your Honor,
was—
THE COURT: It had nothing to do with that
phrase about Swiss courts in Buenos Aires.
Mr. BoccuZZ!: It was, if you read all the lan
guage together, there was no waiver of immunity.
THE COURT: I didn’t read all the language togeth-
er. The bottom of page 6, I am not talking about the
place. I am talking about the general lack of a
waiver of sovereign immunity. Isn’t that correct?
[Page 20]
Ms. CHUNG: That’s correct, your Honor
THE COURT: That’s correct.
Mr. BoccuZZ!I: But that conclusion follows from
here as well
THE COURT: No, it doesn’t
40a
Mr. BOCCUZ2ZI: Because you had the same lan-
guage in both bonds and the language in paragraph
four is not a waiver of sovereign immunity in the
United States.
THE CouRT: I know there was not a waiver of
sovereign immunity anywhere in Lavaggi, didn’t I”?
Mr. BoccuzziI: No. I don’t think you did, your
Honor.
THE COURT: What am | saying at pages 6 and 7.
Ms. CHUNG: I think what you are saying is the
Re[p]ublic has not waived its immunity in the
United States. ‘Therefore, in order to find jurisdic
tion-
THE COURT: Where do I say that? Where do I say
that?
Ms. CHUNG: That would be the only reason why
you would go on to the commercial activity excep-
tion.
Mr. BoccuZZzl: Right. Because the analysis is: Is
there a waiver in that 1605(a)(1) and finding there
was no such
THE COURT: Look, what is the issues before me
now on this motion?
Mr. BoccuzZZ!I: On this motion, your Honor?
THE CouRT: Is there an issue about commercial!
[Page 21]
activity?
MR. ROBERTS: No.
MR. BoOcCCUZZI: They did argue in their brief, did
they not, 1605(a)(2)?
Ms. CHUNG: Both issues are before the Court in
order to find jurisdiction. Either there would have
tla
to be an explicit waiver there would have to be or
commercial activity exception.
Mr. Boccuzzi: Both Lavaggi and this motion
argue that your Honor had jurisdiction either
under 1605(a)(1), which is there is an explicit waiv
er of immunity, and if that wasn’t the case then
1
|
4 at o l . 4
Je ks wWeva ude t
under ieré Was commercial
activity in the United States.
Your Honor found Lavaggi presented with the
same language that there was no explicit waiver to
immunity to claim to the United States and then
went on to deal with the 1605(a)(2) issue.
THE COURT: Well, I wish I would have said that
more clearly. | don’t really find that in the decision.
Mr. Boccuz2z!I: I think your Honor at the time,
you had to do that analysis to reach that. I think
your Honor again was correct based on the fact that
the case law requires a explicit jurisdiction—explic
it waiver the jurisdiction in New York that talks
about New York that. That is not here.
Also, your Honor, as I said before, these plaintiffs
[Page 22]
and many other plaintiffs are suing on these bonds
in Germany as it is. They recognize that. Other
folks have dropped their claims based on the same
language and the German courts are dealing with
them. I would think as a matter of good order that
is a point, but also it is just a fundamental subject
jurisdiction issue your Honor. You need a submis-
sion of jurisdiction which is a waiver to say in New
York or under the FSIA and that language is not
here
12a
MR. ROBERTS: That is, A, not the law, and B,
I don’t know if anybody argued in Lavaggi what we
are arguing Your Honor certainly did not state it
in his decision. No where in your decision do you
quote this language “any court.” It may have been
in the document before.
THE COURT: Any court?
MR. ROBERTS: In 4. In Lavaggi it doesn't even say
any court. In 4 it says, From jurisdiction of any
court. That is not in the Lavaggi decision. In
Lavaggi it does not say any court. That is the dif
ference.
MR. BoccuZ2ZI: Paragraph four, any court refers
to immunity in connection with execution, your
Honor. It follows from 3
MR. ROBERTS: There is no any court language in
Lavaggi. That is the difference. We have any court
here. It is plain, simple. Any court means any court
THE COURT: I think that the matter should be
looked
[Page 23]
at afresh. And Lavaggiin my view is not as clear as
I would like to have it about the grounds on which
I decided. But looking at it afresh, it seems to me,
and I would hold, that the Court should give sensi-
ble effect to the instrument which has been pre-
sented and that is Section 13, Subsection 3. And it
says that the Re[p]ublic hereby irrevocably submits
to the non-exclusive junisdiction of the District
Court in Frankfurt and any federal court sitting in
the city of Buenos Aires as well as any appellate
court of any thereof in any suit, action or proceed
ing against it arising out of or relating to these
A3a
bonds. The submission to jurisdiction is to the
jurisdiction in Frankfurt or in the city of Buenos
Aires.
Now, Subsection 3 goes on to say, The Re[p]ublic
hereby irrevocably waives to the fullest extent is
may effectively do so the defense of an inconvenient
forum to the maintenance of such suit or action or
such proceeding and any present or future objec-
tion to such suit, action or proceeding whether on
the grounds of venue, residence or domicile.
I would conclude that the reference to such suit or
action or such proceeding is—the antecedent to
that is those words in the first sentence in which
Frankfurt and Buenos Aires are chosen, because
that first sentence has the phrase any suit, action
or proceeding.
So the second sentence is not an unlimited way of
permission to select any place in the world for
jurisdiction.
[Page 24]
The third sentence says, The Re[p]ublic agrees
that a final judgment in any such suit, action or
proceeding in the courts mentioned above shall be
conclusive and may be enforced in other jurisdic-
tions by suit or on the judgment or any other
method provided by law. This third sentence
enforces the interpretation that this is a limited
provision. This Subsection 3 is limited because
surely the third sentence is talking about in the
courts mentioned above and that is the courts of
Frankfurt or the city of Buenos Aires.
Now, we come to Subsection 4 of this Section 13
and the plaintiff here is certainly right in saying
44a
that it has some very broad language. And it reads:
To the extent that the Re[p]ublic has or hereafter
may acquire any immunity, sovereign or otherwise,
from jurisdiction of any court or from any legal
process, whether through service or notice, attach-
ment prior to judgment, attachment in aid of exe-
cution, execution or otherwise with respect to itself
or its revenues, assets or properties, the Re[p}ublic
hereby irrevocably waives such immunity in respect
to its obligations under the bonds to the extent it is
permitted to do so under applicable law.
Now, the defense argues that this is simply a fol-
low-up to the last sentence in Subsection 3 about
enforcing judgments It does not literally read with
that lhmitation, but I would say that whatever it
means it should not be read as reading out of this
instrument the reference to Frankfurt and
[Page 25]
the city of Buenos Aires. I[ believe that there is case
law which would support the idea that where there
is an expressed grant of jurisdiction in specific
places that a general waiver of sovereign immunity
does not mean that that suit can be brought any
place in the world. So that is what I am holding.
Now, is there any other ground, aside from
reliance on this Section 13 in Subsections 3 and 4,
is there any other argument in support of jurisdic-
tion in New York’?
MR. ROBERTS: Yes. The word non-exclusive in 3.
It says non-exclusive when it talking about Ger-
many and Buenos Aires. Non-exclusive. Everything
that follows from there is just saying that we won't
to object if you bring it in Frankfurt or Buenos
Aires. That is all it is saying, but it is it not limit-
ing anyone from bringing it anywhere which is why
4 says any court.
Mr. BoccuZZ!I: Your Honor, that is just an argu-
ment that they can try to make the case that under
1605(a)(2) that that the Re[p]ublic would be subject
to jurisdictions here if there Was commercial activ-
ity here that that could be used. 1605{a)(2) is not
available here because these bonds, as it is clear
from Subsection 2 of paragraph 13 were performable
in Germany, they are German denominated instru-
ments. And so as in Lavaggi where you said
1605(2) does not get you junisdiction of this court,
it is the same analysis here. So that term non-
exclusive does not save the case for the plaintiffs
[Page 26]
Ms. CHUNG: Your Honor, I also would like to add
the word non-exclusive is not dispositive if you look
at the Commercial Corporation Sovrybflot.
THE COURT: The motion to dismiss the claim
based on the German bonds is granted.
What other motions do we have?
Mr. Boccuzzi: I think, your Honor, that takes
care of the 54(b) part. This case that we moved to
dismiss the German claims, there are other bonds
where there was jurisdiction. Since your Honor
hadn’t decided the motion to dismiss, there was a
question whether there should have a 54(b) judg-
ment. Since those bonds were dismissed out of the
case, the 54(b) application is now mooted. So that is
taken care of.
The other question was the form of the judgment.
And that is the question of whether plaintiffs are
46a
entitled to—it is a question of interest upon inter-
est after an acceleration of the bonds. Basically
what the plaintiffs are asking for is a judgment
that is different from the 36 other judgments that
your Honor has entered.
The way the law works is if the bonds, the inter-
est payments are coming due and an interest pay-
ment is missed, than interest is owed when a
lawsuit is bought on the missed interest pavement.
Once plaintiff accelerates the bond then what is
due is the principal amount and an interest on that
principal amount as well as any interest on past
due interest
[Page 27]
payments. That is how all the judgments in these
cases have been structured and they all read that
way.
What plaintiffs would like to do in a departure
from all the other cases, and I think to get another
million or so dollars, is to say that they get interest
on interest payments that would have been due
after the acceleration came in. And there is just no
authority or support for that position. I think again
this is a matter that has been dealt with, your
Honor, not just once, 36 times. We have cited the
case law in our letters and I think it is straightfor-
ward and we can take care of it and that would
finalize the term of the judgment in this particular
CVI.
MR. ROBERTS: Your Honor, they don’t cite any
case law. I don’t know what the other 36 cases are.
THE COURT: What is it you are asking for?
47a
MR. ROBERTS: We are asking fur something very
simple. Very simple. Statutory prejudgment inter-
est on the contractual interest, which they admit is
due, until judgment is entered. Not in the future.
They admit that we get contractual interest until
judgment is entered. Obviously the principal was
accelerated and we get prejudgment interest on the
principal. The case law that we submitted is clear
that you get prejudgment interest, the statutory
interest, on principal and interest until judgment
is entered. if judgment was entered today—
[Page 28]
THE COURT: You are taiking about the interest
that is due on the bond
MR. ROBERTS: Correct.
THE COURT: Not prejudgment interest awarded
as a matter of law?
MR. ROBERTS: Let me say what we agree, what
the parties agree. The parties agree that the inter-
est under the bond accrues—continues to accrue
after acceleration until the day of judgment. We all
agree on that. We all agree that we had prejudg-
ment interest on the principal amount, statutory
prejudgment interest. Statutory prejudgment inter-
est on the principal amount. The only dispute is
statutory prejudgment interest on the contractual
interest which has accrued from acceleration to
date If judgment was entered today, we are still
entitled to statutory pre—
THE CouRT: There is a certain amount of interest
due?
MR. ROBERTS: That’s right. Otherwise, all they
are having to do is pay precisely what they owed
48a
under the contract with no penalty, which is what
prejudgment interest is all about. They have held
onto the money. The point of prejudgment statuto-
ry prejudgment interest is to make them pay for
holding onto that money. We haven’t had the
money, therefore we get the statutory—
THE COURT: Frankly I don’t understand why
there isn’t interest due on the entire obligation.
The entire contractual
{Page 29]
obligation. The contractual obligation includes
principal. When I talk about prejudgment interest,
1 am not talking about contractual interest.
MR. ROBERTS: Correct.
THE CouURT: | am talking about interest that
would be awarded because of the law.
MR. ROBERTS: Correct.
THE COURT: Now, when did the prejudgment
interest on principal start running?
MR. ROBERTS: At acceleration.
THE COURT: At acceleration. That was a contrac-
tual obligation.
MR. ROBERTS: Correct.
THE COURT: It wasn’t paid and so the prejudg-
ment interest starts running.
MR. ROBERTS: Right.
THE COURT: The contractual obligation, does the
contract here provide for interest following acceler-
ation?
MR. ROBERTS: It doesn’t address that particular-
ly but it does say interest until the principal is paid
in full. It only makes sense that obviously if they
49a
haven't paid the principal, acceleration is meaning-
less.
THE Court: Well, it is a little difficult. Under the
contract, obviously interest accrued until accelera-
tion. [ am putting aside whether it kept accruing,
but it accrued until
acceleration
MR. ROBERTS: And they have agreed on prejudg-
ment interest on the contractual interest until
acceleration. There is no difference. You get con-
tractual interest until the obligation is paid.
THE Court: Not necessarily.
MR. ROBERTS: It says you get interest until prin-
cipal is paid.
THE CouRT: Acceleration is an event that is
based on a default.
I just have a very simple question: Does the con-
tract literally say that the contractual interest
runs on the accelerated principal?
MR. ROBERTS: It does not expressly say that.
THE COURT: It doesn’t say it then if it doesn’t
expressly say it.
MR. ROBERTS: That’s correct, your Honor. It does-
n’t say it.
THE CouRT: The idea that interest runs until the
principal is paid that is a truism. Of course inter-
est runs assuming in the normal course there is no
default. It runs until it is paid. If there is no con-
tractual obligation to pay interest on an accelerat-
ed principal, there is no such contractual obligation
and therefore all you got is the
Mr. ROBERTS: But they are not disputing that
5Oa
[Page 31]
obligation. They have agreed to pay us contractual
interest until judgment.
MR. Boccu2ZZI: No. We have agreed—
THE CouRT: Have they done that?
MR. ROBERTS: They have agreed.
Mrk. BOcCUZZI: When you say “they,” are you
talking about the Re[p]ublic or your opposing coun-
sel?
MR. ROBERTS: I am talking what we have agreed
on among counsel and it is not in dispute that con-
tractual interest continues after-
THE COURT: What is the rate of contractual inter-
est?
MR. ROBERTS: Various rates.
Mr. Boccu2ZZziI: No. I think the point here that is
getting confused is under New York law if there is
an interest rate just that governs the contract—
here this is, I don’t know, an 11 percent bond, say—
then the prejudgment interest is not the default
9 percent New York State interest rate. It is the
contractual rate. That is just the statutory look-
through.
So the interest they are getting is that amount on
the accelerated principal. They want additional
interest on top of that. Mr. Roberts said it is a
penalty. The point of preyudgment interest is not to
penalize anyone. It is to make him whole. He is
being made whole for the missed interest payments
that were missed leading up to acceleration. That
IS
5la
[Page 32]
part of his judgment, plus interest on those
amounts. Then there is the accelerated principal
amount. Then there is the statutory interest that
accrues on top of that amount, which is the con-
tractual rate.
~~ « > ~, “7 2 ee ae eS ~ tAKeFr Aim
MR. ROBERTS: Your Honor asked a very simple
question and they have answered it in their papers
to your Honor. Does the contractual interest con-
tinue to accrue after acceleration, and they have
said yes.
THE COURT: What Mr. Boccuzzi is saying is that
he is using the amount or the rate, but he is not to
bring—I don’t know whether he has agreed or not—
he is saying now that he has not agreed that con-
tractual interest, interest according to the contract,
continues to run after acceleration.
MR. ROBERTS: That is in their papers. It is in
their papers that the contractual interest continues
to run.
MR. MOORE: I think we are talking past each
other. I think I know what your Honor’s question
is, 1 know what Mr. Roberts concern is, and I think
I can resolve it if you give my one second. That is
the issue really here is what interest rate should
apply to the accelerated principal amount. We
agree that the contractual rate should apply.
THE COURT: That isn’t the issue at all. There will
come a day when the judgment is entered. Now,
that judgment will have to include the amount of
the accelerated principal. It will have to include all
the interest that had contractually
[Page 33]
run and not been paid up until the time of the
acceleration. Those are obligations under the con-
tract. Because without any doubt, the Re[p]ublic
owed interest at least to the time of acceleration.
So whatever that amount is, and that would be eas-
ily calculated, that is an obligation, a contractual
obligation.
Now, if the contract provides that following
acceleration the contractual rate of interest will
continue to accrue then that is a contractual obli-
gation. And if it provides that it will continue to
accrue until the time of a judgment, then as of the
time of judgment what you've got as contractual
obligations is the amount of the principal, the
amount of any interest that accrued prior to the
acceleration, and the amount much any interest
that had accrued prior to the judgment if the con-
tract provides for that.
And then as far as prejudgment interest,
[ assume lawyers know how to figure prejudgment
interest. You figure prejudgment interest on
amounts that were due and unpaid prior to the
judgment. When it comes to the principal that is
easy. Because there is principal. As far as interest,
to figure prejudgment interest on unpaid interest,
as of a certain date there was a certain amount of
unpaid interest, maybe the next month there is
another amount of unpaid interest, and it keeps
increasing. It is a little harder to figure prejudg-
ment interest on unpaid interest, but it can be
done
53a
[Page 34]
There is nothing impossible in the idea that the
contract could say that the contractual interest at
the rate provided for in the bonds keep running
until the time of judgment; but if it doesn’t say
that, it doesn’t say it.
MR. BOCCUZZi: That’s right, your Hono:
THE COURT: All 1 want to know is if it doesn’t say
it then what you are left with is that you get pre
judgment interest on the amount of principal run-
ning from the date of acceleration, you get
prejudgment interest on unpaid interest that was
due under the contract and maybe that is one of
these things you have to due some fancy figuring
Because it would be maybe there was an interest
payment that was due and unpaid at the end of a
certain quarter and another interest payment due
the next quarter and so forth. Kach of those gets
prejudgment interest from the day that it was
missed.
So nobody has cited anything in the bond or the
contract or the prospectus or anything that says
that there is to be interest paid on the accelerated
principal.
MR. ROBERTS: It does not say that your Honor,
but the contract does say interest continues to run
until the principal is paid. You say that is a truism,
but it is also a contractual term. How could a
lender be prejudiced by accelerating and then he
gets no further interest after he accelerates? That
it not possible
THE COURT: As 1 was making the remarks I wa
making,
[Page 35]
it would be rather anomalous to simply stop the
running of the contractual interest
MR. ROBERTS: They don’t say that. That is not
their position. They say contractual interest con
tinues. They are just saying we don't get statutory
prejudgment interest on the
THE COURT: Suppose somebody never sued.
| mean, if you say you only get prejudgment inter
est, maybe they don’t sue. But does interest stop
running?
MR. ROBERTS: Of course not. It continues to run
until it is paid or until judgment is entered
MR. BOCCUZZI: We are giving him interest We
are not giving him interest on interest. We cited
the Citibank case. This was done before, your Honor,
because the judgment has been entered in this way
And your Honor has been doing it correctly. The
quote from the New York authority is well settled
that when a contract provides for interest to be
paid at a specified rate where principal is paid the
contract rate of interest rather than the legal rate
set forth in CPLR 5004 governs until payment of
principal or until the contract is merged into a
judgment.
5o we are giving him exactly what your Honor
sketched out in terms of missed interest payments
up to acceleration. He gets those missed interest
payments plus interest on those. You have your
accelerated amount and then there is prejudgment
[Page 36]
interest in the contractual rate that runs on those
JOA
THE COURT: The interest that was unpaid prior
to acceleration, what about that?
Mr. BoccuZZ!I: He is getting that. Those were
missed interest payments. That is sketched out in
the judgment. Then the Spodac case says he gets
interest on that, those missed interest.
THE COURT: He gets prejudgment interest on
those missed interest payments, right?
MR. BOCCUZZI: Correct But once acceleration
happens
THE COURT: Why does the contractual right to
get interest stop at acceleration?
Mr. BoccuZZ!: Because that is the way the bond
instrument works. Once you have accelerated and
say give me my principal now, there are no more
scheduled interest payment dates after that accel
eration.
MR. ROBERTS: And if they gave us the principal
then, we wouldn’t be here. It is because they didn't
give us the principal upon acceleration that inter
est continues to accrue It is just so elemental, your
Honor. If they paid us, of course acceleration is
meaningful. If they don’t pay us, acceleration ts
meaningless. The interest continues to accrue.
Mr. Boccu2Z!: He is getting interest, but he is
got getting interest on top of that interest. He
wants interest on
[Page 37]
interest after acceleration. The law doesn't provide
that. That is why we cite the Citibank case and
that is how we have done it in these cases. I don't
ay we do it because we have done it that way, but
it was briefed before and your Honor got it right
56a
before and your Honor got it right and it is based
on New York law
it is also the fact that that is what makes him
whole. Is it not a penalty. It is not interest on inter
It is interest on the accelerated amount. That
est.
is what he was due. He said, I have accelerated by
bond, pay me that amount. We didn’t pay that
amount. He brings a lawsuit That amount is the
amount being sued on and then he gets interest on
it. He doesn’t get interest on the interest on that
MR. ROBERTS: They have agreed that we get pre
judgment interest on the interest prior to accelera
tion.
THE COURT: Where have they agreed to that?
MR. ROBERTS: In writing to us and then we sub-
mitted it to your Honor.
THE COURT: Cite me their agreement
Mr. BoccuZZI: The preacceleration interest The
scheduled interest payments that were missed, we
have said and this was briefed before your Honor,
that they get interest on those missed interest pay-
ments. But once acceleration occurs, they don’t get
interest on interest payments that would have
come due after acceleration because they have
accelerated.
[Page 38]
Chat is the way the contract works. When vou are
accelerating, you say I want my principal now. We
didn't give him the principal now because we
defaulted and therefore the prejudgment interest
that accrues 1s prejudgement interest on top of that
iccelerated amount. It is not interest on fictitiou:
57a
interest payments that was hit because there is an
acceleration.
MR. ROBERTS: There is no fiction. The interest
continues to accrue every day after acceleration.
That is not disputed. It is also not disputed that we
get prejudgment interest on the contractual inter-
est prior to acceleration. It is illogical and unfair
not to continue that prejudgment interest after
acceleration until judgment. It is prejudgment
interest.
THE CouRT: Look, you can look at it two ways,
but the acceleration contemplates a right to get
immediate payment of principal. The contract
could or could not provide that following accelera-
tion as long as the principal is not paid, the inter-
est will have continued to accrue quarterly. But
that would be a little bit contradictory to the idea
of acceleration because the bond is immediately
due. It is not due in 2013 or 2021. It is due now.
So it would be anomalous to provide for the con-
tinuation of the regular quarterly payments of
interest that are due. And nobody has cited any
provision in the contract
[Page 39]
saying that such is the case. So on balance it seems
to me the proper interpretation is to not award
interest where the contract doesn’t provide for the
interest. What is due is interest that will be award-
ed pursuant to law and there is such interest, but
I don’t think there is a contractual term which con-
tinues the contractual interest.
So my holding is that the only interest that is
due is the interest that is due under the contract
58a
and that is preacceleration. As far as postaccelera-
tion all that is due is prejudgment interest.
So to the extent that you need to enter orders
based on what I ruled today, please do so. That con-
cludes our proceedings this afternoon. Thank you.
MR. ROBERTS: Thank you, your Honor.
MR. BoccuZZzI: Thank you, your Honor.
59a
[stamp] MEMO ENDORSED
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
05 Civ. 4085 (TPG)
CAPITAL VENTURES INTERNATIONAL,
Plaintiff,
- against -
THE REPUBLIC OF ARGENTINA,
Defendant.
NOTICE OF MOTION TO DISMISS
PURSUANT TO RULE 12(b)(1) AND 12(b)(6)
PLEASE TAKE NOTICE that upon the declara-
tion of Jennifer L. Gorskie, dated July 28, 2005, all
attached exhibits, and the accompanying Memo-
randum of Law, defendant will move this Court, at
a date and time to be determined by this Court,
pursuant to Federal Rule of Civil Procedure
12(b)(1) and 12(b)(6) for an order dismissing plain-
tiff’s claims, and for such other relief as this Court
deems just and proper; and
[HANDWRITTEN]
Motion granted to extent stated in the minu ‘ss of
February 15, 2007, and otherwise denied.
/s/ Thomas P. Griesa
USDJ
2/22/07
[STAMP]
RECEIVED
AUG 1, 2005
CHAMBERS OF JUDGE GRIESA
NOTICE IS FURTHER GIVEN that responses to
the Motion, if any, shall be served by hand on or
before August 16, 2005 on counsel for the Republic
of Argentina, Cleary Gottlieb Steen & Hamilton
LLP, One Liberty Plaza, New York, New York
10006, Attention: Jonathan I. Blackman, Esq.
Dated: New York, New York
July 28, 2005
CLEARY GOTTLIEB STEEN & HAMILTON LLP
By: /s/ Carmine D. Boccuzzi
Jonathan I. Blackman (JB 3846)
Carmine D. Boccuzzi (CB 2177)
One Liberty Plaza
New York, New York 10006
(212) 225-2000
Attorneys for the Republic of Argentina
6la
To: Kenneth G. Roberts
Wolf, Block, Schorr and Solis-Cohen LLP
250 Park Avenue
New York, NY 10177
Attorneys for Plaintiff
Offering Circular
October 30, 1997
The Republic of Argentina
DM 1,000,000,000
8% Deutsche Mark Bonds of 1997/2009
—German Security Code: 195 490—
Issue price: 102 25%
Application will be made to list the DM 1,000,000,000
8% Deutsche Mark Bonds of 1997/2009 (the “Bonds”)
on the Frankfurt Stock Exchange.
ABN AMRO Hoare Govett
ABN AMRO Bank (Deutschland) AG
Commerzbank
Aktiengesellschaft
Credit Suisse First Boston
Aktiengesellschaft
Deutsche Morgan Grenfell
Deutsche Bank Aktiengesellschaft
Dresdner Kleinwort Benson
Dresdner Bank Aktiengesellschaft
DG BANK
Deutsche Genossenschaftsbank
SBC Warburg
A Division of Swiss Bank Corporation
Westdeutsche Landesbank
Girozentrale
63a
Banca Nazionale del Lavoro
Bank Brussel Lambert N.V.
Bayerische Hypotheken- und Wechsel-Bank
Aktiengesellschaft
Bayerische Landesbank
Girozentrale
Bayerische Vereinsbank AG
Bear, Stearns International Limited
BZW Deutschland
Branch of Barclays Bank PLC
CABOTO HOLDING SIM
CARIPLO S.p.A.
Credito Italiano
Goldman, Sachs & Co. oHG
HSBC Trinkaus
Trinkaus & Burkhardt KGaA
ING Barings
Lehman Brothers Bankhaus AG
Merrill Lynch Capital Markets Bank Limited
Frankfurt/Main Branch
J.P. Morgan GmbH
MORGAN STANLEY DEAN WITTER
Nikko Bank (Deutschland) GmbH
Sale 10n Brothers AG
64a
Paribas
Banque Paribas—Zweigniederlassung
Frankfurt am Main
Societe Générale S.A.
UBS
Union Bank of Switzerland
(Deutschland) Aktiengesellschaft
The Bonds are represented by a permanent glob-
al bearer bond (the “Global Bearer Bond”) which
has been deposited with Deutsche Borse Clearing
AG, Frankfurt am Main (“DBC”) on October 30,
1997. No definitive bonds or interest coupons will
be delivered. The right of the holders of the Bonds
to demand delivery of definitive bonds is excluded.
The Bonds have not been and will not be
registered under the United States Securities
Act of 1933, as amended, and are subject to
U.S. tax law requirements. Subject to certain
exceptions, the Bonds may not be offered or
sold or delivered within the United States of
America or to U.S. persons.
The Republic of Argentina (the “Issuer”), having
made all reasonable inquiries, confirms that this
Offering Circular contains all information with
regard to the Issuer and the Bonds which is mate-
rial in the context of the issue and the offering of
the Bonds, that the information contained in this
Offering Circular is in all material respects true
and accurate and not misleading, that the opinions
and intentions expressed in it are honestly held
and that there are no other facts the omission of
65a
vhich would in the context of the issue of the
Bonds make any statement in this Offering Circu-
lar misleading in any material respect. The Issuer
accepts responsibility accordingly.
No person is authorised to give any information
or to make any representations regarding the
Issuer or the Bonds other than those contained in
this Offering Circular and any information or rep-
resentation not contained in this Offering Circular
must not be relied upon as having been authorised
by or on behalf of the Issuer or any Manager.
The delivery of this Offering Circular at any time
does not imply that the information contained in it
is correct as at any time subsequent to the date of
this Offering Circular.
The Managers do not make any representation or
warranty, expressed or implied, as to the accuracy
or completeness of the information in this Offering
Circular. Each person receiving this Offering Cir-
cular acknowledges that such person has not relied
on the Managers or any person affiliated with the
Managers in connection with its investigation of
the accuracy of such information or its investment
decision. Each person contemplating making an
investment in the Bonds must make its own inves-
tigation and analysis of the creditworthiness of the
Issuer and its own determination of the suitability
of any such investment, with particular reference
to its own investment objectives and experience,
and any other factors which may be relevant to it in
connection with such investment.
This Offering Circular does not constitute an
offer of or an invitation by or on behalf of the Issuer
66a
or the Managers to subscribe for or purchase any of
the Bonds.
The distribution of this Offering Circular and the
offering of the Bonds in certain jurisdictions may
be restricted by law Persons into whose possession
this Offering Circular comes are required by the
Issuer and the Managers to inform themselves
about and to observe any such restrictions. For a
further description of restrictions on offers and
sales of Notes and on distribution of this Offering
Circular see “Subscription and Sale”.
In this Offering Circular, references to “DM” and
“Deutsche Mark” are to the lawful currency of the
Federal Republic of Germany.
In connection with this issue ABN AMRO
Bank (Deutschland) AG may overallot or
effect transactions which stabilize or main-
tain the market price of the Bonds at a level
which might not otherwise prevail, to the
extent permitted by applicable laws. Such sta-
bilizing, if commenced, may be discontinued
at any time.
Table of Contents
Subject of this Offering Circular
General Information......
Documents for Inspection
Subscription and Sale
Delivery of the Bonds
Taxation in the Federal Republic
of Germany ...
Sales Restrictions ...........
Use of Proceeds....
Security Codes..........
Investment Considerations
Conditions of Issue..............
Recent Developments....
The Republic of Argentina ..
Territory and Population........
Government and Political Parties
Foreign Affairs and International!
Organizations .........
The Argentine Economy ...........
Introduction
History and Background
68a
Deregulation of the Economy and
Privatizations
Environment
Gross Domestic Product
Principal Sectors of the Economy
Employment and Labor
Poverty
Foreign Trade and Balance of Payment:
Balance of Payments
Foreign Trade...
foreign Investment
Monetary System
The Central Bank.
Financial Sector
Liquidity and Credit Aggregates
[Inflation ..
Foreign Exchange Rates and
International Reserves
Securities Markets.
Public Sector Finance
General
Public Sector Account
The 1997 Budget
Social Security
Public Sector Debt...
General ..
Description of Debt and Debt
Restructuring ..
Debt Record.
Subject of this Offering Circular
Subject of this Offering Circular are the DM
1,.000,000,000 8% Deutsche Mark Bonds of
1997/2009 (the “Bonds’”) issued by the Republic of
Argentina pursuant to Decree No. 1563/96 dated
December 19, 1996 issued by the National Execu
tive Power of the Republic of Argentina, as amend
ed, and Resolution No. 476 dated October 27, 1997
of the Secretary of the Treasury of the Republic of
Argentina
General Information
Documents for Inspection
The documents mentioned in this Offering Circu
lar may be inspected during usual business hours
on any working day on which banks are open fo:
business from the date hercof and so long as any of
the Bonds remain outstanding at the offices of ABN
AMRO Bank (Deutschland) AG, Mainzer Land
strasse 65, 60329 Frankfurt am Main
Subscription and Sale
An international syndicate of banks and finan
clal institutions (the “Banks” or “Managers’) head
7Oa
ed by ABN AMRO Bank (Deutschland) AG as Lead
Manager has purchased the Bonds to which this
Offering Circular pertains. The Bonds were offered
for sale, subject to availability, at the price of
102.25%. Payment date is October 30, 1997.
For the subscribers of the Bonds, the yield is
7.7060% per annum(*) calculated on the basis of
the issue price of 102.25%
Taxation in the Federal Republic
of Germany
In the Federal Republic of Germany, interest
payments in respect of Bonds held in custody by a
bank in Germany to persons who are tax residents
of Germany (or non-residents provided that the
On October 30, 1997, the official exchange rate at the Frank
furt Foreign Exchange between Deutsche Murk and U.S.$
was DM 1.7190 1 U.S.$. Concerning the exchange rate of
Argentine currency, the Peso, see “Monetary Syvstem—For
eign Exchange Rates and International Reserves”
(*)The yield was calculated in accordance with the following
formula by using an iterative method for solving the equation
for the variable (1) (internal rate of return or yield)
(‘FF
()+))
mcan the amount of « pit | nput
IOscriptlion ol the fond
the Ca
7la
interest income falls in a category of income from
German sources, such as income effectively con-
nected with a German trade or business; income
from the letting and leasing of Germany property,
etc ) are subject to an advanced interest income tax
(Zinsabschlagsteuer) of 30%. In addition, there is a
solidarity-surcharge tax (Solidaritaétszuschlag) of
7.5% on the income tax, so that the total rate is
32.25%. The tax withheld may tater be credited as
a prepayment for purposes of the income tax
assessment.
Accrued interest for the time of ownership is also
subject to this withholding tax.
The above summary describes the principal
applications of German withholding tax. For their
particular case, investors should obtain individual
tax advice.
Sales Restrictions
The Bonds have not been and will not be regis-
tered under the U.S. Securities Act of 1933, as
amended, (the “Securities Act’) and may not be
offered or sold within the United States or to or for
the account of, United States persons, except pur-
suant to an exemption from, or in a transaction not
subject to, the registration requirements of the
Securities Act. Fach Manager has represented and
agreed that it has not offered or sold, and will not
offer or sell, any Bonds constituting part of its allot-
ment within the United States or to, or for the ben-
efit or account of United States persons, except in
accordance with Regulation S under the Securities
Act. Accordingly, each Bank has represented and
T2a
agreed that neither it, its affiliates nor any persons
acting on its or their behalf have engaged or will
engage in any directed selling efforts with respect
to the Bonds Terms used in this paragraph have
the meaning given to them by Regulation S under
the Securities Act.
In addition, under U.S. Tres. Reg. §1.163-
5(c)(2))(C) (the “C Rules”), Bonds must be issued
and delivered outside the United States and its
possessions in connection with their original
issuance. Each Manager has represented and
agreed that it has not offered, sold or delivered,
and will not offer, sell or deliver, directly or indi-
rectly, Bonds within the United States or its pos-
sessions in connection with their original issuance.
Further, in connection with their original issuance
of Bonds, each Manager has represented that it has
not communicated, and will not communicate,
directly or indirectly, with a prospective purchaser
if either such manager or such purchaser is within
the United States or its possessions, nor has it,
directly or indirectly, through any of its U.S. offices
communicated nor will it communicate with any
prospective purchaser Terms used in this para-
graph have the meanings given to them by the U.S.
Internal Revenue Code and regulations thereun-
der, including the C Rules
Each Manager represents and agrees that:
(a) 1t has not offered or sold and, prior to the date
six months after the date of issue of the Bonds,
will not offer or sell any Bonds to persons in the
United Kingdom except to persons whose ordi-
73a
nary activities involve them in acquiring, hold-
ing, managing or disposing of investments (as
principal or agent) for the purposes of their
businesses or otherwise in circumstances which
have not resulted and will not result in an offer
to the public in the United Kingdom within the
meaning of ihe Public Offers of Securities RNeg-
ulations 1996 (the “Regulations’”);
it has complied and will comply with all appli-
cable provisions of the Financial Services Act
1986 and the Regulations with regard to any-
thing done by it in relation to the Bonds in,
from or otherwise involving the United King-
dom; and
it has only issued or passed on and will only
issue or pass on in the United Kingdom any
document received by it in connection with the
issue of the Bonds to a person who is of a kind
described in Article 11(3) of the Financial Ser-
vices Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to
whom such document may otherwise lawfully
be issued or passed on.
As used herein, “United Kingdom” means the
United Kingdom of Great Britain and Northern
Ireland.
The Bonds are issued under the “Euro Securities
Exemption” pursuant to § 4(1) No. 1 and § 4(2) of
the Securities Sales Prospectus Act of the Federal
Republic of Germany (Wertpapier-Verkaufspro-
spektgesetz) of December 13, 1990 (the “Securities
74a
Prospectus Act”). Each Manager is aware of the
fact that no sales prospectus (Wertpapier-Ver-
kaufsprospekt) in Germany has been and will be
published and each Manager will comply with the
Securities Prospectus Act and the restrictions
applying to the offer and distribution of Euro Secu-
rities. In particular, cach Manager undertakes not
to engage in public advertisements (6ffentliche
Werbung) in the Federal Republic of Germany with
respect to the Bonds.
In addition to the specific restrictions set out
above, each Manager has agreed that it will
observe all applicable provisions of law in each
jurisdiction in or from which it may offer or sell the
Bonds or distribute any offering material.
Use or Proceeds
The net proceeds of the issue of the Bonds
amounting to approximately DM 992.5 million will
be used by the Issuer for general governmental
purposes.
Security Codes
German Security Code: 195 490
Common Code: 811 5036
ISIN Code: DE 000 195 490 7
Investment Considerations
Investors considering the purchase of Bonds
should decide whether to purchase only after thor-
ough evaluation of the particular risks described
below.
75a
The Issuer is a country which, after a debt crisis
of at least ten years, comprehensively rescheduled
with approximately 750 international creditor
banks substantially all of the foreign currency
denominated commercial bank debt of the Public
Sector in 1993. The claims of commercial banks
subject to the rescheduling amounted to U.S.$ 28.5
billion including an estimated U.S.$ 9.2 billion in
interest arrears. In connection with the reschedul-
ing, the creditor banks forgave part of their capital
claims and refinanced the remainder by accepting
partially collateralized securities with maturities
of up to 30 years.
The rescheduling effected a reduction in the face
amount of debt denominated in foreign currency of
approximately U.S.$ 2.3 billion or a reduction of
the net present value of approximately U.S.$ 5.6
billion The gross foreign currency denominated
debt of the Non-Financial Public Sector was
U.S.$ 63.5 billion at the end of 1992, U.S.$ 64.1 bil-
lion at the end of 1993, U.S.$ 72.3 billion at the end
of 1994. U.S.$ 81.2 billion at the end of 1995 and
U.S.$ 88.9 billion “ at the end of 1996.
The Argentine Government’s current stabiliza-
tion program is built around the plan announced by
then Economy Minister Cavallo on March 20, 1991
(the “Convertibility Plan”) and approved by Con-
gress through passage of the Convertibility Law, as
amended and supplemented. The Convertibility
Plan has sought to reduce inflation and restore eco-
nomic growth through reforms relating to the tax
system, privatization and the opening of the econo-
() Preliminary figure.
76a
my that are intended to address underlying struc-
tural problems that had distorted fiscal and mone-
tary policy.
Although some of the Convertibility Plan’s goals
have already been achieved and its initial success
has attracted international attention, a number of
issues remain to be resolved before the economy of
Argentina can achieve long-term stability.
The Convertibility Plan is centered on two fun-
damental principles:
(1) full international reserve backing for the mone-
(2)
tary base. The monetary base (consisting of cur-
rency in circulation) is not to exceed Banco
Central’s gross international assets at a fixed
rate of one peso per U.S. dollar Gross interna-
tional assets include Banco Central's holdings
of gold, foreign exchange (including short-term
investments), U.S. dollar-denominated Argen-
tine government notes (in a percentage not to
exceed one third of Banco Central’s unrestrict-
ed reserves) and its net Asociaci6én Latinoamer-
icana de Integracion (“ALADI’) claims (except
overdue claims), all freely available and valued
at market prices. Under this arrangement, in
which the peso is fully convertible into the U.S.
dollar, the monetary base can only be increased
when backed by increases in the level of inter-
national reserves, and net whenever the public
sector or the financial sector need to be
financed.
the targeted elimination of the fiscal deficit and
the achievement of a surplus in the primary
balance in order to provide funds for the Gov-
77a
ernment to service its debt and thereby elimi-
nate the need for further borrowings.
Outstanding notes and bonds in foreign currency
(with exception of the Brady Bonds) of the Issuer
are rated Ba3"?) by Moody’s Investors Service
(“Moody’s”) and BB“ by Standard & Poor’s Ratings
Service, a division of The McGraw-Hill Companies,
Inc. (S&P”).
(2) Definition by Moody’s
“Bonds which are rated Ba are judged to have specula-
tive elements; their future cannot be considered as well-
assured. Often the protection of interest and principal
payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in
this class.
Moody’s applies numerical modifiers ] 2 and 3 in each
generic rating classification from Aa through B in its
corporate bond rating system The modifier 1 indicates
that the security ranks in the higher end of its generic
rating category, the modifier 2 indicates a midrange
ranking, and the modifier 3 indicates that the issue
ranks in the lower end of its generic rating category.”
(3) Definition by S & P
“BB, B, CCC, CC, C. Debt rated ‘BB’, ‘B’, ‘CCC’, ‘CC’ and
‘C’ is regarded, on balance, as predominantly speculative
with respect to capacity to pay interest and repay prin-
cipal in accordance with the terms of the obligation. ‘BB’
indicates the lowest degree of speculation and ‘C’ the
highest degree of speculation. While such debt will like-
ly have some quality and protective characteristics,
these are outweighed by large uncertainties or major
risk exposures to adverse conditions. BB Debt rated ‘BB’
has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial,
78a
Payments with respect to bonds and notes issued
by Argentina were properly made during the debt
crisis of the 1980s and in the wake of the Mexican
peso crisis (1994/95). However, this fact cannot be
viewed as a guarantee that payments with respect
to the bonds and notes of Argentina, outstanding in
a possible future debt crisis, will be made in the
same manner. The structure of Argentina’s exter-
nal debt, which has changed as a consequence of
the rescheduling—the share of bonds and notes in
the external debt has increased considerably—cre-
ates a strong possibility that the payment on notes
and bonds in foreign currency issued by Argentina
may also be adversely affected when serious prob-
lems in connection with Argentina’s foreign pay-
ments and/or budget occur.
Therefore the Bonds are suitable only for
speculative investors who are in a position to
assess special risks.
or economic conditions which could lead to inadequate
capacity to meet timely interest and principal payments.
The ‘BB’ rating category is also used for debt subordi-
nated to senior debt that is assigned an actual or implied
‘BBB-’ rating Plus (+) or Minus (—). The ratings from
‘AA’ to ‘CCC’ may be modified by the addition of a plus
or minus sign to show relative standing within the major
categories.”
79a
The Conditions of the Issue will be printed in the
German language: their non-binding translation
follows:
Conditions of the Issue
§ 1
(Form and Denomination)
(1) The issue in the aggregate principal amount of
DM 1,000,000,000.-
divided into
1,000,000 Bonds of DM 1,000 each
Nos. 1 to 1,000,000
(the “Bonds”) payable to bearer and ranking pari
passu among each other
(2) The Bonds, including the right to demand pay-
ment of interest, shall be represented by a perma-
nent Global Bearer Bond (the “Global Bearer
Bond”) which has been deposited with Deutsche
Borse Clearing AG, Frankfurt am Main (“DBC”) No
definitive bonds or interest Coupons will be deliv-
ered The right of the holders of the Bonds (the
“Bondholders”) for the delivery of individual bonds
is excluded. The Bonds are transferable as co-own-
ership participation in the Global Bearer Bond pur-
suant to the rules and regulations of the DEC and
are transferable outside the Federal Republic of
Germany pursuant to the rules and regulations of
the Euroclear System, Brussels, and CEDEL bank
société anonyme, Luxembourg. The Global Bearer
Bond shall be signed manually or in facsimile by an
80a
authorized representative of the Republic of Argenti-
na and shall bear the handwritten signature of a
control officer of the Principal Paying Agent (as
defined below).
§ 2
(Single Currency, Redenomination)
The European Economic and Monetary Union
(EMU) provides for the introduction of a single cur-
rency (Euro) and the substitution of the national
currencies of the Member States participating in
EMU. On the date of the introduction of the single
currency (Euro) for the Federal Republic of Ger-
many, the currency specified in these Conditions of
the Issue and the currency specified for payments
under these Conditions of the Issue shall be substi-
tuted by the single currency (Euro) and the change-
over into the single currency (Euro) shall take
place Conversions shall be based on the officially
fixed conversion rate. Provided that the law which
applies to the Bonds does not prescribe a method of
redenomination which is different from the method
stipulated below and provided that the method
stipulated below is compatible with such law, the
Republic reserves the right, on or after the date on
which the Federal Republic of Germany shall have
become a participating mem)er state of the Euro-
pean Monetary Union,. that has adopted the single
European currency, to determine in accordance
with § 315 of the German Civil Code (Birgerliches
Gesetzbuch) that the face amounts of the Bonds
shall henceforth be deemed to be expressed in the
single European currency (“Euro”). The Republic
8la
shall also be entitled to divide the face amounts of
Bonds into smaller face amounts expressed in Euro
and round new face amounts up or down by up to
'/, cent per Bonds or pay out fractional amounts of
the principal on the next following interest pay-
ment date. The new bonds resulting from the rede-
nomination of Bonds into Euro and their division
into new face amounts shall also be governed by
these Conditions of the Issue. If so determined by
the Republic, redenominated certificates shall be
deemed to be global certificates representing the
Bonds resulting from such redenomination and/or
division into new face amounts. The Bondholders
shall not have the right to require the exchange of
such redenominated global certificates for defini-
tive bonds.
The redenomination of the Bonds, the division
into new face amounts and the conversion of the
Bonds into global certificates shall become effective
with their publication by the Republic in accor-
dance with § 12 of these Conditions of the Issue.
§3
(Interest)
(1) The Bonds bear interest at the rate of 8% per
annum from October 30, 1997. Interest shall be
payable annually in arrears on October 30 of each
year, the first interest payment falling due on
October 30, 1998 The Bonds shall cease to bear
interest as of the beginning of the day on which
they become due for redemption.
82a
(2) Should the Republic fail to redeem the Bonds
when due (or, where the due date is a Saturday,
Sunday, legal holiday or not a Banking Day at the
place of performance (as defined in § 13(2)), on the
next succeeding Banking Day), interest shall con-
tinue to accrue beyond the due date until the actu-
al redemption of the Bonds but not beyond the
expiration of the fourteenth day after the date on
which a notice has been given by the Principal Pay-
ing Agent in accordance with §12 below to the
effect that the necessary funds for redemption have
been provided to the Principal Paying Agent.
“Banking Day” shall mean a day on which banks
are generally open for business at the place of per-
formance.
(3) lf it is necessary to compute interest for any
period of less than a year, interest shall be calcu-
lated on the basis of a 360-day year consisting of 12
months of 380 days each, and, in the case of an
incomplete month, the actual number of days
elapsed.
§ 4
(Redemption)
(1) The Bonds will he redeemed at par on October
30, 2009.
(2) Neither the introduction of a single currency
(Euro) nor the substitution of the national curren-
cies of the Member States of the EU participating
in EMU nor the fixing of the official conversion rate
nor any economic consequences that arise from any
of the aforementioned events or in connection with
83a
EMU shall give rise to any right to prematurely
terminate, contest, cancel, rescind, modify or rene-
gotiate the Conditions of the Issue or any of their
provisions or to raise any other objections and/or
exceptions or to assert any claims for compensa-
tion. The Bonds and the Conditions of the Issue and
4
oll ¢i.ace nememecame aheall ha ,
all their provisions shall be continued unchanged.
§ 5
(Payments)
(1) The Republic undertakes to pay, as and when
due, principal and interest in such freely convert-
ible and transferable currency as at the time of
payment is legal tender in the Federal Republic of
Germany. Principal and interest shall be paid to
the Bondholders only at the offices outside the
United States of America or its possessions of ABN
AMRO Bank (Deutschland) AG (the “Principal Pay-
ing Agent”), without it being permissible, except for
compliance with applicable tax foreign exchange or
other laws and regulations of the place of payment,
to require the execution of an affidavit or compli-
ance with any other formality whatsoever.
(2) The Principal Paying Agent shall transfer at no
charge the amounts to be paid under the Bonds to
the DBC for credit to the relevant accounts of the
depositors of Bonds for the purposes of transfer to
the Bondholders.
(3) The paying agents, in their Capacity as such,
are acting exclusively as agents for the Republic
and do not have any relationship of agency or trust
with the Bondholders. The Republic may with the
84a
consent of the Principal Paying Agent appoint
additional paying agents and revoke the appoint-
ment of paying agents; provided, however, that the
Republic may not appoint any paying agent located
in the United States of America or its possessions.
Such appointment or revocation shall be published
in accordance with § 12.
(4) As long as the Bonds are listed on the Frankfurt
Stock Exchange and the Rules of the Frankfurt
Stock Exchange so require, the Republic shall main-
tain a Paying Agent with a specified office in
Frankfurt am Main.
(5) The Republic may deposit with the Amtsgericht
Frankfurt am Main principal and interest not
claimed by Bondholders within twelve months
after maturity. To the extent that the Republic
Wives its right to withdraw such deposit the rele-
vant claims of the Bondholders against the Repub-
lic shall cease.
§ 6
(Taxes)
All payments of principal and interest in respect
of the Bonds by the Republic will be made free and
clear of, and without withholding or deduction for
or on account of, any present or tuture taxes,
duties, assessments governmental charges or other
duties of whatever nature imposed, levied, collect-
ed, withheld or assessed by or within the Republic
of Argentina or any authority therein or thereof
having power to tax (together “T'axes”), unless
withholding or deduction is required by law. In
va
such event, the Republic shall pay such additional
amounts as will be necessary so that the Bondhold-
ers receive such amounts as would have been
received by them had no such withholding or
deduction been required, except that no such addi-
tional amounts shall be payable with respect to any
Dund tv a holder (or to a third party on behaif of a
holder):
(a) where such holder is liable to such Taxes in
respect of any Bond by reason of his having
some connection with the Republic of Argentina
other than the mere holding of such Bond; or
by reason of failure of such holder to present
such holder’s Bond for payment of principal and
interest on such Bond at maturity or within
thirty days after the relevant payment is first
made available for payment to the holder,
whichever is earlier.
Any reference to “principal” and/or “interest” of the
Bonds shall be deemed to include any additional
amounts which may be payable under this § 6.
§ 7
(Transfer)
The Republic undertakes to pay to or to the order
of the Principal Paying Agent in the lawful curren-
cy of the Federal Republic of Germany all sums
required for the performance of the financial obli-
gations arising from these Conditions of the Issue.
86a
§ 8
(Presentation Period)
The presentation period provided in § 801, sub-
paragraph 1, sentence 1, of the German Civil Code
(Birgerliches Gesetzbuch) shall be reduced to ten
years for the Bonds commencing on the due date for
payment in respect thereof.
§ 9
(Status, Negative Pledge)
(1) The Bonds constitute (subject to subparagraphs
(2) and (3)) direct, unconditional, unsecured and
unsubordinated obligations of the Republic and
shall at all times rank pari passu and without any
preference among themselves. The payment oblhiga-
tions of the Republic under the Bonds shall (subject
to subparagraphs (2) and (3)) at all times rank at
least equally with all its other present and future
unsecured and unsubordinated External Indebted-
ness (as defined below).
(2) So long as any principal and/or interest of the
Bonds remains outstanding, but only up to the time
when, upon maturity of the Bonds, the payment of
all amounts of principal and interest has been duly
provided for, save for the exceptions set out in sub-
paragraph (3), the Republic will not create or per-
mit to subsist any lien, pledge, mortgage, security
interest, deed of trust, charge or other encum-
brance or preferential arrangement whick has the
practical effect of constituting a security interest
(“Lien”) upon the whole or any part of its assets or
revenues to secure any Public External Indebted-
(1)
(11)
(111)
ness (as defined below) of the Republic unless, at
the same time or prior thereto, the Republic’s obli-
gations under the Bonds are secured equally and
rateably therewith.
87a
(3) Notwithstanding the foregoing, the Republic
may permit to subsist.
any Lien over property to secure Public
External Indebtedness of the Republic
incurred for the purpose of financing the
acquisition of such property, any renewal or
extension of any such Lien which is limited
to the original property covered thereby and
which secures any renewal or extension of
the original secured financing,
any Lien existing over such property at the
at the time of its acquisition to secure Pub-
lic External Indebtedness of the Republic
and any renewal or extension of any such
Lien which is limited to the original proper-
ty covered thereby and which secures any
renewal or extension of the original secured
financing,
any Lien crested in connection with the
the transactions contemplated by the
Republic of Argentina 1992 Financing Plan
dated June 23, 1992 (the “1992 Financing
Plan”’ and the implementing documenta-
tion therefor, including any Lien to secure
obligations under the collateralised bonds
issued thereunder (the “Par and Discount
Bonds”) and any Lien securing indebtedness
88a
outstanding on the date of the issue of the
Bonds to the extent required to be equally
and rateably secured with the Par and Dis-
count Bonds,
(iv) any Lien in existence on the date of issue of
the Bonds,
(v) any Lien securing Public External Indebt-
edness of the Republic issued upon surren-
der or cancellation of any of the Par and
Discount Bonds or the principal amount of
any indebtedness outstanding as of June 23,
1992, in each case, to the extent such Lien
is created to secure such Public External
Indebtedness on a basis comparable io the
Par and Discount Bonds,
(vi) any Lien over any of the Par and Discount
Bonds, and
(vii) any Lien securing Public External Indebted-
ness incurred for the purpose of financing
all or part of the costs of the acquisition,
construction or development of a_ project ,
provided that (a) the holders of such Public
External Indebtedness expressly agree to
limit their recourse to the assets and rev-
enues of such project as the principal source
of repayment of such Public External
Indebtedness, and (b) the property over
which such Lien is granted consists solely of
such assets and revenues.
(4) As used in these Conditions of the Issue
89a
“External Indebtedness” means obligations
(other than the Bonds) for borrowed money or evi-
denced by bonds, debentures, notes or other similar
instruments denominated or payable, or which at
the option of the holder thereof may be payable, in
a currency other than the lawful currency of the
Republic provided that no Domestic Fereign Cur-
rency Indebtedness shall constitute External
Indebtedness,
“Public External Indebtedness” means, with
respect to the Republic, any External Indebtedness
of, or guaranteed by, the Republic, as the case may
be, which (i) is publicly offered or privately placed
in securities markets, (11) is in the form of, or rep-
resented by, bonds, notes or other securities or any
guarantees thereof and (iii) is, or was intended at
the time of issue to be, quoted, listed or traded on
any stock exchange, automated trading system or
over-the-counter or other securities market includ-
ing, without prejudice to the general validity of the
foregoing, securities eligible for PORTAL or a sim-
ilar market for the trading of securities eligible for
sale pursuant to Rule 144A under the U.S. Securi-
ties Act of 1933 (or any successor law or regulation
of similar effect),
“Domestic Foreign Currency Indebtedness” means
(i) the following indebtedness (a) Bonos del Te-
soro issued under Decree No. 1527/91 and
Decree No. 1703/91, (b) Bonos de Consoli-
dacion issued under Law No. 23,982 and
Decree No 2140/91, (c) Bonos de Consoli-
dacion de Deudas Previsionales issued
(11)
(111)
90a
under Law No 23,982 and Decree No.
2 140/91, (d) Bonos de la Tesoreria a 10
Anos de Plazo issued under Decree No
211/92 and Decree No 526/92, (e) Bonos de
la Tesoreria a 5 anos de Plazo issued under
Decree No. 211/92 and Decree No. 526/92,
(f) Ferrobonos issued under Decree No.
52/92 and Decree No 526/92, and (g) Bonos
de Consolidacion de Regalias de Hidrocar-
turos a 16 anos de Plazo issued under
Decree No. 2234/92 and Decree No. 54/93,
(n) Bonos del Tesoro a Mediano Plazo en
Dolares Estadounidenses issued under Law
No 24,156 and Decree No. 340/96, and (i)
Bonos de Consolidacion issued under Law
No 24,411 and Decree No. 726/97, and
any indebtedness issued in exchange, or as
replacement, for the Indebtedness referred
so in § 9(i)(a)-(i) above, and
any other indebtedness payable by its terms,
or which at the option of the holder thereof
may be payable, in a currency other than
the lawful currency of the Republic of
Argentina which is (a) offered exclusively
within the Republic of Argentina, or (b) issued
in payment, exchange, substitution, dis-
charge or replacement of indebtedness
payable in the lawful currency of the Repub-
lic of Argentina; provided that in no event
shall the following indebtedness be deemed
to constitute “Domestic Foreign Currency
Indebtedness” (x) Bonos Externos de la
9la
Republica Argentina issued under Law No
19,686 enacted on June 15, 1972 and (y) any
indebtedness issued by the Republic in
exchange, or as replacement, for any indebt-
edness referred to in (x) above.
can
oOo pu
vw
(Events of Default)
(1) If any of the following events (“Events of
Default”) occurs and is continuing, the holder of
any Bond may, upon written notice to the Principal
Paying Agent given before all defaults in respect of
all of the Bonds shall have been remedied, declare
such bond to be immediately due and payable
together with accrued interest thereon, as of the
date on which such notice is received by the Princi-
pal Paying Agent.
(a)
(b)
Non-Payment: the Republic fails to pay any
principal of any of the Bonds when due and
payable or fails to pay any interest on any of
the Bonds when due and payable and such
failure continues for a period of 30 days, or
Breach of Other Obligation: the Republic
does not perform or comply with any one or
more of its other obligations under the
Bonds, which default is incapable of remedy
or is not remedied within 90 days after
notice of such default shall have been given
to the Principal Paying Agent by a Bond-
holder; or
92a
Cross Default: any event or condition shall
occur which results in the acceleration of
the maturity (other than by optional or
mandatory prepayment or redemption) of
any Public External Indebtedness of the
Republic having an aggregate principal
amount of U.S.$ 30,000,000 or more, or any
default in the payment or principal of, or
premium or prepayment charge (if any) or
interest on, any such Public External
Indebtedness having an aggregate principal
amount of U.S. $ 30,000,000 or more, shall
occur when and as the same shall become
due and payable, if such default shall con-
tinue for more than the period of grace, if
any, originally applicable thereto, or
Moratorium: a moratorium on the payment
of principal of, or interest on, the Public
External Indebtedness of the Republic shall
be proposed or declared by the Republic, or
(e) Validity: the validity of the Bonds shall be
contested by the Republic.
The right to declare the Bonds due shall termi-
nate as at the time that all amounts of principal of,
and interest on, the Bonds have been placed at the
disposal of the Principal Paying Agent.
(2) Any notice, including any notice declaring the
Bonds due in accordance with subparagraph (1)
shall be made by means of a written declaration
delivered by hand or registered mail to the Princi-
pal Paying Agent.
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(3) If any of the events specified in subparagraph
(1)(b) through (d) any notice declaring Bonds
immediately due and payable shall unless at the
time such notice is received, any of the other events
specified in subparagraph (1) entitling Bondhold-
ers to declare their Bonds due has occurred,
Agent has received such notices from the holders of
at least DM 100,000,000—in principal amount or
(if this is less than DM 100,000,000—one-tenth in
principal amount of the Bonds then outstanding.
§11
(Issue of Additional Bonds/Consolidation)
The Republic reserves the right from time to time
without the consent of the Bondholders to issue
additional bonds with identical terms, so that the
same shall be consolidated, form a single issue with
and increase the aggregate principal amount of
these Bonds The term “Bonds” as used herein shall,
in the event of such increase, also comprise such
additionally issued bonds.
The Republic may also from time to time, without
the consent of the Bondholders consolidate the
Bonds with one or more issues of other bonds
issued by it, which are originally denominated in
ECU, Euro or a currency substituted by the Euro
and are, in respect of all periods subsequent to
such consolidation, subject to the same terms and
conditions as the Bonds.
The Issuing and Principal Paying Agency Agree-
ment as between the Republic and the Principal
Paying Agent will be amended accordingly.
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§ 12
(Notices)
All notices concerning the Bonds shall be pub-
lished in the German Federal Gazette (Bunde-
sanzeiger) and in at least one national newspaper
designated by the Frankfurt Stock Exchange for
such notices. For legal purposes the publication in
the Federal Gazette shall suffice.
§ 13
(Governing Law, Place of Performance,
Place of Jurisdiction, Waiver of Immunity)
(1) The Bonds both as to form and content, as well
as the rights and duties of the Bondholders, the
Republic and the Paying Agents shall in all
respects be determined in accordance with German
law.
(2) Place of performance shall be Frankfurt am
Main.
(3) The Republic hereby irrevocably submits to the
non-exclusive jurisdiction of the District Court
(Landgericht) in Frankfurt am Main and any fed-
eral court sitting in the City of Buenos Aires as
well as any appellate court of any thereof, in any
suit, action or proceeding against it arising out of
or relating to these Bonds. The Republic hereby
irrevocably waives—to the fullest extent it may
effectively do so—the defense of an inconvenient
forum to the maintenance of such suit or action or
such proceeding and any present or future objec-
tion to such suit, action or proceeding whether on
the grounds of venue, residence or domicile. The
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Republic agrees that a final judgment in any such
suit, action or proceeding in the courts mentioned
above shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or any
other method provided by law.
(4) To the extent that the Republic has or hereafter
may acquire any immunity (sovereign or otherwise)
from jurisdiction of any court or from any legal
process (whether through service or notice, attach-
ment prior to judgment, attachment in aid of exe-
cution, execution or otherwise), with respect to
itself or its revenues, assets or properties, the
Republic hereby irrevocably waives such immunity
in respect of its obligations under the Bonds to the
extent it is permitted to do so under applicable law.
Notwithstanding the foregoing, attachment prior
to judgment or attachment in aid of execution will
not be ordered by Argentine courts in respect of
(i) the assets which constitute freely available
reserves pursuant to Article 6 of the Convertibility
Law, (ii) property of the public domain located in
the territory of Argentina included within the pro-
visions of Articles 2,337 and 2,340 of the Civil Code
of Argentina, (111) property located in the territory
of Argentina which is dedicated to providing an
essential public service, and (iv) property covered
by Articles 66 and 67 of the Permanent Supple-
mentary Budget Law.
(5) For any legal disputes or other proceedings
before German courts, the Republic appoints
FIDEUROP Treuhandgesellschaft fur den gemein-
96a
samen Markt mbH, Marie-Curie-Strasse 30, D-
60493 Frankfurt am Main Germany, as authorized
agent for accepting service of process.
(6) The German text of these Conditions of the
Issuc is legally binding. [he English translation is
for convenience only.
§ 14
(Severability)
Should any provision of these Conditions of the
Issue be or become invalid in whole or in part, the
other provisions shall remain in force. The invalid
provisions shall, according to the intent and pur-
pose of these Conditions of the Issue be replaced by
such valid provision which in its economic effect
corresponds to the invalid provision.
97a
22. Consent to Service; Jurisdiction. The Repub-
lic hereby appoints Banco de la Nacion Argentina,
at its office located at 299 Park Avenue, New York,
New York 10171, and, if such person is not main-
tained by the Republic as its agent for such pur-
pose, the Republic will appoint CT Corporation
System to act as its agent for such purpose] as its
authorized agent (the “Authorized Agent”) upon
whom process may be served in any action arising
out of or based on the Securities or this Agreement
by the holder of any Security which may be insti-
tuted in any state or federal court in The City of
New York, and expressly accepts the jurisdiction of
any such court in respect of such action. Such
appointment shall be irrevocable until all amounts
in respect of the principal of and any interest due
and to become due on or in respect of all the Secu-
rities have been provided to the Fisca] Agent pur-
suant to the terms hereof, except that, if for any
reason, such Authorized Agent ceases to be able to
act as Authorized Agent or to have an address in
the Borough of Manhattan, The City of New York,
the Republic will appoint another person in the
Borough of Manhattan, The City of New York,
selected in its discretion, as such Authorized
Agent. Prior to the date of issuance of any Securi-
ties hereunder, the Republic shall obtain the con-
sent of. Banco de la Nacién Argentina to its
appointment as such Authorized Agent, a copy of
which acceptance it shall provide to the Fiscal
Agent. The Republic shall take any and all action,
including the filing of any and all documents and
instruments, that may be necessary to continue
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such appointment or appointments in full force and
effect as aforesaid. Upon receipt of such service of
process, the Authorized Agent shall advise the
Subministry of Finance promptly by telecopier at
011-54-1-349-6080. Service of process upon the
Authorized Agent at the address indicated above,
as such address may be changed within the Bor-
ough of Manhattan, The City of New York by notice
given by the Authorized Agent to each party here-
to, shall be deemed, in every respect, effective serv-
ice of process upon the Republic. The Republic
hereby irrevocably and unconditionally waives, to
the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of
venue of any aforesaid action arising out of or in
connection with this Agreement brought in any
such court has been brought in an inconvenient
forum. Neither such appointment nor such accept-
ance of jurisdiction shall be interpreted to include
actions brought under the United States federal
securities laws. This appointment and acceptance
of jurisdiction is intended to be effective upon exe-
cution of this agreement without any further act by
the Republic before any such court and introduc-
tion of a true copy of this Agreement into evidence
shall be conclusive and final evidence of such waiv-
er.
Notwithstanding the foregoing, any action aris-
ing out of or based on the Securities may be insti-
tuted by the holder of any Security in any
competent court in the Republic of Argentina.
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The Republic hereby irrevocably waives and
agrees not to plead any immunity from the juris-
diction of any such court to which it might other-
wise be entitled in any action arising out of or
based on the Securities or this Agreement by the
holder of any Security.
23. Governing Law and Counterparts. This
Agreement shall be governed by, and interpreted in
accordance with, the laws of the State of New York.
This Agreement may be executed in any number of
counterparts, each of which shall be deemed an
original, but all of which together shall constitute
one and the same instrument.
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