This month, we discuss NML Capital v. Republic of Argentina,1 in which the U.S. Court of Appeals for the Second Circuit affirmed a lower court order imposing injunctive relief against the Republic of Argentina in connection with the nation’s 2001 default on its sovereign debt. In its decision, written by Judge Barrington Parker and joined by Circuit Judges Rosemary Pooler and Reena Raggi, the court concluded that Argentina breached a promise to repay certain bondholders in the wake of the nation’s default, and upheld a wide-ranging injunction designed to help cure the breach.
Background
In 1994, the Republic of Argentina began issuing sovereign debt securities pursuant to a Fiscal Agency Agreement (FAA). The FAA Bonds were protected against subordination by certain provisions in the FAA, in particular, a “pari passu clause.” This clause provided in part that “[t]he Securities will constitute…direct, unconditional, unsecured and unsubordinated obligations of the Republic and shall at all times rank pari passu without any preference among themselves. The payment obligations of the Republic under the Securities shall at all times rank at least equally with all its other present and future unsecured and unsubordinated External Indebtedness….”2
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