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The vultures that want to bring Argentina to its knees
by Stéphanie Jacquemont
17 April 2012

Argentina has recently been assaulted on several fronts. These attacks are related to the 2001 suspension of payment on its external debt and to cases brought against the country before the ICSID (International Centre for the Settlement of Investment Disputes), the controversial World Bank arbitration tribunal. 

On 26 March 2012 the United States supended Argentina from its General System of Preferences (GSP), a mechanism allowing preferential tariffs to developing countries. [1] According to the Obama administration, this sanction is justified by Argentina’s refusal to abide by two ICSID rulings that condemned the country to pay more than $300 million in compensation to two US firms. [2] One of them, Azurix Corporation, which brought two actions against the Argentine State before the ICSID, had in fact requested that the General System of Preferences be reviewed and Argentina be excluded from it. This “water industry arm of the bankrupt Enron Corporation, [3] as Argentina’s ambassador in Washington put it, had been granted a 30-year concession to supply water to two of the three regions of the province of Buenos Aires. The Argentine authorities had later cancelled this concession, for the company did not comply with investment and service quality standards. 

In September 2011, Washington also made clear that its representatives would vote against any loan being extended to Argentina by the multilateral development banks (such as the Word Bank or the Inter-American Development Bank, IADB). As the US representative’s vote was not enough to stop IADB loans from being granted to the country, a delegation of lobbyists representing holders of defaulted Argentine bonds were recently reported to be in London, seeking to rally Great Britain to the US position. [4]

This campaign, meant to increase the pressure on Buenos Aires, is orchestrated, among others, by a group called ATFA (American Task Force Argentina) which, as mentioned on its website, is “pursuing a fair reconciliation of the Argentine debt default”. Among its members there is what those in the know refer to as an “aggressive creditor”, better known as a vulture fund: Elliott Associates. This vulture fund is no newcomer to debt litigation. In 1999, the New York Court of Appeal ruled that Peru would have to pay $58 million to the fund for a debt that it had previously bought off for only $11 million. The Republic of Congo also figures among the victims of this fearsome shark, which likes to operate in murky waters.

Let’s take a closer look at this vulture fund’s claims in the Argentine case.  

The NML fund, an affiliate of Elliott Management registered in the Cayman Islands, bought Argentine bonds at a significant discount, and refused to take part in the two debt swaps of 2005 and 2010, even though they were favourable to creditors. [5] To recover the full amount of the capital (at its face value, of course) and the payment of interests, NML engaged in a series of legal actions before several tribunals, which ruled in its favour on several occasions. For instance, on 4 March this year, the New York federal judge Thomas Griesa pronounced a judgement in favour of the vulture fund: pursuant to the pari passu or equal footing clause, which requires an equal treatment for all a debtor’s creditors, Argentina should repay NML at the same time as it pays interest on the new bonds issued at the time of the 2005 and 2010 debt swaps. The Argentine Minister of Finance said he rejected this decision, which Argentina has appealed against.

Strangely enough, a few days later the same judge ruled in Argentina’s favour, reversing an earlier decision he had taken in August 2011. At the request of the vulture funds Aurelius and Elliott Management Ltd, the judge had ordered a freeze on funds held at the New York Federal Reserve in the accounts of Argentina’s Central Bank and Citibank, so as to stop the payment of creditors holding Boden 2012 bonds, issued in 2002, and on which Argentina has made regular payments. Judge Griesa lifted the freeze on these funds, which “are not the property of the Republic of Argentina” he said. [6]

Thus, in spite of 12 decisions in their favour taken by New York tribunals, Aurelius and Elliott Management Ltd failed to seize Argentine monies, due to the sovereign immunity which, in the United States, protects most of the assets held on its territory by third countries. But the protection given by sovereign immunity does not seem to be totally effective against vulture funds. Indeed on 6 May 2011 the British Supreme Court ruled in favour of NML, which is seeking the enforcement in the UK of a decision taken by a New York tribunal that awarded the reimbursement of bonds (whose face value is $172 million but that were bought for about half that sum by NML) and the payment of $112 million in interest. According to the Supreme Court, Argentina cannot claim immunity against the seizure of its assets in the United Kingdom since the bonds issued by Argentina and held by the vulture fund NML contain a clause of immunity-waiver. The Financial Times [7] considers this is positive for sovereign debt investors, even if the decision applies only to this specific case and does not mean that state immunity can never be claimed in litigations related to sovereign debts in British courts. 

Scrambling for the spoils in the ICSID

The creditors holding defaulted Argentine bonds have also found an attentive ear in the ICSID arbitrators. In August 2011, an ICSID arbitration tribunal decided it had jurisdiction over a dispute between Argentina and some 60,000 Italian investors, who claimed that the default on their bonds was a breach of the bilateral investment treaty (BIT) signed by Italy and Argentina. This decision was widely challenged since Article 8 of the BIT provides that investors first have to take proceedings before the local courts and can only appeal to the ICSID 18 months later. And yet those Italian investors did not file a complaint before the Argentine courts prior to their ICSID action. Indeed, one of the three arbitrators, George Abi-Saab, made known his dissenting opinion on the decision. First, he pointed out that debt bonds are not protected investments within the meaning of the BIT since there is no territorial link with Argentina. Moreover, in his opinion, Argentina’s consent to arbitration by the ICSID does not include mass claims. Furthermore, the tribunal had arrogated itself a legislative power by substantially modifying the existing rules of procedure and adapting them to this mass claim case. [8]

Even without knowing the final outcome of the case, it can be said that this decision sounds like a warning directed against countries who might want to unilaterally suspend payment on their bonds and who have agreed, via bilateral treaties, to submit to ICSID arbitration. 

It is worth saying that this attack is just one of many led against Argentina in the ICSID. Argentina is the most litigated country in the ICSID, wih 49 claims introduced so far. Even if in many cases, Argentina has requested annulment of or refused to abide by the decisions taken, it has not yet fallen in behind Bolivia, Ecuador, and Venezuela, which withdrew from this biased institution, known for serving the transnational companies’ interests. [9] Yet this step is essential for the country to recover its sovereignty. 

 Argentina as a spectre

Besides the direct pressure put on decision-makers and all the intimidatory legal actions taken against Argentina before several tribunals, the Argentine case is also the subject of a diffuse yet large-scale campaign in the media. The goal is to show that the Argentine default on nearly $100 billion of its external debt was a disaster for the country and that other countries like Greece would be ill-advised to show such firmness. This campaign is all the fiercer [10] and more necessary, since everything seems to indicate that Argentina was right to do so. The default represented a huge financial easing: the resources that were not transferred to the country’s external creditors were allocated to socially useful spending. Far from the chaos predicted by the birds of ill omen in the financial circles, the country was able to recover from a tragic crisis and substantially improve the living conditions of a population which had experienced rapid impoverishment and rampant precariousness. In addition, having broken away from the IMF [11] and stood firm against the Paris Club creditors, it has put an end to their blackmailing and interference in the country’s management. Finally, Argentina has not been ostracized from the community of nations: if it still cannot borrow from the international financial markets –is this really bad news by the way?– it has not been evicted from the very exclusive club of the self-proclaimed leaders of the world (the G20). One could admittedly object that what was possible for an economy such as Argentina’s might not be possible for smaller countries like Greece or Portugal. We would then reply that submission to the creditors’ diktats in these countries has such dreadful consequences that it is hardly conceivable that a default would prove to be more disastrous. 






Translated by Stéphanie Jacquemont in collaboration with Vicki Briault

Footnotes :

[1This is an exception to the most-favoured-nation principle prevailing in the WTO, which obliges its members to give equal treatment to all their trading partners.

[2The two firms are Azurix Corporation and CMS. See the explanations given by the US trade representative Ron Kirk

[3Letter of Ambassador Chiaradia to Treasury Secretary Timothy Geithner dated 25 August 2011,

[4See Alan Wheatley, “Vultures swoop on Argentina”, 29 February 2012,

[5For more information on these debt swaps, see in Spanish Eduardo Lucita, “Otra vez la deuda argentina”, 4 July 2008, and Claudio Katz et al., “Consideraciones sobre el canje y sus implicancias. Los banqueros festejan. El país se eudeuda ¿Se a vuelto progresista pagar la deuda?”, 11 April 2010,

[6The US laws on sovereign immunity protect the assets of central banks of third countries, whether they are independent of the States or not. See “US Judge criticizes Argentina’s ’continued intransigence’ in refusing to honour lawful debts”, 29 March 2012,

[7See Philippa Charles, “Devil in the details for sovereign debt bonds”, The Financial Times, 7 August 2011,

[8Andrew Newcombe, “Mass claims and the distinction between jurisdiction and admissibility (Part II)”, 16 December 2011,

[9For more information on the issue, see in French Cécile Lamarque, “Et de trois : après la Bolivie et l’Équateur, le Venezuela quitte le CIRDI!”, 24 February 2012, and Stéphanie Jacquemont et Yolaine Lhoist “La Bolivie porte une estocade à la Banque mondiale”, 29 October 2007,

[10See for example an announcement by ATFA in the Wall Street Journal :

[11Unfortunately this was at the cost of the early repayment of its debt towards the institution.

Stéphanie Jacquemont