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NML Capital, Ltd. v. Republic of Argentina

United States Court of Appeals for the Second Circuit
699 F.3d 246 (2012)


The Republic of Argentina issued bonds (the FAA bonds) in 1994. The FAA bonds’ issuing documents provided that the bonds would be unsecured, unsubordinated obligations of Argentina. Additionally, the payment obligations on the bonds would have equal payment priority with any other present or future unsecured, unsubordinated obligation of Argentina (the equal-treatment clause). Argentina defaulted on the FAA bonds. After default, Argentina offered to exchange the defaulted FAA bonds for restructured bonds. Argentina stated in the exchange offer that the defaulted FAA bonds might remain in default permanently, and that Argentina had no intentions of resuming payment on any FAA bonds that were not exchanged for restructured bonds. Eventually, 91 percent of the FAA bonds were exchanged for the restructured bonds. Argentina made payments on the restructured bonds, but did not resume payments on the original FAA bonds. The remaining original bondholders sued Argentina in United States district court, alleging that Argentina had violated the issuing provisions by subordinating the FAA bonds to the restructured bonds. The district court issued an injunction requiring Argentina to make the same payments on the FAA bonds that it made on the restructured bonds. Argentina appealed, arguing that the injunction violated the Foreign Sovereign Immunities Act (FSIA).

Rule of Law


Holding and Reasoning (Parker, J.)

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