By Scott Behrendt, Esq. - Los Angeles - June 17,2014
On June 16,2014,the Supreme Court of the United States:Home issued its opinion in the matter of Republic of Argentina v. NML Capital,Ltd.,U.S.Supreme Court,No. 12-842,holding that the Republic of Argentina may not set aside a judgment creditor's subpoenas on banks that sought records related to the Argentina's global financial transactions,in connection with the creditor's judgment enforcement efforts.In its decision,which favors judgment creditors,the Court made clear that no provision in the Foreign Sovereign Immunities Act of 1976 (FSIA),28 U. S. C. §§1330, 1602 et seq.,immunizes a foreign-sovereign judgment debtor from postjudgment discovery of information concerning its extraterritorial assets.

As explained by the Court,"In 2001,petitioner, Republic of Argentina,defaulted on its external debt.In 2005 and 2010,it restructured most of that debt by offering creditors new securities (with less favorable terms) to swap out for the defaulted ones.Most bondholders went along.Respondent,NML Capital,Ltd.(NML),among others,did not.NML brought 11 actions against Argentina in the Southern District of New York to collect on its debt,and prevailed in every one.It is owed around $2.5 billion,which Argentina has not paid.Having been unable to collect on its judgments from Argentina,NML has attempted to execute them against Argentina’s property.

In 2010, “‘[i]n order to locate Argentina’s assets and accounts,learn how Argentina moves its assets through New York and around the world,and accurately identify the places and times when those assets might be subject to attachment and execution (whether under [United States law] or the law of foreign jurisdictions),’” id.,at 203 (quoting NML brief),NML served subpoenas on two nonparty banks,Bank of America (BOA) and Banco de la Nación Argentina (BNA),an Argentinian bank with a branch in New York City. For the most part,the two subpoenas target the same kinds of information: documents relating to accounts maintained by or on behalf of Argentina,documents identifying the opening and closing dates of Argentina’s accounts, current balances,transaction histories,records of electronic fund transfers,debts owed by the bank to Argentina,transfers in and out of Argentina’s accounts,and information about transferors and transferees.

Argentina,joined by BOA,moved to quash the BOA subpoena."Argentina ultimately took the position that a court order requiring compliance with the subpoenas would transgress the FSIA because it"permitted discovery of Argentina's extraterritorial assets"and infringed Argentina's sovereign immunity.

The U.S. Supreme Court rejected Argentina's position and ruled in favor of the judgment creditor,noting in part:

Argentina maintains that,if a judgment creditor could not ultimately execute a judgment against certain property,then it has no business pursuing discovery of information pertaining to that property. But the reason for these subpoenas is that NML does not yet know what property Argentina has and where it is,let alone whether it is executable under the relevant jurisdiction’s law.If,bizarrely,NML’s subpoenas had sought only "information that could not lead to executable assets in the United States or abroad,"then Argentina likely would be correct to say that the subpoenas were unenforceable—not because information about nonexecutable assets enjoys a penumbral "discovery immunity" under the Act, but because information that could not possibly lead to executable assets is simply not "relevant" to execution in the first place []. But of course that is not what the subpoenas seek.

They ask for information about Argentina’s worldwide assets generally,so that NML can identify where Argentina may be holding property that is subject to execution.To be sure, that request is bound to turn up information about property that Argentina regards as immune.But NML may think the same property not immune.In which case, Argentina’s self-serving legal assertion will not automatically prevail;the District Court will have to settle the matter.

Although the Court's opinion does not address the issue of whether or not certain assets of Argentina that are located by the judgment creditor may be immune from the judgment enforcement process,it does make clear that a subpoena seeking that information does not run afoul of the FSIA.

Scott Behrendt is an attorney specializing in judgment enforcement and debt collection matters in California State and Federal Courts. Scott Behrendt can be reached at 310-557-2009 or 714-549-6200. For more information please visit www.scottbehrendtattorney.com