Us-judge wants to punish argentina – judgment disregarded

Us-judge wants to punish argentina - judgment disregarded

New york district judge thomas griesa announced penalties on monday (local time) because he sees his ruling disregarded by the government in buenos aires. "The court has ruled that argentina’s behavior is illegal," said griesa.

The judge had forbidden the country to serve other creditors as long as it has not settled claims by hedge funds, led by the new york firm NML capital, for at least 1.5 billion dollars (1.2 billion euros). Argentina, however, refuses. President cristina fernandez de kirchner calls fonds "vultures".

Argentina’s eagle minister hector timerman called the judge’s decision "a violation of international law" that has no practical consequences. Griesa has achieved the "sad record" of being the first judge to accuse a sovereign state of contempt of court over a debt dispute, according to a declaration by the auben ministry published in buenos aires on monday evening.

The legal dispute is taking place in the USA because the disputed bonds were once issued in dollars under american law in order to make them more attractive to international investors. But now U.S. Judge griesa can block the interest payments, which fall through the bank of new york mellon, virtually right in front of his house.

In order to place the government securities under domestic law, and thus remove them from the reach of U.S. Judges and hedge funds, argentina had recently passed a new law. The government wants to offer bondholders the chance to exchange their securities so that they can be serviced in buenos aires, bypassing the arm of the u.S. Judiciary.

The hedge funds had filed a lawsuit against this plan. Judge griesa now sided with them: "the intention to move the operations out of the u.S. In order to be able to export the prohibited payments is illegal."However, he did not want to join the demands to fine the country 50 000 dollars per day as long as the debts to the funds are outstanding.

The level and type of sanctions should be decided at a later stage. Argentina had already made it clear in advance of monday’s hearing that it would not pay the fines demanded by the hedge funds. This is according to documents filed with the court and a letter to u.S. Secretary of state john kerry.

Griesa made it clear that he had made a significant decision: "we all know that it is rare for a court to punish a party for contempt of judgment". Most recently, he had rejected a request from the hedge funds on the grounds that this would only further harden the fronts.

The disputed debt results from argentina’s sovereign default at the end of 2001. The hedge funds had then favorably stocked up on default-threatened bonds and refused the following debt restructurings.

They demand full repayment. Because argentina persists in defaulting, the country is now considered technically insolvent – it is not allowed to service those creditors who, unlike the hedge funds, were prepared to waive their claims.