ARGENTINA: Cabinet Chief Jorge Capitanich accuses U.S. courts of malpractice and says country will seek legal recourse for debt issue in international sphere

Record ID: 449136

  • Title: ARGENTINA: Cabinet Chief Jorge Capitanich accuses U.S. courts of malpractice and says country will seek legal recourse for debt issue in international sphere
  • Date: 31st July 2014
  • Summary: VARIOUS OF ARGENTINE NEWSPAPER HEADLINES REGARDING DEBT ISSUE
  • Embargoed: 15th August 2014 13:00
  • Keywords:
  • Location: Argentina
  • Country: Argentina
  • Topics: International Relations,Economic News
  • Reuters ID: LVA3PRT09E8CG6IG7P1TYOS5AED3
  • Story Text: Argentina's Cabinet Chief, Jorge Capitanich, insisted on Thursday (July 31) the country was in fact not in default in spite of reports to the contrary. In briefing the press at the Government House in Buenos Aires Thursday, Capitanich also urged holders of exchanged bonds to demand their money from U.S. Judge Thomas Griesa, who blocked a June 30 interest payment.
    Argentina had been seeking a last-minute suspension of a ruling by Griesa in New York mandating Argentina pay holdouts $1.33 billion plus interest. He ruled Argentina could not service its exchange debt unless it paid the holdouts at the same time.
    Capitanich also labelled Daniel Pollack, the mediator appointed by Griesa, as "incompetent" after Latin America's No. 3 economy failed to reach a deal on Wednesday (July 30) with holdout investors suing the country and fell into its second default in 12 years.

    "There has effectively been malpractice here by the judiciary in the United States and the responsibility falls on the three levels of its government. We have also observed a marked incompetence of the Special Master [Daniel Pollack] to generate reasonable negotiation conditions, which is something Argentina has laid down in a very clear way," said Capitanich.
    The Cabinet Chief also said that Argentina would look to the international sphere for legal recourse.

    "Various paths are being pursued throughout the international sphere, such as an appeal to the International Court in the Hague, with or without the stay," he said.
    Regarding speculation that a deal could be reached between holdout bondholders and private banks, Capitanich explained that if a third party buys the debt held by holdout investors there would be no breach of the legal clause that was seen as a major obstacle in their failed debt negotiations.

    "Any eventual agreement between private parties obviously does not involve interference by the state, but the negotiations naturally must respect the fundamental principles of the state," he stated.
    The legal clause in question is the Rights on Future Offers Clause, known as the RUFO clause.

    "There is a clause called the 'RUFO clause,' which is the favourite clause of the creditors, can generate legal consequences if the state intervenes directly or indirectly," Capitanich said.
    The so-called RUFO clause prevents Argentina from paying investors better terms than those taken by bondholders who accepted large writedowns in restructurings that followed its last default in 2002.
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