NML Capital Ltd v Republic of Argentina

JurisdictionEngland & Wales
JudgeMummery,Elias L JJ.,Aikens
Judgment Date04 February 2010
Neutral Citation[2010] EWCA Civ 41
CourtCourt of Appeal (Civil Division)
Docket NumberCase No: A3/2009/0338
Date04 February 2010

[2010] EWCA Civ 41

[2009] EWHC 110 (Comm)

IN THE HIGH COURT OF JUSTICE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT

QUEEN'S BENCH DIVISION (COMMERCIAL)

Mr Justice Blair

Before: Lord Justice Mummery

Lord Justice Aikens

and

Lord Justice Elias

Case No: A3/2009/0338

Between:
Republic of Argentina
Appellant
and
Nml Capital Limited
Respondent

Mr Anthony Trace QC and Mr Benjamin John and Mr Ciaran Keller (instructed by Travers Smith LLP, London) for the Appellant

Mr Jonathan Nash QC and Mr Peter Ratcliffe (instructed by Dechert LLP, London) for the Respondent

Hearing dates: 18 th and 19 th November 2009

Crown copyright©

LORD JUSTICE AIKENS
1

This appeal from the order of Blair J dated 29 January 2009 concerns sovereign debt, sovereign immunity and an attempt by a hedge fund to bring an action in England to enforce a summary judgment obtained in the United States courts against the Republic of Argentina for the sum of US$284,184,632.30. It raises novel points of English procedural law concerning claims against sovereign states, on the correct construction of provisions in the Civil Jurisdiction and Judgments Act 1982 (the “ CJJA”) and on the relationship of those provisions with the State Immunity Act 1978 (“the SIA”).

The background facts

2

Argentina, like other sovereign states, has to raise money to finance government expenditure by selling bonds denominated in a foreign currency, often US dollars, on the international bond market. The repayment of the principal and interest on these bonds is an obligation of the issuing sovereign state. Such bonds are called “sovereign bonds”, as opposed to bonds denominated in the national currency, which are “government bonds”. Sovereign bonds are often referred to as “sovereign debt”.

3

In 1994, Argentina entered into a Fiscal Agency Agreement (“the FAA”) with Bankers Trust Co. By the FAA, Argentina could issue, through Bankers Trust as the fiscal agent, series of notes or other securities which would constitute obligations of the state of Argentina. Clause 22 of the FAA is headed “Consent to service: Jurisdiction”. The FAA also contained an exhibit setting out the terms of bonds to be issued pursuant to its terms. Amongst the standard terms of the bonds is a clause dealing with issues of jurisdiction and immunity with regard to claims on the bonds. This term is set out in Appendix 3 to this judgment. Its provisions give rise to one of the arguments concerning sovereign immunity in this case. By clause 23 the FAA is governed by New York law. The terms for the bonds also stipulated that they would be governed by and construed according to New York law.

4

Pursuant to the FAA two series of US dollar denominated bonds (amongst others) were issued by Argentina. One series comprised 12% global bonds maturing on 1 February 2020 and the other series comprised 10.25% global bonds maturing on 21 July 2030. I will refer to these collectively as “the bond series”. Those bonds contained the jurisdiction and immunity clause I have mentioned. They were subject to New York law.

5

By 2001 Argentina was in serious financial, social and political difficulties. There was a huge withdrawal of capital from Argentina, both internally and by foreign investors. On 24 December 2001 Argentina was compelled to declare a moratorium on interest and principal on all its debt, including its sovereign debt, which thus included the bonds. The result of the collapse in confidence in Argentina's ability to pay on its sovereign debt was that the market value of the bonds fell considerably.

6

NML Capital Ltd (“NML”) is a Cayman Island company. It is an affiliate of Elliott Associates LP, a New York based hedge fund which trades in “distressed sovereign debt”. There are a number of hedge funds which buy up, at a steep discount to face value, sovereign debt of states that are in deep financial difficulties, then claim that there has been an “event of default” under the terms of the bonds and demand repayment of the full face value of the bonds bought. When the demands are not met, litigation ensues. If the hedge fund succeeds it will then attempt to enforce the judgment obtained against the sovereign state concerned. Such hedge funds are sometimes unflatteringly called “vulture funds”.

7

Between 6 June 2001 and 2 September 2003 affiliates of NML bought bonds in the two bond series at prices which were, in aggregate, 55.37% and 62.82% of the face value of the respective series. I will call the bonds thus purchased “the bonds”. In November 2003, NML asserted that Argentina was in default under the terms of the FAA because of its failure to pay interest on the bonds.

8

In 2005 Argentina, with assistance from the IMF and the World Bank, launched a huge debt restructuring plan. This consisted of an offer to existing bond holders to exchange their current holdings for new bonds to be issued by Argentina. This offer was accepted by 76.15% of the aggregate eligible debt. It was the largest sovereign debt restructuring exercise in history.

9

However, NML refused to take part in this restructuring offer. Instead it issued proceedings against Argentina in the United States District Court for the Southern District of New York, which handles nearly all of New York City's financial litigation. NML claimed that Argentina had committed an “event of default” under the FAA and that, under the terms of the bonds, NML was entitled to accelerated payment of the principal amount of the bonds and outstanding interest. The principal value of the bonds claimed was US$172,153,000. Unpaid interest on the bonds and interest on the unpaid interest claimed amounted to US$112,031,632.30. The total claimed was therefore US$284,184,632.30.

10

On 11 May 2006, Judge Thomas P Griesa granted NML a motion for summary judgment against Argentina on NML's claim under the bonds. On 18 December 2006, the judge entered judgment against Argentina and in favour of NML for US$284,184,632.30 plus continuing interest compounded annually. Proceedings to enforce that judgment have been started by NML in New York.

The English proceedings

11

NML decided that it also wished to enforce the New York judgment in England. Because there is no treaty between the United States and Great Britain for the mutual recognition and enforcement of judgments, there is therefore no simple statutory method for the recognition and enforcement of a United States judgment in the English courts. A person who is a judgment creditor of a United States judgment who wishes to enforce it in England must bring an action on the foreign judgment in the English courts. 1 If judgment is obtained, then it is the English judgment that can then be enforced in England.

12

Thus NML prepared a draft Claim Form claiming the amount of the US judgment in its favour and interest from 18 December 2006. It also prepared draft Particulars of

Claim, which were signed by Leading Counsel, Mr Jonathan Nash QC, who has represented NML throughout these proceedings, including this appeal. The Particulars of Claim referred to the FAA, (called “the Agreement” in the pleading), the bonds, the New York action and the summary judgment. It calculated the interest due on the judgment debt from 18 December 2006. It stated that the District Court was a court of competent jurisdiction and that the judgment was final
13

Then, under the heading “Waiver of Immunity”, paragraph 8 of the Particulars of Claim stated:

“By section 22 of the Agreement Argentina waived and agreed not to plead any immunity in respect of these proceedings. Further and in any event the Agreement and the Bonds are “commercial transactions” for the purposes of the State Immunity Act 1978 (“the SIA”) sections 3(1) and 3(3), in respect of which a state is not immune. In the circumstances Argentina has no immunity in respect of these proceedings”.

14

The prayer of the Particulars of Claim sought judgment for the principal amount and interest, either under section 35A of the Supreme Court Act 1981, or under the provisions of Title 28 of the United States Code section 1961.

15

NML next sought permission to issue the Claim Form and to serve it on Argentina out of the jurisdiction. The application was made, (as is normal) without notice to Argentina, on 14 March 2008. The application was supported by a witness statement by Alexandra Doucas, an assistant solicitor of Dechert LLP, solicitors for NML (“Dechert”). The witness statement set out the facts. It stated that NML believed that Argentina either had or may at some time in the future have assets in England. It stated, in paragraph 5, that NML's claim was therefore for the enforcement of the New York judgment and “…pursuant to CPR 6.20(9), is a claim which can be served out of the jurisdiction, with the permission of the court”. 2 Paragraph 6 of the witness statement repeated what had been set out in paragraph 8 of the Particulars of Claim concerning “Waiver of Immunity” by Argentina.

16

Paragraph 7 of the witness statement said that NML believed that it had a real prospect of succeeding in the claim. It also stated that if permission to serve the Claim Form out of the jurisdiction were to be granted then NML would request that it be served on Argentina by the Foreign and Commonwealth Office.

17

There was an exhibit to the witness statement. This included copies of the FAA, the terms of the bonds, the New York judgment and draft versions of the Claim Form and Particulars of Claim, together with translations into Spanish.

18

On 2 April 2008, David Steel J, having considered the application for permission to serve out of the...

To continue reading

Request your trial
10 cases
  • Estate of Michael Heiser and 121 Others v The Islamic Republic of Iran
    • United Kingdom
    • Queen's Bench Division
    • 31 July 2019
    ...the New York court would have had jurisdiction if it had applied rules corresponding to those applicable in the UK; see at [31]. 52 [2010] 3 WLR 874; [2010] EWCA Civ 41 53 14 th ed (2006) vol.1 para 14–095 54 [2017] UKSC 62 55 See Singapore: State Immunity Act 1979 s7, Australia: Foreign......
  • AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 27 May 2011
    ...cause of action and a new gateway might have been appropriate (at 478 D/E). 135 Mr White also relies on the recent case of NML Capital Ltd v. Republic of Argentina [2010] EWCA Civ 41, [2010] 3 WLR 874, where it appears to have been common ground that the identification of a new gateway at......
  • NML Capital Ltd v Republic of Argentina
    • United Kingdom
    • Supreme Court
    • 6 July 2011
    ...UKSC 31 before Lord Phillips, President Lord Walker Lord Mance Lord Collins Lord Clarke THE SUPREME COURT Trinity Term On appeal from: [2010] EWCA Civ 41 Jonathan Sumption QC Peter Ratcliffe Sandy Phipps (Instructed by Dechert LLP) Respondent Mark Howard QC Benjamin John Ciaran Keller (Inst......
  • Tan Chi Fang and 3 others v HM Attorney General
    • United Kingdom
    • Privy Council
    • 6 June 2023
    ...proceedings; …” 170 The obligation on the courts to respect the immunity of sovereign states was described by Aikens LJ in NML Capital Ltd v Republic of Argentina [2010] EWCA Civ 41, [2011] QB 8, para 49. He said that section 1 of the State Immunity Act imposes a duty on all UK courts in ......
  • Request a trial to view additional results
2 firm's commentaries
  • Disputes With States
    • United Kingdom
    • Mondaq UK
    • 15 September 2021
    ...in the arbitration. Enforcement of a foreign judgment Earlier this year the Court of Appeal in Republic of Argentina v NML Capital Ltd. [2010] EWCA Civ 41 had to deal with a new point on state "5 By 2001 Argentina was in serious financial, social and political difficulties. There was a huge......
  • Disputes With States
    • United Kingdom
    • Mondaq UK
    • 15 September 2021
    ...in the arbitration. Enforcement of a foreign judgment Earlier this year the Court of Appeal in Republic of Argentina v NML Capital Ltd. [2010] EWCA Civ 41 had to deal with a new point on state "5 By 2001 Argentina was in serious financial, social and political difficulties. There was a huge......
1 books & journal articles
  • Kuwait Airways Corp. c. Irak, 2010 CSC 40.
    • Canada
    • McGill Law Journal Vol. 56 No. 3, April 2011
    • 1 April 2011
    ...art 3148, 3164 et s CcQ? (54) Voir NML Capital Ltd v Argentina, [2009] EWHC 110 (Comm), [2009] 2 WLR 1332 au para 14 : > ; en appel : [2010] EWCA Civ 41, [2010] 3 WLR 874 au para 92 [...] each of the exceptions set out in sections 2 to 11 [of the UK State Immunity Act 1978] requires the cla......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT