Skip to content

Belgian aspects of the Argentinian sovereign debt litigation

Sept/Oct 2013

Eurobondholders v The Bank of New York Mellon SA and Euroclear Bank SA, 28 June 2013

The default of the Republic of Argentina on its sovereign debt and the multitude of litigation it has given rise to is widely known. This article considers how the Belgian courts have become involved with aggrieved bondholders attempting to use the Belgian courts to force financial institutions, based in Belgium, and who participate in the payment process, to make certain payments under the bonds in the hope to sidestep U.S. court decisions on the same issues.

Since 2001 the Republic of Argentina (the Republic) has defaulted on its sovereign debt bonds issued in the 1990s. In 2005 and 2010, in an effort to restructure its debt, the Republic allowed holders of defaulted bonds to exchange their bonds for new ones issued at a rate of twenty-five to twenty-nine cents on the dollar. The Republic was able to restructure more than 90% of its debt through this exchange. However, a small percentage of holders of old bonds (mainly hedge funds specialised in distressed sovereign debt) did not accept the restructuring and kept their old defaulted bonds. After the restructuring, the Republic has consistently paid the new bondholders (the Exchange holders) whilst continuing to default on the old bonds. The old bondholders have sought full collection of their debt mainly before the U.S. courts but also elsewhere.

On 23 February 2012 , Judge Griesa (U.S. District Court of the Southern District of New York) in NML Capital Ltd v Argentina held that the Republic violated a standard pari passu clause in its old unrestructured bonds and ordered the Republic not to make any payments on new bonds unless it made a ratable payment to the holders of the old bonds, including NML Capital Ltd.1

The 23 February 2012 order was challenged before the Court of Appeals of the Second Circuit, as a result of which the matter was remanded to Judge Griesa.2 This gave rise to Judge Griesa’s 21 November 2012 order, which reiterated the terms of the February order , elaborated on some aspects and which was again challenged before the Second Circuit.

In this article, we focus on how, pending this second appeal, this U.S. case developed an unexpected Belgian twist.

Effect on third parties

The starting point for the Belgian proceedings is a central issue in the U.S. proceedings too, ie how Judge Griesa’s orders should apply to third parties.

On 23 February 2012, Judge Griesa held that, inter alia, the injunctions applied to "all participants in the payment process", so that "those persons and entities who act in active concert or participation with the Republic, to assist the Republic in fulfilling its payment obligations under the Exchange Bonds" were bound by the order. On 21 November 2012,3 Judge Griesa revised the 23 February 2012 order by adding that "participants" included the indenture trustees, the registered owners of the new bonds and the nominees of the depositaries for the new bonds, any institution acting as nominee, the clearing corporations and system, depositaries, operators of clearing systems, settlement agents for the new bonds, the trustee paying agents and transfer agents for the new bonds and generally any other agents engaged by any of the foregoing or the Republic in connection with their obligations under the new bonds.

Judge Griesa expressly named as participants a number of The Bank of New York Mellon entities (several of The Bank of New York Mellon entities act as trustee of the indenture, paying agent and registered owner with respect to the exchange bonds) and many other financial institutions (including Euroclear Bank) among others.

The Republic and several non-parties to the proceedings, including The Bank of New York Mellon and a group of Exchange holders (the Eurobondholders) challenged the 21 November 2012 order, in particular its extremely broad scope with respect to third parties.

On 28 November 2012, the Court of Appeals of the Second Circuit stayed Judge Griesa’s orders pending the outcome of the appeal. Practically, this stay meant that parties and non-parties were temporarily not required to comply with the 23 February and 21 November 2012 orders.

A Belgian connection

While contesting Judge Griesa’s orders before the Second Circuit, the Eurobondholders attempted in parallel to obtain from the Brussels commercial court an injunction in summary proceedings (référés/kortgeding) compelling Brussels-based The Bank of New York Mellon SA and Euroclear Bank to effect payment on the due dates in accordance with their respective obligations as paying agent and clearing system. Of all "participants" involved in the chain of payment, the Eurobondholders chose to sue these two Belgian defendants because, the Eurobondholders argued, they were the ultimate links in the chain of payment.

The Eurobondholders were trying to obtain from the Belgian court the result they were simultaneously seeking in the appellate proceedings, namely that The Bank of New York Mellon SA and Euroclear Bank continue to pay them, in case the stay on Judge Griesa’s orders was lifted.

The Brussels commercial court held on 28 June 2013 that such claim was so hypothetical, and the Eurobondholders’ alleged damage was so uncertain that they failed to establish the required interest. Their claim therefore lacked standing.

The court ruled that the claims relied on a series of hypothetical factors because the Eurobondholders had in effect asked the Belgian court to rule that:

  • if the stay on Judge Griesa’s orders was lifted;
  • if Judge Griesa’s orders were confirmed on appeal;
  • if the Republic, despite such orders, proceeded to transfer funds to the participants for payment to the Exchange holders without effecting any ratable payment to NML Capital; and
  • if all participants in the chain of payments then transferred the said funds to The Bank of New York Mellon SA and Euroclear Bank,

then The Bank of New York Mellon SA and Euroclear Bank should be obliged to transfer such funds for payment to the Eurobondholders, notwithstanding Judge Griesa’s orders.


Not only did the Eurobondholders seek to have a Belgian court effectively sidestep the effect of the Second Circuit’s appeal judgment, but also they expressly asked the Second Circuit to withhold judgment on the applicability of Judge Griesa’s orders to The Bank of New York Mellon SA and Euroclear Bank pending determination by the Belgian court.

In effect, the Eurobondholders sought to obtain from the Belgian judge a more favourable decision than what they feared the Second Circuit would decide (but had not yet decided) whilst asking the Second Circuit to abstain from interfering with this potentially, but not certainly, more favourable Belgian decision.

The Belgian episode of this saga is not over . The Eurobondholders have now commenced long form proceedings on the merits (the previous proceedings were summary) before the Brussels commercial court against The Bank of New York Mellon SA and Euroclear Bank.

In the meantime, the Second Circuit confirmed Judge Griesa’s orders on 23 August 2013,4 but at the same time maintaining the stay until the U.S. Supreme Court issues, as the case may be, a writ of certiorari.

All eyes are now on the U.S. Supreme Court.


1. A comprehensive report on the case was published by A&O Global Law Intelligence Unit on 27 December 2012.
NML Capital Ltd v Republic of Argentina, 699 F.3d 246 (2dCir.2012).
NML Capital Ltd v Republic of Argentina, No 08 Civ 6978(TPG), 2012 WL 5895786 (S.D.N.Y., 21 November 2012). 4. 2013 WL 4487563 (C.A.2 (N.Y.)).

Northern Europe