FacebookTwitterRedditEmail

The Trial of the Century?

The beauty and lasting power behind the US Constitution is mostly due to its simplicity and clarity. With high-school English comprehension, plus a bit of bedtime reading and everyday common sense, the mechanical clockwork that makes US governance tick comes to life. The US Constitution is shorter than many short-stories.

“The trial of the century”

Now fast forward to the “Argentina vs. Vulture Funds” litigation and the unfortunate high-profile involvement of the US judiciary in what the Financial Times has coined “the trial of the century”.  Such spectacular denomination surely obeys to the fact that we have now passed from previous UN-enforceability of sovereign debt (by definition) to potent help freely offered to rogue creditors (vulture funds) which will bring about negative consequences world-wide (of course).

As University of Georgia Prof. Tim Samples has exquisitely put it, the current situation establishes  “… a radical departure from the traditional unenforceability of sovereign debt in favor of the opposite extreme: potent injunctive remedies applicable to third parties… a landmark case in a trend that threatens destabilizing consequences for sovereign debt restructuring — a major concern for sovereigns as well as their creditors — and creates serious uncertainties for financial institutions”. The term “sovereign” is mentioned three times.

Size matters

The world’s global sovereign debt is close to USD 55 Trillion (three times larger than US GDP) and thus has enormous impact on financial markets and everyday economics, political stability and even national security. Credit Default Swaps (CDS), otherwise known as “insurance in case of default” leverage such impact with unfathomable counterparty risk worldwide.

Sovereign debt is not limited to emerging markets as the Eurozone holds its largest single portion with a very thick mesh of debtors and creditors intertwined in an unimaginable criss-cross matrix. Europe also matters.

Judicial footbal

Now then, with Judge Griesa (84) quarterbacking from his Manhattan office and/or his Montana ranch, the US judiciary team (with help from the US Supreme Court) has scored some historical ‘touchwrongs’ in the US governance game. Meanwhile the Executive Branch watches idly from the sidelines.

Actually,  Judge Griesa’s daring plays (including a couple of Hail Mary passes) have ‘touched-wrong’ both legal and diplomatic fundamentals which will serve as precedent for other (huge) cases of outstanding international sovereign debts.

Foul plays

(1) ) The US Supreme Court went far beyond the US Constitution thru its “exorbitant approval” of vulture funds’ full discovery (precise information) of Argentina’s seizable assets worldwide. That means letting vulture funds know exactly where Argentina has property that can be embargoed, so that they don’t waste time, money and energies finding that out. US Supreme Court Justice Ruth Bader Ginsburg enjoys plenty of fine company with her dissent on this issue. CHECK.

(2) The judiciary Code of Conduct forbids US judges from punishing parties with scorn and/or bias, let alone a sovereign nation state, however “recalcitrant” (sic) it may be deemed to be. CHECK.

(3) The US Constitution expects the Supreme Court to comply with its responsibility to oversee trascendental judgements with long-term consequences that visibly exceed the scope and authority of lower courts of law. CHECK.

(4) The Attorney General’s job description includes overseeing legal matters affecting long-lasting interests of the US. CHECK.

(5) The State Department and Congress are expected to oversee any foreign policy matter along the same lines. CHECK.

(6) ‘Pari passu’ is not a single clause. There are several ‘pari passu’ clauses and interpretation thereof  is, at the very least, highly ambiguous and deeply contentious worldwide, even in the US. CHECK.

(7) A New York judge cannot declare it “illegal”for a sovereign nation state to pay any of its creditors, nor force US trustee banks to withold such payments, let alone outside the US. CHECK

(8)  The US Constitution does not foresee any Judiciary Branch involvement in other nation states’ affairs as such fall squarely within the realm of the political branches of the US government (Congress and the President). CHECK.

The perfect storm

Sometimes Argentina’s unique manners are certainly not welcome and, true enough, most of the time its English skills are not a source of envy. But unprecedented US judiciary meddling shoving Argentina under a bus will definetly not solve the problem although it will surely rock the international financial boat while still navigating 2008 high-waves seas.
The last thing the financial world now needs is an unpredictable and uncertain sovereign debt market with rogue creditors supported by rogue courts.

However it’s sliced, the US judiciary’s blatant tinkering has enabled a tiny minority (1.6%) to thwart the world’s largest and most widely supported (92.4%) Sovereign Debt Default restructuring. Worse, it is all being done despite the glaring absence of internationally acknowledged legislation on sovereign bankruptcy to abide by.

As a matter of fact, it might readily trigger an international cascade of competing “legal” claims involving many other sovereign defaults besides Argentina’s.

By the way

Will the US continue to be viewed as a convenient place to issue sovereign debt ?

Is the US risking reciprocal adverse treatment from foreign courts, embassies or institutions?

Is the Federal Reserve aware of the near future requirements regarding all of the above?
Jorge Vilches writes about trade and finances.
More articles by:

Jorge Vilches is a financial op-ed columnist based in Buenos Aires, Argentina. He can be reached at: jorgevilches@fibertel.com.ar

bernie-the-sandernistas-cover-344x550
Weekend Edition
January 17, 2020
Friday - Sunday
Jeffrey St. Clair
Roaming Charges: No Woman, No Cry
Kathleen Wallace
Hijacking the Struggles of Others, Elizabeth Warren Style
Robert Hunziker
The Rumbling Methane Enigma
Frank Joyce
Will the Constitution Fail Again?
Pete Dolack
Claims that the ‘NAFTA 2’ Agreement is Better are a Macabre Joke
Andrew Levine
Biden Daze
Vijay Prashad
Not an Inch: Indian Students Stand Against the Far Right
Ramzy Baroud
Sealed Off and Forgotten: What You Should Know about Israel’s ‘Firing Zones’ in the West Bank
Norman Solomon
Not Bernie, Us. Not Warren, Us. Their Clash Underscores the Need for Grassroots Wisdom
Ted Rall
America’s Long History of Meddling in Russia
David Rosen
The Irregulators vs. FCC: the Trial Begins
Jennifer Matsui
The Krown
Joseph Natoli
Resolutions and Obstacles/2020
Sarah Anderson
War Profiteering is Real
James McFadden
The Business Party Syndicate
Ajamu Baraka
Trump Prosecutors Make Move to Ensure that Embassy Protectors are Convicted
David Swanson
CNN is Trash
Rev. William Alberts
Finally a Christian Call for Trump’s Removal
Dave Lindorff
The ERA Just Got Ratified by Virginia, the Needed 38th State!
W. T. Whitney
Mexico Takes Action on Coup in Bolivia and on CELAC
Steve Early
How General Strike Rhetoric Became a Reality in Seattle 
Jessicah Pierre
Learning From King’s Last Campaign
Mark Dickman
Saint Greta and the Dragon
Jared Bernstein - Dean Baker
Reducing the Health Care Tax
Clark T. Scott
Uniting “Progressives” Instead of Democrats
Nilofar Suhrawardy
Trump & Johnson: What a Contrast, Image-wise!
Ron Jacobs
Abusing America’s Children—Free Market Policy
George Wuerthner
Mills Are Being Closed by National Economic Trends, Not Environmental Regulations
Basav Sen
Nearly All Americans Want Off of Fossil Fuels
Mark Ashwill
Playing Geopolitical Whack-a-Mole: The Viet Nam Flag Issue Revisited
Jesse Jackson
New Hope for One of America’s Poorest Communities
Binoy Kampmark
Harry and Meghan Exit: The Royal Family Propaganda Machine
Ralph Nader
Trump: Making America Dread Again!
Rob Okun
A Call to Men to join Women’s March
Kollibri terre Sonnenblume
We All Need to Be Tree Huggers Now
Tom Stephens
The New York Times’ Delusions of Empire
Julian Rose
Fake-Green Zero Carbon Fraud
Louis Proyect
The Best Films of 2019
Matthew Stevenson
Across the Balkans: Into Kosovo
Colin Todhunter
Gone Fishing? No Fish but Plenty of Pesticides and a Public Health Crisis
Julian Vigo
Can New Tech Replace In-Class Learning?
Gaither Stewart
The Bench: the Life of Things
Nicky Reid
Trannies with Guns: Because Enough is Enough!
James Haught
Baby Dinosaurs on Noah’s Ark
David Yearsley
Brecht in Berlin
FacebookTwitterRedditEmail