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On 16 June 2014, the Supreme Court of the United States rejected the petition for a writ of certiorari stemming from the dispute over the meaning of the  pari passu  clause in the Argentine sovereign bonds. This decision had a dramatic impact on Argentina’s sovereign debt restructurings (SDR) – indeed, it arguably led to Argentina’s second default in 13 years on 30 July 2014. On the same day that the petition for certiorari was rejected, the Supreme Court rendered a judgment on the issue of the relationship between discovery in aid of execution against the debtor state’s extraterritorial assets and the law of state immunity. In  Republic of Argentina v. NML Capital, Ltd ., judgment of 16 June 2014, the Supreme Court affirmed the Second Circuit’s conclusion that the extraterritorial assets discovery against two non-party banks in aid of executing the judgments stemming from Argentina’s default of its external debt did not offend Argentina’s sovereign immunity. This comment addresses this judgment on extraterritorial discovery which, although less headline grabbing than the decisions on the  pari passu  clause, also marks a victory for holdout creditors. It first provides a summary of the background of the case and the judgment, and then considers its implications on the future SDR. Regarding the implications of the case on the future SDR, this comment also describes the developments of law concerning the relationship between the law on foreign investment and SDR (in investment arbitration) and the relationship between investment arbitration awards and sovereign immunity (in US courts). First, it examines the recent decisions in ICSID arbitration concerning the disputes arising from the Argentina’s default and subsequent SDR ( Abaclat v. Argentina  (decision on jurisdiction and admissibility of 4 August 2011) and  Ambiente v. Argentina  (decision on jurisdiction and admissibility of 8 February 2013)). In essence, these decisions opened the door to investment treaty arbitration for holdout creditors of international sovereign bonds, for the first time in the history of investment arbitration. It then describes the Second Circuit’s recent decision in  Blue Ridge v. Argentina  (judgment of 19 August 2013) in which the court concluded that the defendant state in an ICSID arbitration was considered to have waived its jurisdictional immunity under the Foreign State Immunity Act of 1976 (FSIA). It argues that the combination of: (a)  Argentina v. NML , (b)  Blue Ridge v. Argentina , and (c) the openness of ICSID arbitration to disputes arising from SDR will have potentially serious consequences for future SDR.

Extraterritorial Discovery in Aid of Execution and State Immunity: Case Comment on Republic of Argentina v. NML Capital, Ltd ., 573 U.S. ___ (2014)