In 1994, the Republic of Argentina issued a series of sovereign bonds. The bonds contained a jurisdictional clause stipulating governance under New York law. NML Capital Limited (NML), a Cayman Islands-based hedge fund and affiliate of New York-based Elliot Management, purchased the then-distressed bonds between June 2001 and September 2003 at about half their face value. As previously reported in the Hedge Fund Law Report, Argentina suspended interest and principal payments on this debt in December 2001 and NML Capital filed eleven lawsuits against Argentina. See “If a Hedge Fund Holder of Defaulted Sovereign Debt Obtains a Judgment Against the Defaulting Sovereign, What Assets Can the Hedge Fund Go After to Satisfy the Judgment?
,” Hedge Fund Law Report, Vol. 4, No. 21 (Jun. 23, 2011) (also detailing one such lawsuit involving NML and Argentina in the United States District Court for the Central District of California). In one such action, NML sued Argentina for the bonds’ full value with interest in the United States District Court for the Southern District of New York. On December 18, 2006, the Southern District entered a summary judgment order in favor of NML and against Argentina for the sum of about $284 million. NML sought to enforce the judgment and recover assets internationally. NML brought a successful common law action in the English Commercial Court. However, that judgment was reversed by the Court of Appeal (an intermediate appellate court), which held that Argentina is protected by state immunity. On July 6, 2011, the Supreme Court of the United Kingdom unanimously overturned the decision of the Court of Appeal. This decision provides greater certainty to hedge funds holding distressed government debt regarding their ability to seek recovery in English courts. We summarize the background of the action and the English high court’s legal analysis.