It seems as though the Argentine ambassador in France will no longer need to pay embassy expenses out of his own pocket. A French judge lifted the freeze imposed on April 3rd. More importantly, a German judge released the funds that German companies owed Argentine tax authorities. Interestingly, Judge Wölber did not base his decision on sovereign immunity. Rather, he ruled that since the tax payments were owed by the companies’ Argentine operations, German courts had no authority. It remains to be seen if this precedent will be followed by other European courts, but the Argentine government is optimistic.
Interestingly, U.S. courts have taken the same position. In 1999, the New York-based Leucadia National Corporation sued Nicaragua over $26 million in defaulted debt that it had purchased for $1.14 million. A New York court granted the company $87 million. (No, I don’t know why.) It tried to collect by attaching Nicaragua’s share of the ticket and landing fees paid by U.S.-based airlines that flew to that country. U.S. courts, however, refused to uphold the judgment. But don’t cry for Leucadia. Eventually the World Bank paid off the debt at 4.5¢ on the dollar, including accrued interest. By my calculations, Leucadia received about $7.8 million, for a nice return of 584%.
I am increasingly unsympathetic to Argentina. But I am also relatively unsympathetic to the vulture funds that try to use the judicial system to impose sanctions on defaulting governments. I may change that position if we start seeing more ploys like President Correa’s brilliant gamble, but that’s still a hypothetical fear, not a real one.
P.S. It seems like I was wrong about Ecuador. I’ll discuss why, but only if there’s interest. No reason to admit error if nobody cares ...