When lawyers declare war!

  You know, the more I learn, the more I think that President Correa of Ecuador is really playing with fire in defaulting on his debts.  Brazil is mad at him, and you don't want to get the new imperial rulers of South America mad at you.  But more importantly, he's got his American creditors mad at you ... and it seems as though those creditors may have a rather powerful legal recourse.  It'll all depend on the definition of a “central bank.”

But let's start at the beginning. What happens when lawyers declare war on a country? Well, remember this post, on the U.S. sanctions against Manuel “La Piña” Noriega ?  Turns out that the sanctions weren't really Elliot Abrams' idea. Rather, the credit goes to a lawyer, William Rogers, acting on behalf of his client, former President Eric Delvalle of Panama. 

La Piña, you see, had an anger-management problem. He decapitated Hugo Spadafora, one of his political opponents.  When the President of Panama, Nicolás Barletta, made the mistake of thinking that he, you know, ran the country, and decided to investigate the head-chopping, Noriega locked him in his office and threatened his family.  At 3am, President Barletta appeared on national television and offered his resignation, which the National Assemby accepted in a late-night emergency session.  Eric Delvalle, the education minister, then became President. A little while later, Delvalle decided to pass on to La Piña an American offer to let him peacefully resign with all his ill-gotten gains. In response, Pineapple-face ejected Delvalle from the presidency.  Delvalle got word that he was going to be arrested the next day, and managed to make it to an American military base. His ambassador-at-large hired Rogers, and then ...

... Rogers' firm filed suits to freeze Panamanian assets in the United States, beginning with the banks.  On March 3, the courts froze the U.S. accounts of the Banco Nacional de Panama (BNP).  The freeze deliberately cut off the BNP’s liquidity — it could no longer access any of the deposit accounts it held in American banks.  Nor could it clear checks through American institutions. The BNP had to close its doors.  In Rogers' words: 

“It was a conscious plan to tighten the financial noose around the neck of the Noriega regime. The consequences were seen with precision: Starve the banking system of cash, force the banks to close, and thus cause —not to put too fine a point on it — considerable financial, economic distress in Panama. The economy doesn’t function now.” 

Since the BNP was also the Panamanian clearinghouse for cashing domestic checks, the subsequent payday, March 14, became a bit problematic. How could Panamanian firms make payroll? Over 145,000 people, twenty percent of Panama’s labor force, had no access to the $30 million in wages they were owed. A general strike quickly ensued, beginning with the dock workers. By the end of March, Panama’s economy was in disarray, and the country defaulted on its foreign debts.   

Rogers was quietly pleased with himself:

“I don’t know of anyone else who — I mean on the assumption that it works, and Noriega is out — I don’t know of any effort to overturn another government by litigation which really was based on, and derived from, litigation in the United States. Or that worked as fast as this, or that had the consequences this one has.”

Well, it didn't work. But think about it for a moment. Could lawyers declare war on Ecuador for defaulting on its debts the same way that they declared war on Panama for ousting a president? After all Ecuador uses the dollar. And sanctions that didn't work on a dictator might be very effective in swinging public opinion against an elected president. Maybe Felix Salmon was on to something. 

It all depends on whether American courts consider the Banco Central de Ecuador (BCE) to be a real central bank. If it is, then its assets are not attachable, and U.S. courts cannot interfere with its functioning. But if it isn't, well, then some enterprising lawyer could go give it the full Rogers. And wouldn't that be interesting to watch? 

From a big distance, that is. Correa may be worried about this possibility. The BCE is buying a lot of gold ... which is weird, to say the least. But is Ecuador vulnerable?

Lawyers read this blog. So help a brother out with his research. Could somebody do to the BCE what Rogers did to the BNP, or is Ecuador safe? 

Comments

[Will Baird]

NO comments? WTF. over. This one was a post I have been WAITING for some people to chime up on about. I find it fascinating!

Wasn't there some sort of this happening wrt Iran and Libya back in the day also?

[Noel Maurer]

Sorry, V.O., I don't follow how that question pertains to the topic of this thread. To be honest, I don't follow the question at all.

If you don't respond, I'll have to assume that you're a very clever bot and block you; after all, your nick is a little odd.

[Will Baird]

It's a bot, Noel. I get them frequently.

[Michael OKane]

Let's not forget that lawyers--specifically prosecutors--conducted U.S. foreign policy by indicting Noriega. Somehow the Neutrality Treaty was overlooked. I was told that in the context of the case against Noriega, that if the case against Noriega was dropped for political reasons--which, if the Rule of Law exists in the United States, cannot happen--then the case would be dropped against his codefendants as well.

Since I can't find your other post about driving on the the left in Panama: are your sure? I remember that there were odd traffic rules concerning the swing bridge at Pedro Miguel and a Bailey Bridge somewhere near Gamboa, but that was it. I'm pretty sure that I would have known.

On this point, Myanmar switched to driving on the right in the 1970's because a fortune-teller advised the government head to do so. Strangely, they kept right-hand side drive cars. The result is that a left hand turn in Myanmar is an extremely dangerous operation.

And in Bolivia, they import cars with steering wheels on the right and move the pedals and wheel to the left leaving the other controls on what is now the passenger side.