D. Enforcing Contractual Waivers of Immunity
- As reported in the Guide, US courts are as zealous about enforcing contractual agreements to waive sovereign immunity as they are in enforcing the protections of immunity itself. The certainty of contract is seen as key to the vitality and operation of the financial markets in particular.
- In the midst of the crises rolling through the global markets, litigants likely will seek broader interpretations and enforcement of waivers. Two recent decisions highlight this trend.
- Argentine Sovereign Debt Waiver Extends to Pension Funds: Aurelius Capital Partners. LP v. The Republic of Argentina, 07-CIV-2715 (TPG) (S.D.N.Y. 2008)
(a) The "main difficulty" in the US lawsuits seeking to recover from the Republic of Argentina on its defaulted sovereign debt has been finding a way for the plaintiff creditors to recover on the many judgments that have been and will be entered. The creditors found new hope in December 2008 when the US trial court agreed that plaintiffs could attach $200 million in New York investment accounts belonging to certain private and public Argentine pension funds because those accounts had been transferred to an Argentine entity known as ANSES. See Opinion, December 11, 2008 (Rulings of Special Interest).
(b) Although Argentine law expressly provided that ANSES assets could not be attached and could be used only for payments to the pensioners, the US court nonetheless found the attachment proper under the FSIA because:
(i) Argentina itself had contractually agreed to a broad waiver of sovereign immunity when it issued the underlying debt.
(ii) ANSES was found to be nothing more than a subdivision of Argentina and, therefore, bound by Argentina's broad contractual waiver of immunity. Argentina had so abused, misused, and manipulated ANSES and its assets as to remove any semblance of independent existence for ANSES. Indeed, testimony and other evidence showed that Argentina had effectively nationalized private as well as public pension funds for the purpose of propping up its budget by investing the funds in more sovereign debt.
(iii) The FSIA also requires that, to attach sovereign assets, the assets must be "used for a commercial activity in the United States." 28 USC §§ 1610(a), (d). There was no serious dispute that the assets in question ? investment accounts ? met this requirement. As a matter of law, investment accounts are commercial in nature even if the ultimate use of the funds is governmental, as Argentina claimed.
- Scope of Immunity Waiver Equal to Scope of Forum Waiver: In Belize Telecom, discussed above, the Circuit Court held that Belize had waived immunity for claims with respect to the appointment and removal of directors. The court found that such claims plainly were encompassed in the parties' contractual forum selection clause. The court rejected Belize's argument that the scope of its immunity waiver should be narrower than the forum waiver. 528 F. 3d at 1309, n. 13.