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1 UNI TED STATES DI STRI CT COURT
SOUTHERN DI STRI CT OF NEWYORK
2 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

3 NML CAPI TAL, LTD. , et al . ,

4 Pl ai nt i f f s,

5 v. 08 CV 6978 ( TPG)

6 THE REPUBLI C OF ARGENTI NA,

7 Def endant .

8 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

9 New Yor k, N. Y.
August 21, 2014
10 3: 05 p. m.

11 Bef or e:

12 HON. THOMAS P. GRI ESA,

13 Di st r i ct J udge

14 A P P E A R A N C E S

15
DECHERT LLP
16 At t or neys f or Pl ai nt i f f NML Capi t al , Lt d.
BY: ROBERT A. COHEN
17
GI BSON DUNN & CRUTCHER LLP
18 At t or neys f or Pl ai nt i f f NML Capi t al , Lt d.
BY: MATTHEWD. McGI LL
19
FRI EDMAN KAPLAN SEI LER & ADELMAN LLP
20 At t or neys f or I nt er est ed Par t i es Aur el i us Capi t al Par t ner s
and Bl ue Angel
21 BY: EDWARD A. FRI EDMAN

22 GOODWI N PROCTER LLP
At t or neys f or Pl ai nt i f f Ol i f ant Fund Lt d.
23 BY: ROBERT D. CARROLL

24

25


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1 APPEARANCES ( Cont ' d)

2 MI LBERG LLP
At t or neys f or Var el a pl ai nt i f f s
3 BY: MI CHAEL C. SPENCER

4 REED SMI TH LLP
At t or neys f or The Bank of New Yor k Mel l on
5 BY: NEI L GRAY
ERI C A. SCHAFFER
6
CLEARY GOTTLI EB STEEN & HAMI LTON LLP
7 At t or neys f or Def endant
BY: CARMI NE D. BOCCUZZI , J R.
8
DAVI S POLK & WARDWELL LLP
9 At t or neys f or Ci t i bank
BY: KAREN E. WAGNER
10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25


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1 ( Case cal l ed)

2 THE COURT: Al l r i ght . Let ' s st ar t wi t h Mr . Cohen.

3 You asked f or t he conf er ence. Do you have an appl i cat i on?

4 MR. COHEN: Thank you, your Honor . Rober t Cohen f r om

5 Decher t on behal f of pl ai nt i f f NML Capi t al .

6 Your Honor , we ar e her e wi t h an appl i cat i on f or a

7 ci t at i on of cont empt wi t h r espect t o t he Republ i c of

8 Ar gent i na' s cumul at i ve vi ol at i ons of your Honor ' s amended

9 Febr uar y 23r d or der .

10 The most r ecent of t hose vi ol at i ons i s t he

11 i nt r oduct i on of l egi sl at i on t hi s week i n t he Congr ess of

12 Ar gent i na t hat woul d have t he ef f ect of gut t i ng t he amended

13 Febr uar y 23r d or der , i n t hat i t woul d pr ovi de f or a mechani sm

14 t o pay t he exchange bondhol der s i nt er est payment s i n Ar gent i na

15 and out si de t he cont r ol and j ur i sdi ct i on of t hi s cour t , t he

16 pr eci se r i sk t hat t he amended Febr uar y 23r d or der s and

17 subsequent or der s wer e desi gned t o avoi d.

18 Thi s t hr eat , t he t hr eat t o f i nd a way ar ound your

19 Honor ' s or der , has been per col at i ng si nce at l east August of

20 2013. Your Honor may r emember t hat f ol l owi ng t he Second

21 Ci r cui t ' s af f i r mance of t he amended Febr uar y 23r d or der ,

22 Pr esi dent Ki r chner went on t he ai r waves i n Ar gent i na and sai d

23 she was goi ng t o f i nd a way t o evade t hat or der by al l owi ng

24 payment i n Ar gent i na.

25 We came t o your Honor , br ought t hat t o your at t ent i on,


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1 and t hat r esul t ed i n an or der on Oct ober 3r d of 2013, whi ch

2 speci f i cal l y pr ohi bi t ed t he evasi on of t he amended Febr uar y

3 23r d or der , i ncl udi ng by adopt i ng a mechani smt o pay i n

4 Ar gent i na.

5 Cl ear y Got t l i eb sai d at t hat t i me t hat t he speech of

6 t he pr esi dent was mer el y pol i t i cs. She was t al ki ng t o t he

7 popul ace. Ther e wer e no such pl ans, and t her e wer e no such

8 document s, whi ch we sought as par t of t hat pr oceedi ng t o

9 descr i be what t hat pl an mi ght be. They sai d t her e wer e no such

10 t hi ngs.

11 On J une 16t h of t hi s year , t he Supr eme Cour t deni ed

12 cer t i or ar i and t he amended Febr uar y 23r d or der became f ul l y

13 ef f ect i ve. That ver y ni ght , J une 16t h, t he pr esi dent went back

14 on t he ai r waves i n Ar gent i na and r epeat ed t he t hr eat t o cr eat e

15 a mechani smt o avoi d t he amended Febr uar y 23r d or der , by

16 al l owi ng payment t o be made on bonds t o be i ssued i n Ar gent i na

17 and pai d i n Ar gent i na t o t he exchange bondhol der s.

18 On t he next day, t he economy mi ni st er , Mr . Axel

19 Ki ci l l of , al so had a nat i onwi de pr ess conf er ence wher e he

20 r epeat ed t hat same t hr eat .

21 We br ought t hose i nci dent s t o t he Cour t ' s at t ent i on,

22 and on J une 20, t hr ee days l at er , your Honor ent er ed an or der ,

23 a shor t t wo- par agr aph or der , whi ch sai d, " I n hi s J une 17, 2014

24 speech, Ar gent i na' s economy mi ni st er , Axel Ki ci l l of , pr oposed

25 t hat Ar gent i na i ni t i at e st eps t o car r y out a debt exchange t o


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1 pay t he exchange bondhol der s i n Ar gent i na under Ar gent i ne l aw.

2 Thi s Cour t r ul es t hat t he above pr oposal of t he economy

3 mi ni st er i s i n vi ol at i on of t he r ul i ngs and pr ocedur es now i n

4 pl ace i n t he Sout her n Di st r i ct of New Yor k, and t he Republ i c of

5 Ar gent i na i s pr ohi bi t ed f r omcar r yi ng out t he pr oposal of t he

6 economy mi ni st er . " That was J une 20, your Honor .

7 A week l at er , your Honor , al so i n def i ance of t he

8 amended Febr uar y 23r d or der , Ar gent i na pur por t ed t o t ake st eps

9 t o make a payment on exchange bonds wi t hout si mul t aneousl y

10 payi ng what we ar e cal l i ng t he hol dout s. That was cont umaci ous

11 and i n di r ect vi ol at i on of t he Cour t ' s amended Febr uar y 23r d

12 or der .

13 Your Honor f ound t hat i t was i l l egal f or t hemt o do

14 t hat , and f or t unat el y, as we know, Bank of New Yor k Mel l on

15 abi ded by t he or der and di d not f or war d t hat money on, al t hough

16 t her e have been some ot her r el at ed i nci dent s t hat we have been

17 deal i ng wi t h r ecent l y.

18 THE COURT: What was t he l at t er ?

19 MR. COHEN: I amr ef er r i ng, your Honor , t o t he

20 Ci t i bank i ssue wi t h r espect t o cer t ai n of t he moneys t hat wer e

21 pai d at t he end of J une.

22 Ear l i er t hi s week, on Tuesday, t he pr esi dent agai n

23 went on nat i onal t el evi si on and announced t hat she had

24 i nt r oduced l egi sl at i on i n t he Congr ess of Ar gent i na t hat i f

25 adopt ed woul d pr ovi de a mechani smf or exchange bondhol der s t o


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1 be pai d i n Ar gent i na on bonds t o be exchanged f or t hei r bonds,

2 and unabashedl y, t he pr esi dent sai d, Thi s i s t o avoi d t he

3 or der s of t hi s cour t .

4 And yest er day, Mi ni st er Ki ci l l of agai n r epeat ed what

5 t he pr esi dent sai d. He sai d t hat t hese st eps wer e necessar y

6 because t he cour t s of t he Uni t ed St at es - - t hi s Cour t , t he

7 Supr eme Cour t and ot her s - - have put i t i n an unt enabl e

8 posi t i on, i n vi ol at i on of i nt er nat i onal l aw, and as a sover ei gn

9 count r y t hey wer e goi ng t o t ake t hese st eps.

10 Your Honor , we t hi nk t hi s accumul at i on of def i ant ,

11 bl at ant l y def i ant , act i ons f i nal l y r equi r e t hi s Cour t t o f i nd

12 t he Republ i c i n cont empt . And i t ' s i mpor t ant , your Honor , not

13 j ust because of t he i mpact we hope i t wi l l have on Ar gent i na,

14 but because what t hey have pr oposed, i n or der t o be ef f ect i ve,

15 we bel i eve wi l l r equi r e t hi r d par t i es t hat ar e wi t hi n t hi s

16 Cour t ' s j ur i sdi ct i on t o cooper at e i n some manner or means, and

17 t hey need t o know t hat t hi s Cour t i s pr epar ed t o act har shl y

18 wi t h r espect t o anyone who woul d vi ol at e t hi s Cour t ' s or der .

19 THE COURT: Bef or e we get t o cont empt , i sn' t i t

20 necessar y t o deal wi t h t he i ssue of whet her t hi s August 19

21 pr oposal of t he pr esi dent i s or i s not l egal , i s or i s not i n

22 compl i ance wi t h t he cur r ent i nj unct i ons and or der s of t he

23 cour t ? I sn' t t hat t he f i r st t hi ng t hat must be deal t wi t h?

24 MR. COHEN: Yes, your Honor . And I t hi nk t hat t he

25 pr oposal i n t he l egi sl at i on i s t hat exchange bondhol der s be


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1 gi ven t he oppor t uni t y t o exchange t hei r bonds, whi ch ar e

2 payabl e t hr ough Bank of New Yor k Mel l on, f or bonds t hat woul d

3 be i ssued i n Ar gent i na, under Ar gent i ne l aw, and payabl e

4 t hr ough an ent i t y t hat i s a gover nment cont r ol l ed t r ust

5 company.

6 I f t hat happened, your Honor , t her e woul d be no

7 obl i gat i on on t he par t of Ar gent i na any l onger t o pay t he

8 hol dout cr edi t or s at t he same t i me t hat t he exchange

9 bondhol der s wer e pai d. That , we t hi nk, your Honor , i s a di r ect

10 vi ol at i on of t he amended Febr uar y 23r d or der , and i t i s exact l y

11 t he ci r cumst ance t hat your Honor addr essed when you ent er ed

12 your J une 20t h of t hi s year or der sayi ng t hat i f Mi ni st er

13 Ki ci l l of ' s pr oposal was adopt ed, i t woul d be i l l egal and a

14 vi ol at i on of t he amended Febr uar y 23r d or der .

15 So I don' t t hi nk t her e i s any doubt t hat what has been

16 pr oposed i s a cl ear and i nt ended way t o evade your Honor ' s

17 or der .

18 THE COURT: Let me j ust get back t hen t o t he i ssue of

19 cont empt of cour t . I guess t he answer s t o my quest i ons ar e

20 pr et t y evi dent , but I amgoi ng t o ask t hemanyway.

21 The Republ i c has obl i gat i ons, and I don' t want t o get

22 i nt o t oo much of t hi s i n any quest i oni ng, but how does a

23 f i ndi ng of cont empt cont r i but e t o t he set t l ement of t hi s case?

24 Because t he set t l ement i s what has got t o come somehow, some

25 day. The Cour t i s f i ni shed i ssui ng j udgment s and so f or t h so


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1 t her e has got t o be a set t l ement . So how does i t cont r i but e t o

2 a set t l ement ?

3 MR. COHEN: Your Honor , we, t oo, bel i eve t hat a

4 set t l ement i s t he way t hat t hi s mat t er wi l l ul t i mat el y be

5 r esol ved, and we wel come and appl aud t he ef f or t s t hat Speci al

6 Mast er Pol l ack has under t aken t o t r y t o make t hat happen, and

7 he has been i n cont act wi t h us, and I bel i eve wi t h t he ot her

8 si de, t o keep t hose di scussi ons goi ng.

9 But t o answer your quest i on di r ect l y, t he Republ i c

10 needs t o f eel t hat i t has t o set t l e. Par t i es t o l i t i gat i on

11 don' t t ypi cal l y set t l e unl ess t hey f eel i t i s necessar y or i n

12 t hei r best i nt er est . And we bel i eve t hat we can pr opose

13 sanct i ons, and we woul d l i ke t o def er di scussi ng what t hose ar e

14 pr eci sel y.

15 THE COURT: What ar e you sayi ng now?

16 MR. COHEN: I amsayi ng t hat we bel i eve t hat we can

17 pr opose sanct i ons t hat wi l l have t he ef f ect or cont r i but e t o

18 t he ef f ect of t he Republ i c f eel i ng a need t o r esol ve i t s

19 di sput e wi t h t he hol dout s. Unt i l t hat happens, your Honor ,

20 unt i l t her e i s a change i n ci r cumst ance, we ar e concer ned t hat

21 t he Republ i c wi l l cont i nue t o behave as i t has, whi ch i s

22 f eel i ng no compul si on t o deal wi t h t hi s pr obl em. But we t hi nk

23 we can suggest t o your Honor , and we woul d pr opose t o do t hat

24 l eadi ng up t o per haps a hear i ng i n ear l y Sept ember on what t he

25 appr opr i at e sanct i ons shoul d be, but t her e ar e monet ar y and


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1 non- monet ar y sanct i ons t hat we t hi nk wi l l bi t e t he Republ i c i n

2 a way t hat i t wi l l f eel mor e i ncl i ned t o engage i n t hose

3 set t l ement di scussi ons.

4 THE COURT: Al l r i ght . You wi l l want t o def er t hat

5 t i l l Sept ember .

6 MR. COHEN: Yes, your Honor .

7 MR. FRI EDMAN: May I add a coupl e of t hi ngs?

8 THE COURT: You go ahead.

9 MR. FRI EDMAN: Thank you.

10 THE COURT: Mr . Fr i edman.

11 MR. FRI EDMAN: Yes, your Honor .

12 Edwar d Fr i edman, Fr i edman Kapl an Sei l er & Adel man, on

13 behal f of t he Aur el i us and Bl ue Angel pl ai nt i f f s.

14 J ust t wo t hi ngs, your Honor . Fi r st , i n answer t o your

15 Honor ' s quest i on, how does a f i ndi ng of cont empt cont r i but e t o

16 set t l ement , I woul d submi t t hat a f i ndi ng of cont empt di r ect l y

17 cont r i but es t o t he pr ospect s f or set t l ement because a f i ndi ng

18 of cont empt woul d send a cl ear message t hat i n t hi s cour t t he

19 r ul e of l aw must be r espect ed, and t hat i f i t i s not , t he Cour t

20 wi l l cont i nue t o appl y and enf or ce t he r ul e of l aw. And,

21 f ur t her mor e, a f i ndi ng of cont empt , whi ch we bel i eve i s cl ear l y

22 war r ant ed, wi l l send a cl ear message not onl y t o Ar gent i na, but

23 al so t o t hi r d par t i es who mi ght be ot her wi se i ncl i ned t o assi st

24 Ar gent i na.

25 So we bel i eve t hat a f i ndi ng of cont empt i s di r ect l y


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1 r el evant t o and suppor t i ve of t he pr ospect s f or set t l ement .

2 THE COURT: Maybe Mr . Cohen answer ed t hi s, but i f

3 t her e i s a f i ndi ng of cont empt , ar e you seeki ng sanct i ons now

4 or woul d you pr opose sanct i ons l at er ?

5 MR. FRI EDMAN: That ' s an excel l ent quest i on, your

6 Honor . What Mr . Cohen and I and t he pl ai nt i f f s woul d suggest

7 i s t hat t he f i r st st ep shoul d be a f i ndi ng by t he Cour t t hat

8 t he Republ i c' s cont i nued vi ol at i ons war r ant a f i ndi ng of

9 cont empt , and as a f i r st st ep t her e shoul d be an or der hol di ng

10 t he Republ i c i n cont empt . Subsequent l y, we woul d suggest t he

11 Cour t shoul d consi der what sanct i ons ar e war r ant ed as a r esul t

12 of t he cont empt .

13 So, i n answer t o your Honor ' s quest i on, we do bel i eve

14 t her e shoul d be a t wo- st ep pr ocess, wi t h t he f i r st st ep si mpl y

15 bei ng a f i ndi ng t hat because Ar gent i na has r epeat edl y vi ol at ed

16 t he or der s of t hi s Cour t , Ar gent i na i s i n cont empt of cour t .

17 THE COURT: Look, I amgoi ng t o ask t he same quest i on

18 t o you t hat I asked of Mr . Cohen.

19 Obvi ousl y, I assume you t ake t he posi t i on t hat t he

20 pr oposal of August 19 i s cont r ar y t o t he or der s of t he Cour t

21 and must be st r i cken, r i ght ?

22 MR. FRI EDMAN: Yes, your Honor .

23 THE COURT: Now, r egar dl ess of how t hat i ssue comes

24 out , I have sai d i t t oday, we al l know i t , and t hat i s, t he

25 t hi ng t hat i s of par amount necessi t y i s t o have a set t l ement .


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1 Wi t hout t hat , t her e wi l l be peopl e who shoul d be pai d i nt er est ,

2 t hey won' t be get t i ng t hei r i nt er est . Ther e must be a

3 set t l ement .

4 Obvi ousl y, i f you have got a j udgment debt or who

5 si mpl y pays t he j udgment 100 per cent , t her e i s no need f or a

6 set t l ement , but t hat ' s r eal l y not goi ng t o come about her e i n

7 anyt hi ng l i ke a si mpl e f or m. So my quest i on i s: Recogni zi ng

8 t hat ul t i mat el y, wi t h t he benef i t of ever ybody, i ncl udi ng some

9 ver y i nnocent par t i es, t her e must be a set t l ement , how does a

10 f i ndi ng of cont empt cont r i but e t o a set t l ement ?

11 MR. FRI EDMAN: The answer t o t hat quest i on, your

12 Honor , i s t hat what we see i n Ar gent i na' s conduct i s a pat t er n

13 of r epeat ed ef f or t s t o evade t he or der s of your Honor and t o

14 evade t he j ur i sdi ct i on of t hi s Cour t . I f i r ml y bel i eve t hat

15 t her e wi l l not be a set t l ement unt i l i t becomes cr yst al cl ear

16 t o t he Republ i c of Ar gent i na t hat i t s evasi on ef f or t s wi l l not

17 be count enanced and wi l l not succeed.

18 That i s why we ar e her e t oday aski ng your Honor t o

19 r ul e and decl ar e f i r ml y, and agai n, t hat vi ol at i ons of t hi s

20 Cour t ' s or der wi l l not be count enanced. And we bel i eve t hat

21 t he way t o send t hat message i n ver y cl ear t er ms i s t o r ul e

22 t hat , on t he basi s of r epeat ed, bl at ant vi ol at i ons of expr ess

23 or der s of t hi s Cour t , Ar gent i na i s i n cont empt of cour t . And

24 we bel i eve, as I was sayi ng, your Honor , t hat such a cl ear

25 r ul i ng by t hi s Cour t t hat t he r ul e of l aw wi l l be r espect ed i n


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1 t hi s cour t i s necessar y as a condi t i on f or set t l ement

2 negot i at i ons and ul t i mat el y set t l ement .

3 THE COURT: Al l r i ght . Let me hear f r omMr . Boccuzzi .

4 MR. FRI EDMAN: May I j ust add ver y br i ef l y bef or e I

5 si t down one ot her t hi ng t hat I want ed t o say so t he r ecor d

6 wi l l be cl ear ?

7 THE COURT: Of cour se.

8 MR. FRI EDMAN: Under t he pr oposed l egi sl at i on t hat we

9 have descr i bed t o your Honor i n t he l et t er t hi s week, under

10 t hat l egi sl at i on, t he exchange bonds woul d be swapped f or new

11 bonds i ssued i n Ar gent i na and payabl e i n Ar gent i na. I t hi nk

12 i t ' s i mpor t ant t o not e t hat , as a t echni cal mat t er , under your

13 Honor ' s r ul i ngs, Ar gent i na woul d st i l l have an obl i gat i on t o

14 make r at eabl e payment s t o t he pl ai nt i f f s when i t pays t hose new

15 bonds.

16 However , and t hi s i s t he key poi nt about t he

17 vi ol at i on, i f t he l egi sl at i on i s enact ed and t he new bonds ar e

18 i ssued, t hen t he Cour t ' s abi l i t y t o enf or ce t he amended

19 Febr uar y 23 or der s wi l l be dest r oyed, because Ar gent i na wi l l

20 have succeeded i n cr eat i ng a new payment mechani smaway f r om

21 t he par t i es such as Bank of New Yor k Mel l on t hat have been

22 compl yi ng wi t h your Honor ' s or der s. And t hat i s why we vi ew

23 t hi s as an i ncr edi bl y danger ous vi ol at i on of your Honor ' s or der

24 and a vi ol at i on t hat t hr eat ens t o dest r oy t he abi l i t y of your

25 Honor t o enf or ce t he or der i n t he f ut ur e.


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1 THE COURT: Thank you.

2 Mr . Boccuzzi .

3 MR. BOCCUZZI : Thank you, your Honor . Good af t er noon.

4 Car mi ne Boccuzzi f r omCl ear y Got t l i eb on behal f of t he Republ i c

5 of Ar gent i na.

6 J ust t o answer your Honor ' s quest i on t hat you posed t o

7 bot h pl ai nt i f f s' counsel about how woul d a f i ndi ng of cont empt

8 cont r i but e t o a possi bl e set t l ement , i t woul d not , your Honor ,

9 and I t hi nk i t woul d not f or t wo r easons, i n r esponse t o bot h

10 of t hei r answer s.

11 When Mr . Bl ackman was her e l ast t i me, he t al ked about

12 t he r at her heat ed r het or i c t hat ' s out t her e di r ect ed t owar ds

13 Ar gent i na, di r ect ed t owar ds Cl ear y Got t l i eb. A f i ndi ng of

14 cont empt woul d onl y be pour i ng gasol i ne on t hat f i r e. I t

15 woul dn' t be conduci ve t o a heal t hy di al ogue among anybody. So

16 t hat woul d be har mf ul and del et er i ous t o possi bl e set t l ement

17 t al ks.

18 I n t er ms of t hi r d par t i es, your Honor has i n pl ace t he

19 ant i - evasi on i nj unct i ons. Ever ybody knows about t hem. Those

20 ar e ver y br oadl y wor ded and t hey ar e ver y cl ear . We have seen

21 i t i n act i on wi t h Bank of New Yor k not movi ng t he money, wi t h

22 ot her i nst i t ut i ons comi ng t o your Honor and sayi ng, I don' t

23 want t o vi ol at e t he i nj unct i on or t he ant i - evasi on pr ovi si ons,

24 your Honor pl ease t el l me what t o do. So a f i ndi ng of cont empt

25 adds not hi ng by way of hel pi ng br i ng about set t l ement .


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1 I n t er ms of t hei r ent i t l ement t o a f i ndi ng of

2 cont empt , t hey ar e j ust not ent i t l ed t o t hat as a mat t er of

3 l aw. As a pr ocedur al mat t er , your Honor , l ocal r ul e 83. 6

4 r equi r es t hat a f i ndi ng of cont empt be made on by not i ce of

5 mot i on, by or der t o show cause, and t hat t her e i s an af f i davi t

6 t hat set s f or t h wi t h par t i cul ar i t y t he mi sconduct t hat ' s bei ng

7 compl ai ned of . None of t hat i s i n t he pl ai nt i f f s' appl i cat i on,

8 and even i f i t was, I have had no oppor t uni t y t o r espond t o i t .

9 Put t i ng t hat pr ocedur al pr obl emasi de, as a mat t er of

10 subst ance, and we haven' t been abl e t o f ul l y r esear ch i t yet

11 gi ven t he t i me we have had i n t er ms of t he hear i ng bei ng

12 cal l ed, we ar e not awar e of any case i n whi ch t he pr oposi ng of

13 a bi l l f or consi der at i on by a l egi sl at or of a f or ei gn

14 sover ei gn, or any sover ei gn, wi t hi n t he Uni t ed St at es or

15 out si de, has been deemed t o be a cont empt .

16 What we ar e deal i ng wi t h, i n t er ms of Ar gent i na, i s a

17 f or ei gn st at e deal i ng at t he hi ghest pol i t i cal l evel s wi t h t he

18 f al l out cr eat ed by t he cour t or der s t hat have been ent er ed

19 agai nst i t . These or der s, as we al l know, have enor mous

20 ef f ect s on t hi r d par t i es, whomyour Honor has char act er i zed as

21 by and l ar ge i nnocent , t hi r d par t i es who ar e not even i n t hi s

22 r oom, t hi r d par t i es who ar e not subj ect t o t hi s Cour t ' s

23 j ur i sdi ct i on. Obvi ousl y, i t has ef f ect s on t he l ar ger

24 r est r uct ur i ng by t he Republ i c and on Ar gent i na' s economy, and

25 t hose ar e i ssues t hat ar e br oader and out si de of t hi s Cour t ,


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1 beyond t he Cour t ' s j ur i sdi ct i on.

2 THE COURT: Let me i nt er r upt you. Di d Cl ear y Got t l i eb

3 know about t hi s pr oposed l egi sl at i on i n advance?

4 MR. BOCCUZZI : We di d not , your Honor . Cl ear y

5 Got t l i eb l ear ned about t hi s on Tuesday ni ght when i t was

6 r el eased as par t of t he pr esi dent ' s publ i c st at ement .

7 I woul d add, your Honor , i n t er ms of t he l egi sl at i on,

8 t he l egi sl at i on wi l l be di scussed and debat ed i n t he Ar gent i ne

9 Congr ess. So we ar e many st eps away f r omany act t hat coul d be

10 even adj udged by your Honor t o be vi ol at i ve or not vi ol at i ve of

11 your Honor ' s i nj unct i ons. And I woul d not e t hat t he l anguage

12 i n t he bi l l aut hor i zes cer t ai n conduct whi ch pl ai nt i f f s say

13 woul d r un af oul of your Honor ' s i nj unct i ons; i t doesn' t r equi r e

14 i t . So t hat ' s anot her l evel of r emove f r omany act , any

15 cont r over sy f or your Honor t o be abl e t o say t hi s or t hat

16 vi ol at es t he i nj unct i on.

17 As an asi de, cases l i ke t hi s have been br ought i n t he

18 Uni t ed St at es about a bi l l t hat ' s been pr oposed, and t hose have

19 been deemed not even r i pe f or adj udi cat i on, much l ess r i pe f or

20 a cont empt ci t at i on.

21 THE COURT: Wel l , what you say i s wel l t aken. The

22 pr obl emi s, we ar e not her e as i f we wer e st ar t i ng af r esh. We

23 have backgr ound. I amgoi ng t o be f r ank t o say I amabsol ut el y

24 appal l ed t hat t he Republ i c woul d not consul t wi t h Cl ear y

25 Got t l i eb bef or e i t made t hi s pr oposal . The pr oposal i s a


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1 pr oposal made by t he pr esi dent of t he count r y, and i n l i ght of

2 al l t he backgr ound, i t i s not somet hi ng t hat spr i ngs af r esh and

3 so f or t h.

4 Why don' t you f i ni sh up and I wi l l r ul e.

5 MR. BOCCUZZI : I was al most done. My mai n poi nt ,

6 si nce we ar e her e t oday, as your Honor sai d, i n t hi s conf er ence

7 t o t al k about t he appl i cat i on f or cont empt , I t hi nk i n summar y,

8 cont empt , t hey ar e not ent i t l ed t o i t as a mat t er of pr ocedur al

9 and t he ot her under l yi ng f act ual scenar i o we ar e deal i ng wi t h.

10 And, al so, I don' t t hi nk at al l a ci t at i on of cont empt wi l l

11 hel p t he par t i es r each any sor t of negot i at ed sol ut i on or a

12 set t l ement . So, r eal l y, I wi l l j ust concl ude wi t h t hat poi nt .

13 The ot her poi nt I woul d say i s Mr . Cohen t al ked about

14 st at ement s made a year ago. We went t hr ough t he ent i r e per i od

15 of t he appeal wi t h no vi ol at i on of t he ant i - evasi on i nj unct i on.

16 As we have l ear ned now, t hi s hear i ng i s t he best evi dence.

17 What t he Republ i c i s doi ng i t ' s doi ng openl y. Thi s i s a bi l l ,

18 par t of a democr at i c pr ocess. I t was publ i c knowl edge. Wi t hi n

19 36 hour s we ar e bef or e your Honor . So, r eal l y, we ar e i n

20 mi dst r eamher e, t her e i s no basi s f or a cont empt , and t hey know

21 how t o r espect t hei r r i ght s shoul d anyt hi ng t hey deemami ss

22 occur .

23 THE COURT: I s t her e any ot her l awyer t hat wi shes t o

24 speak?

25 I don' t hear anybody. Let me go ahead wi t h my r ul i ng.


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1 Under t he i nj unct i on and cour t or der now i n ef f ect ,

2 whenever t he Republ i c makes any payment - - and t he r el evant

3 payment her e woul d be payment of i nt er est - - whenever t he

4 Republ i c woul d make any payment on t he bonds i ssued by t he

5 Republ i c i n t he 2005 and 2010 exchanges, t her e must al so be a

6 payment on t he Republ i c' s obl i gat i ons t o j udgment cr edi t or s,

7 t hat i s, peopl e who di d not exchange.

8 I have sai d t hi s bef or e, but i t has t o be sai d agai n:

9 The Republ i c has and cont i nues t o t ake what i s basi cal l y a

10 l awl ess posi t i on. I t has t aken t hi s posi t i on over t he year s,

11 and st i l l t akes t hi s posi t i on. I have ment i oned t hi s bef or e, I

12 have ment i oned i t pr obabl y mor e t han t wo or t hr ee t i mes, but i t

13 has t o be bor ne i n mi nd ever y t i me we consi der t he i ssues.

14 The Republ i c of f er ed exchanges i n 2005 and 2010. The

15 exchanges wer e not compul sor y. Peopl e coul d exchange or not

16 exchange, and t he maj or i t y of peopl e di d. But t her e was a

17 subst ant i al amount of peopl e i nt er est ed i n t he bonds who di d

18 not exchange. They mai nt ai ned t hei r posi t i on as havi ng

19 l awf ul l y obt ai ned j udgment s i n t hi s cour t . Anot her way t o t er m

20 t hemi s j udgment cr edi t or s.

21 Ther ef or e, t he Republ i c had obl i gat i ons af t er t he

22 exchanges, had obl i gat i ons t o t he exchanger s t o ser vi ce t hose

23 new bonds, but t hey al so had obl i gat i ons t o t he j udgment

24 cr edi t or s. And bei ng a j udgment cr edi t or i n t hi s cour t i s not

25 a l i ght mat t er . I t gi ves one r i ght s. And t hose r i ght s her e


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1 devel oped i n a way t hat t he r ecor d shows, and I amnot goi ng t o

2 go i nt o det ai l about i t . But t he poi nt I want t o make i s t hat

3 t he Republ i c had t hese t wo obl i gat i ons af t er t he exchanges:

4 One of cour se was t o t he peopl e who accept ed t he exchanges; t he

5 ot her was t o t he hol der s of j udgment s who di d not make t he

6 exchanges. The Republ i c had t hose t wo obl i gat i ons, bot h

7 subst ant i al , bot h ser i ous, bot h needi ng t he pr oper r esol ut i on.

8 The Republ i c spent year s t aki ng what was r eal l y a

9 l awl ess posi t i on, a posi t i on expr essl y espoused by t he hi ghest

10 of f i ci al s, and t hat was t hat t he peopl e who had j udgment s woul d

11 not get pai d. Thi s was t he expr ess pol i cy of t he Republ i c of

12 Ar gent i na, expr essed i n numer ous ways over a l ong per i od of

13 t i me. Thi s was a l awl ess posi t i on. The Republ i c had no r i ght

14 t o i gnor e, t o decl ar e t hat i t woul d not pay. I t had,

15 obvi ousl y, no possi bl e r i ght or l egal basi s t o t ake t he

16 posi t i on t hat i t woul d not ser vi ce t he peopl e who had

17 j udgment s. Thi s posi t i on has l ed t o t he year s of l i t i gat i on

18 whi ch have occur r ed.

19 At some poi nt t he par t i es who hel d t he j udgment s

20 pr oposed t o t he Cour t what i s r ef er r ed t o as t he par i passu

21 t r eat ment . I hel d t hat t hey wer e ent i t l ed t o t hat . The Cour t

22 of Appeal s af f i r med me on t hat . Whi ch means, i n subst ance,

23 wi t hout goi ng i nt o det ai l - - and t hi s i s t he l aw of t he Second

24 Ci r cui t Cour t of Appeal s, not onl y of t he Di st r i ct Cour t , t hi s

25 i s t he l aw l ai d down by t he Second Ci r cui t Cour t of Appeal s - -


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1 i f t he Republ i c pr oposes t o pay i nt er est , f or i nst ance, on t he

2 exchange bonds, i t must make a payment at t he same t i me on t he

3 obl i gat i on t o t he j udgment cr edi t or s. And t he amount of t hat

4 and t he f or mul a f or cal cul at i ng al l of t hat I won' t t r y t o get

5 i nt o. But what I want t o st r ess t oday, and i t i s r el evant t o

6 t he cur r ent i ssue pr esent ed by t he cur r ent pr oposal , i s t hi s:

7 The Republ i c has obl i gat i ons t o peopl e who made t he exchanges,

8 and t he Republ i c has i t s obl i gat i ons t o t he peopl e who have

9 j udgment s.

10 Ther e i s i n ef f ect an i nj unct i on - - and t hi s i s al l

11 appr oved by t he Cour t of Appeal s - - t her e i s i n ef f ect an

12 i nj unct i on, whi ch r equi r es t he Republ i c of Ar gent i na as

13 f ol l ows: I f t he Republ i c pr oposes t o pay i nt er est , f or

14 i nst ance, t o t he peopl e who have t he exchange bonds, i t must

15 make an appr opr i at e r ecogni t i on and payment t o t he peopl e who

16 have t he j udgment s and who have now, as est abl i shed by t he

17 Di st r i ct Cour t and t he Cour t of Appeal s, who have t hi s r i ght

18 whi ch i s cal l ed t he par i passu r i ght ; i n ot her wor ds,

19 basi cal l y, t he r i ght t o equal t r eat ment .

20 ( Cont i nued on next page)

21

22

23

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1 THE COURT: What I ' ve sai d t hi s af t er noon I have sai d

2 bef or e, i n essence. And what I ' msayi ng now i s cor r ect on t he

3 f act s, i t ' s cor r ect on t he l aw. I t s cor r ect ness i s est abl i shed

4 not onl y by t he di st r i ct cour t , but by t he Cour t of Appeal s.

5 The Republ i c of Ar gent i na wi l l not r ecogni ze t hi s f ul l

6 obl i gat i on. Thi s i s a l awl ess posi t i on. I r eal l y don' t know

7 why t he Republ i c shoul d t ake such a posi t i on. But whet her i t ' s

8 r at i onal or i r r at i onal or what ever , i t i s a l awl ess posi t i on.

9 Now, I want t o come t o t he pr oposal made by t he

10 Pr esi dent of t he Republ i c of Ar gent i na on August 19t h. I n t hi s

11 pr oposal , t he Pr esi dent of t he Republ i c st at es t hat she i s

12 maki ng t hi s pr oposal , and t hat i t wi l l be submi t t ed t o t he

13 Senat e and Chamber of Deput i es of Ar gent i na. I don' t bel i eve

14 t hat submi ssi on has yet been made.

15 Mr . Boccuzzi qui t e r easonabl y ar gued t hat any act i on

16 by t hi s Cour t i s pr emat ur e, because i f t her e i s t o be an act ual

17 pr oposal , i t has t o be appr oved by t he par l i ament , and such has

18 not occur r ed. Under nor mal ci r cumst ances, I woul d agr ee wi t h

19 Mr . Book see.

20 But we don' t have nor mal ci r cumst ances. And a

21 pr oposal by t he pr esi dent has t o be t aken ser i ousl y by t hi s

22 Cour t . And i f i t i s i mpr oper , t her e must be a r emedy. I f

23 t her e i s not a r emedy, t he next t hi ng we can f i nd out i s t hat

24 t he payment pr ocess has been moved t o Ar gent i na, et c. , et c.

25 And t hat coul d happen over ni ght . Ther ef or e, t he pr oposal of


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1 t he pr esi dent pr esent s t he Cour t wi t h a genui ne i ssue t hat

2 needs t o be deal t wi t h. I do not bel i eve t he pr esi dent was

3 maki ng a pr oposal wi t h t he i nt ent i on of backi ng down about i t

4 i nst ead of submi t t i ng i t t o par l i ament .

5 The essence of t he pr oposal i s t o pr ovi de f or t he

6 payment of i nt er est on t he exchange debt . I t woul d al so r emove

7 t he Bank of New Yor k Mel l on as i ndent ur e t r ust ee and r epl ace

8 and have a new i ndent ur e t r ust ee, i f t hat woul d be what i t

9 woul d be cal l ed, l ocat ed i n Ar gent i na. And one way or anot her ,

10 t he pr oposal woul d have t he ef f ect of doi ng away wi t h t he

11 j ur i sdi ct i on over t he exchange secur i t i es, j ur i sdi ct i on i n New

12 Yor k, and havi ng t hat go t o Ar gent i na.

13 I want t o be ver y cl ear , and I want t o st at e i t r i ght

14 now. Thi s pr oposal i s a vi ol at i on of t he cur r ent or der s of

15 t hi s Cour t and of t he Second Ci r cui t . I t i s i l l egal , and t he

16 Cour t di r ect s t hat i t cannot be car r i ed out .

17 Let me r epeat .

18 The pr oposal of August 19, whi ch woul d i nvol ve met hods

19 of payment of i nt er est whi ch woul d i nvol ve pr ocedur es and so

20 f or t h, i t i s t he r ul i ng of t he Cour t t hat t hat i s i n vi ol at i on

21 of t he cur r ent i nj unct i ons and or der s of t he Cour t ; i t i s

22 i l l egal and cannot be car r i ed out .

23 The cur r ent i nj unct i ons and or der s of t hi s Cour t as I

24 have sai d sur el y al l ow payment of i nt er est t o exchange

25 bondhol der s; but what t he i nj unct i ons and or der s of t he Cour t


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1 r ecogni ze i s t hat t her e i s a whol e ot her si de t o t he

2 obl i gat i ons of t he Republ i c of Ar gent i na, and t hat i s t he

3 obl i gat i on t o peopl e who have j udgment s whi ch have not been

4 pai d.

5 The r equi r ement of t he i nj unct i ons and or der s now i n

6 ef f ect i s t hat i n t he event t he Republ i c wi shes t o make

7 i nt er est payment s t o t he exchanger s, i t must make an

8 appr opr i at e payment t o t he j udgment cr edi t or s under a f or mul a

9 whi ch I won' t t r y t o r epeat .

10 Thi s i s not sur pr i si ng.

11 What t he cur r ent or der s and i nj unct i ons r equi r e i s

12 t hat t he Republ i c ser vi ce al l of i t s obl i gat i ons.

13 I f someone had a cont r act t o buy a house f or $100, 000,

14 and payment was due, and t he cl osi ng was Sept ember 30 of some

15 year , i f t he buyer came i n and sai d, Wel l , I ' mr eady t o cl ose.

16 I have $80, 000.

17 The sel l er woul d say, Wher e i s t he ot her $20, 000?

18 And i f t he buyer sai d, Wel l , $80, 000 i s a l ot of

19 money, and my f ami l y i s r eady t o move i n, and we shoul d get t he

20 house, he woul d be l aughed out of t he nei ghbor hood.

21 Get t i ng back t o our i ssue.

22 The pr oposal of August 19 woul d pr ovi de f or payment of

23 i nt er est t o t he exchanger s, but no payment of t he ot her

24 obl i gat i on; t her ef or e, t he pr oposal of August 19 i s not a

25 l awf ul car r yi ng out of t he obl i gat i ons of t he Republ i c.


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1 Ther e i s an i nj unct i on whi ch r equi r es t he Republ i c, i f

2 i t i s goi ng t o make payment t o exchanger s, i t r equi r es

3 ser vi ci ng of t he ot her obl i gat i on, t hat i s, t he obl i gat i on t o

4 t he j udgment cr edi t or s. The pr oposal of August 19 does not

5 compl y wi t h t he cur r ent i nj unct i on and or der of t he Cour t ; i t

6 does not cont ai n any pr ovi si on about payment t o t he j udgment

7 cr edi t or s. And as f ar as t he pr ocess, i t has been est abl i shed

8 over year s - - and t hi s dat es back t o t he or i gi nal cont r act ual

9 document s on t he or i gi nal bonds - - any i ssues ar i si ng f r om

10 def aul t wi l l be handl ed i n t hi s Cour t ; not i n Ar gent i na, but i n

11 t hi s Cour t , t he f eder al cour t i n New Yor k. And t hat ' s what has

12 happened over year s. And when i ssues have come up, t he

13 Republ i c has come up i nt o t hi s Cour t . The Republ i c hasn' t gone

14 t o Ar gent i na; t he Republ i c has come t o t hi s Cour t t o deal wi t h

15 i ssues whi ch have come up over t he year s.

16 So t he pr ocessi ng l i t i gat i on, i f any, about t he

17 exchange bonds wi l l cont i nue t o r esi de i n t he Sout her n Di st r i ct

18 of New Yor k, and any payment s ar e t o be i n compl i ance wi t h t he

19 i nj unct i on t hat i s i n ef f ect . The pr oposal of August 19 i s

20 cont r ar y t o al l of t hat . I t i s a vi ol at i on of t he cur r ent

21 i nj unct i on and or der of t he Cour t ; i t i s i l l egal , and t he Cour t

22 di r ect s t hat i t cannot be car r i ed out .

23 Thank you ver y much.

24 I t hi nk t hat i t i s under st ood, I t hi nk t he Bank of New

25 Yor k showed cl ear l y t hat any ent i t y t hat assi st s t he Republ i c


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1 of Ar gent i na i n avoi di ng t he basi c or der of t hi s Cour t , t hat

2 woul d be a cl ear vi ol at i on.

3 I want t o now get back t o t he i ssue of cont empt .

4 I t hi nk t hat i f i t wer e cl ear l y pr oper t o f i nd t he

5 Republ i c i n cont empt , I don' t t hi nk t hat t he f or mal i t i es of

6 Rul e 83 or what ever i t i s woul d need t o appl y; i n ot her wor ds,

7 i f t her e i s cont empt , t hat i s somet hi ng t hat can happen on t he

8 spot and be deal t wi t h on t he spot .

9 I want t o r et ur n t o somet hi ng t hat I dwel l ed upon

10 ear l i er , and t hat i s t hi s: Ther e ar e no mor e j udgment s t o be

11 ent er ed. What i s goi ng on now i s a pr ocess of r ecover i ng on

12 set t l ement s or j udgment s.

13 I n t hi s case, i t i s cl ear as can be t hat somehow,

14 somet i me, and, I hope, sooner r at her t han l at er , t her e wi l l be

15 a set t l ement . Ther e can be a set t l ement . Ther e ar e i ssues i n

16 t he way, but t hey can be deal t wi t h. Ther e i s a hi ghl y

17 compet ent and exper i enced speci al mast er who has, by cour t

18 or der , been gi ven t he r esponsi bi l i t y of assi st i ng t o f i nd a

19 possi bl e set t l ement .

20 I f t he Republ i c can avoi d f ur t her i l l egal act i vi t i es

21 such as t he one t hat occur r ed on August 19, and I woul d hope

22 t hat Cl ear y Got t l i eb woul d be br ought i n and counsel on t hi s,

23 t hat i f t he Republ i c can avoi d t hat , and i f we can have a

24 pr ocess l eadi ng t o a set t l ement , t hat i s t he pat h t hat shoul d

25 be t aken. Maybe t he Republ i c doesn' t want t o set t l e, but i f


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1 t he Republ i c doesn' t set t l e, i t wi l l have quar t er , af t er

2 quar t er , af t er quar t er of peopl e t hat i t owes i nt er est t o who

3 wi l l not be get t i ng t hei r i nt er est , not because of what a

4 f eder al j udge says, but because of t he f or mat l ai d down and

5 appr oved by t he Cour t of Appeal s.

6 I n my j udgment , i t does not add anyt hi ng t o t he scal es

7 of set t l ement t o make a f i ndi ng of cont empt . What I have f ound

8 i s cer t ai n f act s, and I par t i cul ar l y have f ound t hat t he

9 pr oposal of August 19 i s i nval i d, i l l egal , and i n vi ol at i on of

10 cur r ent cour t or der s and i nj unct i ons. To nul l i f y t hat August

11 19 pr oposal of t he pr esi dent of t he count r y, t hat ' s t he measur e

12 t hat i s r eal l y r equi r ed t hi s af t er noon. And t hat ' s as f ar as

13 I ' mgoi ng t o go at t he pr esent moment .

14 Thank you ver y much.

15 * * *

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