Argentina wanted to restructure its debt, but not all of its creditors went along. Argentina resisted, but the creditors prevailed in court, obtaining a judgment that Argentina could not pay its other creditors unless they were paid in full. Argentina appealed, but to no avail. (And along the way, questions were raised about Argentina’s candor to the courts.) As Jonathan Macey explained, the adverse judgment may be difficult for Argentina (and those creditors willing to accept dramatically reduced payments as part of a restructuring), but it was a victory for the rule of law.
Argentina refuses to pay the objecting creditors (largely hedge funds), and is apparently unwilling to make a deal, so it has defaulted. (Background here.) Did Argentina have other options? Those supporting its creditors think so, and believe Argentina has been receiving bad counsel. Either way, the courts in these cases have done their jobs. Writes Alison Frankel:
the hedge fund litigation with Argentina has laid bare the limits on the power of U.S. courts, the borderline between litigation and foreign policy. Thanks to Argentina, bond investors are now on notice that they might not be able to enforce U.S. judgments against foreign sovereigns. They’ll have to factor that risk into investment decisions.
But at least investors know. U.S. courts fulfilled their duty. They heard all sides, rendered decisions and reconsidered those decisions on appeal. They laid down the law. They just can’t get Argentina to follow it.