litigation | paulhunterjones

In 1945 the global community took a deep sigh of relief. Celebrations broke out across the planet. World War II had come to an end in the Pacific and Europe. No one doubts the magnitude and historical significance of the end of the war. How many people lost their lives in the fighting? Historians have never agreed on the exact number of deaths. It is known that twice as many civilians lost their lives as did combatants. The best estimates put the number of dead between 70-90 million. Russia suffered by far the most casualties. According to Britannica.com, “there can be no real statistical measurement of the human and material cost of World War II. The money cost to governments has been estimated at more than $1,000,000,000,000. This figure does not represent the human misery, deprivation, and suffering, the dislocation of peoples, or the sheer physical destruction of property that the war involved.” The conflict between a few nations had led (again) to a global battle. The international community’s efforts to limit the fighting in Ukraine to Ukraine can be understood given the state of the world 80 years ago.

Could WWII have been averted? In an effort to avert global wars, the international community established The League of Nations in 1920. The formation of the League was the result of a grand idea; nations would have a forum to discuss their difference and avoid armed conflict. Conversation and debate would replace guns and bombs. Let’s remember the historical context in which the League came to life. WWI had just ended. The “war to end all wars” needed help to make sure another global war did not erupt.

I will not offer a discourse as to why the League was fatally flawed. Most international organizations cannot meet their goals due to regional differences and claims of national sovereignty. Did you know that the United States never joined the League of Nations? The League’s main arm ceased operations in 1946. Other League components would eventually be incorporated back into the United Nations. The United States is one of the founding members of the U.N. We as a nation had learned a lesson. Today´s international community is more complex and contentious than most past historians could have ever imagined.

We should give credit to the founders of the U.N. The signatory nations to the U.N Charter anticipated the need for some kind of international tribunal to hear and resolve regional differences. World leaders understood that a global community acting in unison stood a better chance of preventing armed conflict than two nations in bilateral negotiations. Some ground rules had to be laid if this grand idea was to succeed. Nations will always have their differences. Leaders representing the collective views of their citizens are often very passionate and expressive as to what they believe is correct and just. A third party had to arbitrate these differences and impose a ¨legal resolution.

The U.N. Charter established the International Court of Justice. Nations now had a forum to resolve their disputes. The ICJ is the U.N.’s principal judicial organ. It began hearing cases in 1946. The Court’s principal offices are in the Peace Palace in the Hague Netherlands. U.N. member nations automatically have access to the ICJ. According to the Court’s official website:

“The Court’s role is to settle, in accordance with international law, legal disputes submitted to it by States and to give advisory opinions on legal questions referred to it by authorized United Nations organs and specialized agencies”

A nation can commence with the ICJ a case against another nation. These types of proceedings are called contentious. The case title would appear on the docket as nation1 vs nation2. Also, two nations can agree to submit their controversy to the ICJ for consideration and resolution. These types of cases would be titled Nation1/Nation2. At this moment, there are about 17 cases on the Court’s active docket for either consideration or are under consideration by the Court. The cases involve complex issues of international law. The Judges are called upon to consider and apply conflicting local laws. Just like court cases here in the U.S. litigation before the ICJ results in one party winning and the other losing. A nation may not be happy with the outcome but they do not turn to conflict to impose their solution.

After years of litigation before the ICJ judges, the winning nation is often left without a mechanism to enforce the Court’s judgment. ICJ decisions are normally final without a recourse to appeal. Once the decision and judgment are filed, that’s it. The World Court can tell a nation to pay this or do that but has no way of compelling the nation to do anything. Under very limited circumstances, a nation might be able to enforce the decision in a nation’s local court system.

Many international legal experts and pundits have lambasted the ICJ’s lack of an enforcement mechanism. They argue that the Court’s inability to enforce it decisions makes it a “toothless tiger.” This is true as it is irrelevant. The ICJ is a legal institution whose main goal is political in nature and not legal. After nations have litigated for years to obtain a disposition of their case, national passions have usually subsided. Most nations that appear before the ICJ respect the court’s decisions. After the ruling, nation-litigants often find a way to negotiate their difference.

An added incentive to nations to either comply with the decision or negotiate a lasting resolution is the fact that the international community often penalizes a non-compliant nation. Sanctions are imposed upon the nation that fails to comply with the Court’s judgment and order. Of greater consequence is that international lending organizations restrict the losing nation’s access to critically needed funding.

I believe that in an imperfect world we should not impose perfection upon the International Court of Justice. It has prevented countless regional conflicts from exploding into armed conflict. The Court gives hope to nations that believe that they have a place to be heard and have their grievances fairly decided. We cannot politically or legally expect more from the Court.

For more than 12 years the Republic of Argentina has battled so-called vulture funds in US federal courts. This litigation grew out of the country’s massive sovereign debt default in 2001. At that time most investors did everything possible to unload their portfolios of the country’s debt. Yet, there were courageous investors who were willing to speculate on the country’s debt rising up from the financial abyss. A few funds invested billions into purchasing Argentina’s junk bonds. Though Argentina has renegotiated much of its 2001 debt with bondholders and has paid these “exchange bondholders” pennies on their original debt, the funds who took the risk of investing in the junk bonds have refused to renegotiate the contractual terms of their bonds. These funds want to be paid what they were promised and not a penny less. Who can blame them for demanding full payment.

Most legal experts and financial advisers close to the litigation have little sympathy for the former South American economic powerhouse. Don’t Cry for Me Argentina is their response when Argentina demands justice that it does not deserve. On October 26, 2012 the United States Court of Appeals for the

Second Circuit decided the case of NML Capital v. the Republic of Argentina. The Court affirmed in part and remanded in part the lower court’s decision of Federal Judge Griesa of the Southern District. In the case Judge Griesa ruled against Argentina in granting the applications of the Plaintiffs. Much to the chagrin of Argentina; its fiery pronunciations of sovereign integrity and legal (quasi political) arguments that it had a sovereign right to force restructuring upon debt holders were judicially debunked by the District Court.

It did not surprise anyone that Argentina appealed the court’s decision to the Supreme Court. While Argentina was litigating its case before the Supreme Court Argentinians in high office were waging a battle to wind public opinion. Clearly Argentina was (is) looking to negotiate a settlement with the non-exchange bondholders. Yet the country’s last formal offer of settlement was rejected on or about March 27, 2013 by the U.S. Court of Appeals for the 2^nd Circuit as being inadequate. I wrote at that time that Argentina was heading for another debt default. The U.S. courts are not going to let politics trump the law or their decisions. Argentina’s total disregard for the judicial decisions and judgments makes a mockery of America’s judicially system and the sanctity of the law.

The high court next considered and disposed of Argentina’s (its banks’ claim) that its foreign assets were not subject to discovery by the non-exchange bondholders. The Justice’s were almost unanimous in deciding against the Latin America country. Justice Anthony Scalia writing for the court held that the Foreign Sovereign Immunities Act did not limit the scope of discovery available to a judgment creditor in a federal post-judgment execution proceeding against a foreign sovereign. In the well written decision Justice Scalia specifically alluded to the fact that Argentina had waived part of its immunity by choosing to litigate in the U.S. courts. The Republic of Argentina stands properly before the court like any other person. Argentina’s dreaded “vulture funds” are now positioned to discovery the Republic’s assets worldwide. What follows next is rather obvious; the non-exchange bondholders will seek to attach the discovered assets in hopes of satisfying their judgments.

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