Argentina has managed so far to stymie its foreign creditors in international courts but some creditors are adopting "potentially far-reaching" strategies to recover the $88 billion or so owed to them, Dow Jones reports the International Monetary Fund said over the weekend.
In a report to its governing committee, the IMF said Argentina has stonewalled its foreign creditors so successfully that many of them no longer try very hard to enforce court judgments in their favor. It described a "lull in enforcement activity" by creditors who "may feel somewhat frustrated by the inability to find assets available for attachment."
But some creditors are just getting tougher, the IMF said. It cited a lawsuit filed in US federal court in June by a businessman named Ottavio Lavaggi, seeking class-action status for himself and about a million other holders of Argentine bonds. The suit asserts "willful, wanton, and malicious" conduct by the Argentine government and seeks not only the repayment of the bonds but also punitive damages "in excess of $100 billion." The pursuit of punitive damages is a novel strategy for plaintiffs in cases involving sovereign-debt defaults. The IMF called the suit "yet another example of aggressive strategies intended to raise the stakes in sovereign-debt litigation." That case, and a few others like it, could have "far-reaching" effects, the IMF said.
The IMF, reporting to its governing committee, said foreign bond holders have had little luck so far in legal proceedings against Argentina. In New York courts, some creditors spent "extensive time contesting the scope of information that Argentina should provide on the location of its commercial assets" but the effort yielded "rather limited information to the judgment creditors." Still, the number of lawsuits against Argentina has been growing. "Notwithstanding the apparent difficulty in enforcing court judgments against Argentina, five additional class actions have been filed in New York court since February 2004, bringing the pending class actions to 15," the IMF said. Only one of those lawsuits has actually achieved class-action status, but even that case is "stalled."