"We are in the soup" exclaimed, federal judge Thomas Griesa, referring to Argentina allegedly defaulting on its sovereign bonds. And so we are.
According to bondholders, on July 30 of 2014, Argentina defaulted on its sovereign debt for the eighth time in its history. That a developing nation is accused of defaulting on its international debt might not warrant legal headlines, but in this case the "soup" was precipitated by a court order from Judge Griesa, of the Southern District of New York. Judge Griesa is presiding over litigation brought by Argentina's "hold-out" bondholders, including hedge funds who refused to restructure their bonds after Argentina's previous bond default in 2001, and chose instead to pursue judicial relief.
The hold-outs' litigation against Argentina is but the latest prominent example of how Latin American countries and the companies that do business with them can become embroiled in international commercial litigation and arbitrationoften involving considerable time and expense that were not factored into underlying business decisions. Judicial actions involving a Latin American country can arise from many international business activities:
privatizations and initial public offerings; sovereign bond issues; debt restructurings; construction projects; international trade issues; project finance and infrastructure development; and public-private partnerships. Despite the wide variety of ways in which businesses and Latin American countries can become involved in international litigation, there are several common questions every company, business owner or counsel advising such companies should evaluate prior to doing business with a Latin American country. Latin American governments doing business with foreign companies should also consider these factors.
Can a Private Party Sue a Foreign Sovereign in U.S. Court?
If a U.S. forum is available, it is often, but not always preferable for a U.S. party. However, there are certain gateway issues that a claimant must consider before filing suit in the U.S. To proceed with a lawsuit against a Latin American country in the U.S., the claimant must comply with the Foreign Sovereign Immunities Act ("FSIA"), which provides the sole basis to sue a foreign sovereign in the U.S. Generally, if a foreign defendant qualifies as a "foreign state" under the FSIA, the Act provides that it shall be immune to suit in any U.S. Courtfederal or stateunless a statutory exception to...