An S&C team was named Law360 “Legal Lions of the Week” for prevailing again for the Republic of Argentina in a dispute over whether the country owes more than $650 million to hedge funds that had speculated on certain of its securities with contingent payments. After obtaining a March 2024 ruling by U.S. District Judge Loretta Preska of the Southern District of New York dismissing the hedge funds’ claims, S&C persuaded a unanimous U.S. Court of Appeals for the Second Circuit to affirm on July 16. The court held that the plaintiffs’ claims were barred under the indenture’s “no-action” clause, which required certain notice requirements before bringing suit. It also held that disputed payments were not principal and interest, which would have exempted the plaintiffs from the no-action clause.
The ruling provided needed clarification for the interpretation of no-action clauses, which are an important standard provision of indentures. The Second Circuit decision reaffirms that these clauses must be strictly construed to protect against the risk of strike suits.
The case involves securities that the Republic issued in 2005 and 2010 in debt restructurings. The securities provided for contingent payments to be made when various triggers were met, including that Argentina’s GDP grew by three percent or more in a given year. In 2014, the method for estimating Argentina’s GDP changed, and Argentina concluded that no payment was due for 2013 based on the published GDP figures. Aurelius Capital sued in 2019, claiming it was owed a payment for 2013. More hedge funds followed. Some plaintiffs had purchased their securities on a speculative basis after the Republic announced that no payment for 2013 was due.
The S&C team includes Robert Giuffra Jr. (who argued the appeal), Sergio Galvis, Amanda Davidoff, Thomas White, Elizabeth Rose and Arturo Carlos Schultz.