Foreign Sovereign Immunity: U.S. Court of Appeals Rules Argentine Central Bank Reserves Immune from Attachment and Execution

Sullivan & Cromwell LLP - July 11, 2011

In an important sovereign immunity decision, the United States Court of Appeals for the Second Circuit ruled last week that the immunity provided to central bank assets in the Foreign Sovereign Immunities Act (the “FSIA”) does not depend on whether the central bank is “independent” from the parent state. Rather, ruling on an issue of first impression, the Court held that the immunity depends only on whether the assets are used for “central banking functions.” The Court therefore vacated attachments that bondholders of the Republic of Argentina had obtained on approximately $100 million of reserves of the Central Bank of Argentina (known by its initials in Spanish as “BCRA”) held at the Federal Reserve Bank of New York (the “FRBNY”). NML Capital, Ltd. v. Banco Central de la República Argentina, No. 10-1487-cv(L), --- F.3d ---, 2011 WL 2611269, at *19-20 (2d Cir. July 5, 2011). Sullivan & Cromwell LLP represented BCRA in the case.