NEW YORK, March 28 (Reuters) - A U.S. judge threw out claims
by bondholders on up to $ 2.21 billion of Argentine funds held at
the Federal Reserve Bank of New York, but criticized the
country's "continued intransigence" in refusing to pay creditors
holding defaulted debt.
Argentina defaulted on roughly $100 billion in debt during a
2001-02 economic crisis. It restructured about 92 percent of
that through swaps in 2005 and 2010, but holdout creditors are
still suing to recover the full value of their bonds.
U.S. District Judge Thomas Griesa in Manhattan said on
Wednesday that bondholders Aurelius Capital Partners LP and
affiliates, as well as the investor Kenneth Dart's EM Ltd,
failed to show the money held at the New York Fed could
rightfully be used to satisfy their claims.
The holdouts, who have been awarded about $1.8 billion of
judgments in 12 cases, won an order last August to freeze the
funds, which were deposited at the Fed in the accounts of
Argentina's central bank and Citibank.
Griesa's decision vacates that order.
"The funds are not the property of the Republic," Griesa
said, adding that t he money was being held for "traditional
central bank functions."
Argentina, the central bank and Citibank argued that the
money the bondholders had sought to seize -- which was earmarked
for paying creditors holding Argentina's Boden 2012 bonds --
never even passed through the New York Fed and was transferred
to creditors or their custodians in Argentina.
In any case, Buenos Aires argued the funds ceased to belong
to the country as soon as they were transferred over for payment
to the Boden bondholders, an argument Griesa apparently backed.
The Boden 12 bonds were first issued in 2002 and the country
has made regular payments on them.
Charles Platto, a lawyer for EM, declined to comment. A
lawyer for Aurelius did not immediately respond to a request for
DECADE OF LITIGATION
Argentina has faced a decade of U.S. litigation overseen by
Griesa that arose from its default. This has hampered efforts by
Latin America's third-largest economy to return to global
Griesa said that while "the law and the facts" compelled his
conclusion, he urged Argentina to do a better job addressing
claims of holders of its defaulted debt.
"This is yet another situation growing out of the Republic's
continued intransigence in failing to honor its lawful judgment
debts," he wrote. "The plaintiffs in these cases, in seeking to
vindicate their legal rights, are not able to do so by any
regular and clear-cut devices."
Griesa has granted several billion dollars in court
judgments to holdout creditors. But so far, they have not been
able to collect any money, because U.S. sovereign immunity laws
protect most assets owned by a country abroad.
Last July, a federal appeals court in New York ordered the
lifting of a freeze on $100 million of Argentina central bank
deposits in the United States.
It said U.S. law shields property of a foreign central bank
used for traditional central banking activities, regardless of
whether the bank is independent from its parent state.
The 12 cases are all in the U.S. District Court, Southern
District of New York. Among them are EM Ltd v. Argentina, No.
03-02507, and Aurelius Capital Partners LP et al v. Argentina,
(Reporting By Jonathan Stempel; Additional reporting by Hilary
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