die pari passu clause des Ecuador 2012 und 2030 USD-Bond // governing law new york

Ecuador shall ensure that at all times its obligations hereunder constitute unconditional general

obligations of Ecuador ranking at least

pari passu in priority of payment with all other present and

future unsecured and unsubordinated External Indebtedness of Ecuador.

------------------------

19

Governing Law

(a)

This Bond and the Indenture shall be construed in accordance with and govemed by the law of the

State of New York.

(b)

Ecuador hereby irrevocably submits to the jurisdiction of any New York state or United States

federal court sitting in the City of New York, and any appellate court from any thereof, in any

action or proceeding arising out of or relating to the Bonds and Ecuador hereby irrevocably agrees

that all claims in respect of such action or proceeding may be heard and determined in such New

Building a Better Seating Chart for Sovereign Restructurings

Anna Gelpern

American University Washington College of Law


Emory Law Journal, Vol. 53, 2004

Abstract:     
Every sovereign debt restructuring in recent memory has wrestled with the problem of inter-creditor equity. Governments have discriminated among creditors in ways that were hard to predict and often were not revealed until after a debt default. In contrast, debts of firms, individuals and even localities are ranked in order of priority established by contract and statute. This ranking is known at borrowing, generally corresponds to the order of repayment in bankruptcy liquidation, and helps define the creditors' relative bargaining power in reorganization. Without a bankruptcy backstop, most debts of national governments are legally equal. Yet in practice, sovereign immunity empowers a government to choose the order of repayment among its creditors based on political imperatives, financing needs, reputational concerns or any other considerations. A transparent, enforceable priority system for sovereign debt could reduce the risk of involuntary subordination, the attraction of lending to overindebted governments and the need for collateral. When all else fails, such a system could make restructuring less messy. But an effort to imagine sovereign priorities shows both the utility and the limits of domestic bankruptcy as a source for solutions to sovereign debt crises. This article suggests that while incremental improvement is possible and desirable, in the sovereign context, the most robust priority structures are doomed to fail.
Number of Pages in PDF File: 44
Keywords: sovereign debt, emerging markets, sovereign bankruptcy, international law, IMF, Latin America, Argentina
JEL Classification: F34, F36, K29, K33
Accepted Paper Series 

 

 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=902026

Argentina, Elliott, and the pari passu war By Felix Salmon

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Argentina, Elliott, and the pari passu war

By Felix Salmon

April 10, 2012

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sovereign debt

Anna Gelpern puts it well: “for the small but committed contingent of pari passu pointy heads, this is WorldCupOlympicMarchMadnessSuperBowl.” I’m one of the contingent, and I’ve been actively enjoying myself reading various appeals and amici briefs in the case of Elliott Associates vs Argentina. (Technically, it’s not Elliott Associates but rather NML, an Elliott sub-fund, but make no mistake: this is very much a fight between Argentina and the most famous vulture fund in the world.)
Elliott, which is run by the billionaire Republican activist Paul Singer, has suffered a rare and public loss with respect to its Argentina strategy. It bought up Argentine debt around the time the country defaulted, and then refused to enter into the country’s bond exchange, taking its chances in U.S. court instead. That, in hindsight, was a mistake: Argentina’s new bonds, turbo-charged with GDP warrants, performed extremely well. While its defaulted debt has gone absolutely nowhere.
When Elliott started litigating its defaulted debt a decade ago, it quite explicitly told the judge in the U.S. Southern District, Thomas Griesa, that it wouldn’t wheel out the most notorious and legally dubious weapon in its arsenal: the pari passu argument it used to devastating effect against Peru in 2000. In 2003, indeed, Argentina’s lawyers asked the court for a declaration that the argument was legally bonkers; the only reason that Griesa didn’t provide that declaration was that Elliott Associates — in line with all the other holdout creditors — said that it had no intention of making the argument, “at any time in the near or distant future”.
In fact, Elliott was just playing the waiting game — waiting, that is, for 91% of the other creditors to go away, persuaded by Argentina to accept its exchange offer. And then, after a decent amount of time — five years — it suddenly decided that it was going to attempt to use its rather odd pari passu argument after all.
Waiting that long held dangers, since it smells of what lawyers call “laches” — unreasonable delay in making a claim. But it was also quite smart, since at that point Elliott had been fighting Argentina in front of Judge Griesa for a decade, and Griesa was officially Fed Up with the whole thing and just wanted to make it go away.
Griesa’s orders (here here here) are notable for their lack of legal reasoning: Griesa is throwing his hands in the air, here, and basically punting the whole issue up to the appeals court. Each one is very short, certainly in comparison to the long, compelling, and clearly-argued amici briefs, let alone Argentina’s masterful, 84-page response. After reading that, and the briefs from the Justice Department and The Clearing House , it’s basically impossible to see how Griesa’s order can possibly be upheld on appeal.
It’s hard to count the number of reasons why Griesa’s ruling doesn’t make sense, but it’s worth running down a few of them. For one thing, the whole thing is based on the “ratable payment” reading of the pari passu clause — that, in the words of NYU law professor Andreas Lowenfeld, “a borrower from Tom, Dick, and Harry can’t say ‘I will pay Tom and Dick in full, and if there is anything left over I’ll pay Harry’.” Unfortunately, that’s exactly what the borrower can do. If I owe money to my landlord and to my credit-card issuer and to my brother-in-law, it’s up to me which of them I repay, and in which order. All those creditors might have legal recourse if I don’t pay them. But the landlord can’t claim the money I’m paying to my brother-in-law, nor vice-versa.
In this case, Argentina is paying the holders of its new bonds, or, to be precise, it’s paying the trustee who accepts money on their behalf. Once it has transferred money to the trustee, that money no longer belongs to Argentina: it belongs to the new bondholders, the people who accepted a large haircut on their debt as part of Argentina’s bond exchange. What’s scary about Griesa’s order is that he’s ordering and injunctioning not only Argentina, but also the innocent bondholders of Argentina’s new debt. It’s almost impossible to see why they should be paying off Elliott, especially since Elliott wants to be paid all principal and interest payments on its bonds, sans any kind of haircut at all. That doesn’t sound very pari passu to me, if all the other bondholders have taken a 70% haircut.
The problem for Elliott, here, is that it rushed, very soon after Argentina defaulted, to convert its Argentine bonds into court judgments.* That’s easy: Any bondholder who has been defaulted on can become a judgment creditor pretty easily. But becoming a judgment creditor also happens to be the remedy, in the bond documentation, if Argentina violates the pari passu clause. (Which, incidentally, no one knows what it means.) Griesa, in going after the trustee for other Argentine creditors, is going well beyond the letter of the contract, just because that seems to be the only way of getting Argentina’s attention.
Certainly Argentina has no intention of paying Elliott anything. The country’s view of Elliott is that it’s an annoyance, which is causing it to rack up millions of dollars in legal expenses. And as a result, Griesa’s view of Argentina is that while it will happily send expensive lawyers to appear in front of him on a regular basis, it will never actually pay the plaintiffs, no matter what he rules. Which is why, I think, he finally cracked and issued this pari passu ruling: it was the only way he could think of to get Argentina’s attention.
The ruling doesn’t make a lot of sense. For one thing, it requires that Elliott will suffer “irreparable harm” if it isn’t paid. But of course the harm here isn’t irreparable: it’s just money. You pay Elliott money, the harm goes way. That’s pretty much the definition of reparable harm. And then there’s the fraught sovereign-immunity aspect of everything: Griesa’s ruling flies in the face of the Foreign Sovereign Immunities Act, which for obvious reasons the U.S. and most other countries are big fans of. Argentina did waive its sovereign immunity in its original bond issue, but the degree to which that’s even really possible is far from settled under case law.
All of which is to say that Reynolds Holding is wrong when he says that Elliot has “shown it’s possible to win against debtor nations”. Elliott has been a judgment creditor of Argentina for a decade now, and it’s still a judgment creditor: Griesa is a judge, and he can’t ultimately do much more than hand down judgments. The difficult bit has never been getting a court to rule that you’re owed money: that’s the easy bit. The difficult bit is actually collecting on that judgment. And the base-case scenario here is that Elliott is not going to collect.
In fact, the sovereign-debt world is probably a little bit relieved that the Court of Appeals now has the opportunity, once and for all, to set a clear precedent on what the pari passu clause really means in sovereign debt contracts. This issue has been up in the air for far too long, unhappily for sovereigns. When Griesa gets his ruling overturned on appeal, we’ll finally have the pari passu ruling we’ve been waiting for since 2000. Of course, it’s conceivably possible that the appeals court will uphold Griesa’s ruling, and thereby deal a massive and pretty much unenforceable blow to sovereign debt management around the world. But it’s very unlikely. Elliott might have won the battle for its unorthodox pari passu interpretation. But in doing so, it’s set itself up for losing the war.
Update: I’m now told that despite litigating this suit for a decade, Elliott has chosen not to become a judgment creditor. Which may or may not be smart. In any case, bondholders have the right to accelerate their bonds — make all principal and interest due and payable immediately — if the pari passu clause is breached. But Elliott has already done that.
*Update 2: Elliott now confirms that it is a judgment creditor of Argentina after all. Right first time. Sorry about that

 http://blogs.reuters.com/felix-salmon/2012/04/10/argentina-elliott-and-the-pari-passu-war/

Supreme Court Overrules Sigma Finance Decision: A Return to Pari Passu?

Supreme Court Overrules Sigma Finance Decision: A Return to Pari Passu?

November 13 2009

Facts
Supreme Court Decision
Comment

A Supreme Court decision on October 29 2009(1) overturned the previous Court of Appeal ruling in relation to Sigma Finance (in administrative receivership).(2) The Court of Appeal had held that Sigma's assets were to be distributed to certain creditors holding notes that matured within a 60-day realization period following an enforcement event, in priority to other secured creditors.
Facts
Sigma was a structured investment vehicle (SIV) which invested in asset-backed securities. It financed such investments by issuing short-term commercial paper and obtaining liquidity from other sources, including facilities and currency and interest-rate hedging. All of Sigma's assets were secured under the terms of a security trust deed dated March 27 2003 in favour of Sigma's secured creditors.
On October 6 2008 Sigma joined a list of other well-known SIV victims of the credit crunch - including Whistlejacket, Cheyne and Golden Key - when administrative receivers were appointed over its assets under the terms of the security trust deed.
The issue facing Sigma's receivers - as had been the case for other SIV receivers - was how they should distribute moneys coming into their hands when faced with secured creditors with debts with different maturity dates under the deed.
Previous casesWhere the language in a security trust deed is clear, previous decisions have shown that the courts will not generally let the pari passu principle of distribution (ie, treating creditors equally according to ranking) interfere with the parties' contractual intentions. In Cheyne(3) and Whistlejacket(4) the High Court interpreted the payment provision clauses in the relevant security trust deeds in such a way that the receivers were obliged to adopt a 'pay as you go' approach to distribution.
Most recently, in Golden Key(5) the Court of Appeal held that parties to a commercial agreement should be free to agree that assets should be distributed among them on a 'pay as you go' basis, rather than pari passu. The court considered that if it was not the commercial intention that the assets be distributed pari passu, the courts should not automatically impose distribution pari passu where the terms of the contractual agreement are ambiguous.
Sigma's realization periodThe occurrence of an enforcement event under the security trust deed started a 60-day realization period during which the security trustee was required to establish separate asset pools for creditors with short-term and long-term liabilities. In order to establish such asset pools, the security trustee was required to dispose of or otherwise deal with Sigma's assets as it deemed appropriate.
During the realization period, Clause 7.6 of the deed required the security trustee "so far as possible [to] discharge on the due dates therefor any short-term liabilities falling due for payment during such period, using cash or other realizable or maturing assets of the issuer".
Supreme Court Decision
The Court of Appeal had held that the assets should be distributed preferentially according to the dates when the relevant debts became due. It was clearly persuaded that the last sentence of Clause 7.6 should be given its natural meaning. The appeal to the Supreme Court was formulated on the basis that the assets should instead be distributed pari passu among all secured creditors, irrespective of the maturity date of their debt.
A Supreme Court majority considered that the Court of Appeal had given too much weight to the natural meaning of the words of the deed and too little weight to their overall context.
Lord Mance stated that when considering the meaning of the deed to a reasonable person with the relevant background, the key factor was "an understanding of [the deed's] overall scheme and a reading of its individual sentences and phrases which places them in the context of that overall scheme". He considered that as the definition of 'enforcement event' did not necessarily equate to insolvency or insufficiency of assets to meet all secured liabilities, the relevant clauses of the deed were drafted on the assumption that Sigma had enough assets to cover its liabilities to secured creditors. Therefore, Clause 7.6 appeared to be relevant only where the underlying assumption was that all secured liabilities can be covered and no issue of priority would arise. Applying the Court of Appeal's interpretation raised a number of other problems of consistency with the terms of the deed, including the practical ability to pay debts on their due date during the realization period and the conflicting duties on the security trustee to meet realization period debts as they fell due, but also to establish asset pools for the benefit of both short and long-term creditors. The Court of Appeal's construction would also result in no priority or protection for payment of the fees and expenses of the security trustee and receivers if the debts falling due in the realization period were paid as they fell due.
Comment
Many SIV cases have relied on the parties' contractual intentions when determining asset distribution, rather than the fundamental English law principle of pari passu distribution on insolvency. The Supreme Court's decision in Sigma marks a return to this fundamental principle, but only on a specific interpretation of the contractual provisions in question and where such provisions are insufficient to show that the parties intended certain creditors to be paid on a 'pay as you go' basis. Lord Collins considered that:

"[o]nce Clause 7.6 of [the deed] is seen in context, the conclusion that the receivers were not obliged to give priority to the first maturing short-term liabilities is consistent with the wording of the clause in the context of [the deed] as a whole and with the commercial purpose of the instrument."

As several judges have noted, the facts of SIV cases vary greatly, which makes it difficult to interpret any judgment as an indication of how the courts might approach future cases. However, the decision provides some certainty as to how the courts are likely to respond if required to interpret conflicting contractual provisions, unless the drafting of such clauses is clear and unambiguous. As Collins put it: "Detailed semantic analysis must give way to business common sense."
For further information on this topic please contact Kenneth Baird, Anne Sharp or Victoria Cromwell at Freshfields Bruckhaus Deringer LLP by telephone (+44 20 7936 4000), fax (+44 20 7832 7001) or email (ken.baird@freshfields.com, anne.sharp@freshfields.com or victoria.cromwell@freshfields.com).
Endnotes
(1) In re Sigma Finance Corporation (in administrative receivership) and In re The Insolvency Act 1986 [2009] UKSC 2.
(2) In the matter of Sigma Finance Corporation (in administrative receivership) [2008] EWCA Civ 1303.
(3) Kahn v Interested Party A (In re Whistlejacket Capital) [2008] EWCA Civ 575.
(4) Cheyne Finance plc, Re [2007] EWHC 2402_2 (Ch), September 12 2007.
(5) In the matter of Golden Key Limited (in receivership) [2009] EWHC 148 (Ch).

---

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Session II: Pari Passu—from New York to EU // ich hatte das Glück hierfür eine Einladung zu haben.....

EU Sovereign Debt Crisis: Where From - Where To?

21 June 2012

MSc Law and Finance students, jointly with the Centre for Commercial Law Studies and the School of Economics and Finance of Queen Mary, University of London, in association with Freshfields, Bruckhaus Deringer LLP are organising a conference on the afternoon of 21 June 2012, titled ‘EU Sovereign Debt Crisis: Where From - Where To?’.
The conference has two parts: a technical part with three sessions (Session I: Collective Action Clauses: Any Progress?; Session II: Pari Passu—from New York to EU?; and, Session III: The Institutional Framework) and a round table preceded with two key note presentations.
The event aims to encourage a fruitful discussion on the recent developments of the European debt crisis and its worldwide implications for financial markets, and the world economy at large. Particular emphasis will be given to the way forward and the future of certain aspects such as litigation, debt markets, contractual provisions, etc. The conference will include very high profile speakers from different backgrounds, including the academic community, policy makers and market participants and practitioners who have shaped events within the sovereign debt sphere.
Some of the confirmed speakers include:

• Ken Baird (Freshfields)
• Mario Blejer (former Governor of the Central Bank of Argentina)
• Lachlan Burn (Linklaters)
• Glen Davis, QC (3-4 South Square)
• Nick Firoozye (Nomura)
• Professor Anna Gelpern (American University, Washington College of Law)
• Professor Mitu Gulati (Duke University)
• Dr Rodrigo Olivares-Caminal (CCLS, Queen Mary, University of London)
• Charles Proctor (Edwards Wildman)
• Philip Wood (Allen & Overy)

Contact

This event is by invitation only. Registration is required.
If you have any questions please contact Ms Katherine Zaim k.zaim@qmul.ac.uk, the events manager at the Centre for Commercial Law Studies; or, Dr Rodrigo Olivares-Caminal r.olivares-caminal@qmul.ac.uk, the academic liaison responsible for this event at the Centre for Commercial Law Studies, Queen Mary, University of London.

Organised by:

The Centre for Commercial Law Studies in association with Freshfields Bruckhaus Deringer LLP with the collaboration of AR Consulting & Communication Group.

http://www.ccls.qmul.ac.uk/events/75218.html

Pari Passu Argument Moved to July 18

Pari Passu Argument Moved to July 18

posted by Anna Gelpern

Alas, we must slog through another month to find out how it ends. The NML v. Argentina argument in the Second Circuit was postponed at the eleventh hour. In other news, one of the panel members recused himself, also at the eleventh hour. And Professor Ronald Mann joined the amicus party on the NML side on a narrow U.S. payments point.

June 20, 2012 at 1:14 AM in Sovereign Debt|Permalink|Comments (0)

http://www.creditslips.org/creditslips/

http://www.creditslips.org/creditslips/GelpernAuthor.html

Anna Gelpern habe ich gestern in London kennegelenrt (Sov Debt / pari passu event bei freshfields)

As these things go, we are more likely to double down on the crazy of the pari passu clause with a pari passu statute. Now that's a party I would not miss.

Permalink|Comments (0)

Edge of Reason: Paripassupalooza on Capitol Hill

posted by Anna Gelpern

Like the rest of us, the U.S. Congress cannot wait until the Second Circuit argument on pari passu, now scheduled for June 20th. Unlike the rest of us, the U.S. Congress can do something about it -- and it is.
This Thursday, the House Financial Services Committee is holding hearings on how the Obama Administration is mean to investors, with the U.S. brief in the pari passu litigation as one of three case studies, apparently on par with the mortgage settlement and the auto bailout. Adam and Stephen are both testifying, along with David Skeel and Ted Olson, who happens to represent the creditors in the Argentina litigation (lawyers for Argentina are not on the program).
While people might differ on the merits of all three cases, sticking the pari passu filling in the bankruptcy sandwich strikes me as rather loopy, not least because the U.S. brief this time is a carbon copy of the Bush Administration brief in 2004 on the same issue. (Meanwhile, the Obama Administration slapped trade sanctions on Argentina for ignoring investor arbitration awards.) Maybe they were going for the consumer-corporate-sovereign bankruptcy tour d'horizon effect, but the result is a mashup of apples, oranges, and green lizards.
On the merits, if they do spend any time on Argentina, I expect a replay of the flat-wrong argument that Collective Action Clauses somehow make the pari passu issue go away. The fact that Greece promptly paid its holdouts despite having the most favorable CACs ever is a case in point. I also worry about the hearings getting diverted into the totally intederminate and therefore massively manipulative debate about the meaning of pari passu. The crux of the controversy is not whether Argentina breached a covenant, but rather, whether pari passu can be the basis for a worldwide injunction. This is just too weedy to get straight in a hearing of this sort.
Then again, if anyone really cared about investors in foreign sovereign debt, they would be talking about sovereign immunity and sovereign bankruptcy, not pari passu. As these things go, we are more likely to double down on the crazy of the pari passu clause with a pari passu statute. Now that's a party I would not miss.

June 5, 2012 at 10:58 AM in Sovereign Debt|Permalink|Comments (5)

Nonetheless, he believes it would not be unreasonable to question at least the appearance of partiality, especially given that, in addition to his friendship with a witness fo Argentina, Judge Leval, as the parties are undoubtedly aware, practiced from 1969 to 1975, first asr

UNITED STATES COURT OF APPEALS
FOR THE
SECOND CIRCUIT
                                     
At a stated termofthe United StatesCourt ofAppealsforthe SecondCircuit, held at the
Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New York, on the
18 day of June, two thousand twelve,

The Republic of Argentina,
Defendant-Appellant.
Judge Leval has become aware in preparing this case that a friend of many years gave an
expert affidavit for Argentina in the district court. Troland Link, Esq., and Judge Leval were college
classmates during the 1950's and have had a friendly relationship for many years. The Links and the
Levals have been guests in each others' houses.
Judge Leval is confident that his friendship with Mr. Link would have no effect on his
consideration of the case. Nonetheless, he believes it would not be unreasonable to question at least
the appearance of partiality, especially given that, in addition to his friendship with a witness for
Argentina, Judge Leval, as the parties are undoubtedly aware, practiced from 1969 to 1975, first as
an associate, then as a partner, with the Cleary Gottlieb firm, which represents Argentina.
In view of the combination of circumstances, Judge Leval will take recusal unless the parties
unanimously remit the disqualification. See Code of Conduct for United States Judges, Canon 3(D).
The parties are directed to advise the Clerk by email as rapidly as possible and in any event within
!"#$%&'()'*+&&&&&,-./0$12%&34*&&&&&5"6$%&'&&&&&&*78'98(*'(&&&&&&734(+7&&&&&&(24 hours whether they remit Judge Leval's disqualification. The Clerk will advise the panel whether
the parties have, or have not, unanimously remitted the disqualification and will not advise of the
position of any individual party.
So ordered.
For the Court:      
Catherine O’Hagan Wolfe
Clerk of Court

paripassu at his best: The oral argument of this appeal, which was scheduled for June 20, 2012, is hereby adjourned to July 18, 2012 at 11:00 a.m

UNITED STATES COURT OF APPEALS

FOR THE

SECOND CIRCUIT

At a stated term of the United States Court of Appeals for the Second Circuit, held at the

Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New York, on the

18 day of June,

th two thousand twelve,

NML Capital, Ltd., Aurelius Capital Master Ltd., ORDER

ACP Master, Ltd., Blue Angel Capital I LLC, Docket Nos. 12-105(Lead), 12-109(Con),

Aurelius Opportunities Fund II, LLC, Pablo Alberto 12-111 (Con, 12-157 (Con),

Varela, Lila Ines Burgueno, Mirta Susana Dieguez, 12-158 (Con),12-163 (Con),

Maria Evangelina Carballo, Leandro Daniel Pomilio, 12-164 (Con), 12-170 (Con),

Susana Aquerreta, Maria Elena Corral, Teresa Munoz 12-176 (Con), 12-185 (Con),

De Corral, Norma Elsa Lavorato, Cesar Ruben Vazquez, 12-189 (Con), 12-214 (Con),

Norma Haydee Gines, Marta Azucena Vazquez, Olifant 12-909 (Con), 12-914 (Con),

Fund, Ltd., 12-916 (Con), 12-919 (Con),

12-920 (Con), 12-923 (Con),

Plaintiffs-Appellees, 12-924 (Con), 12-926 (Con),

12-939 (Con), 12-943 (Con),

v. 12-951 (Con), 12-968 (Con),

12-971 (Con)

The Republic of Argentina,

Defendant-Appellant.

The oral argument of this appeal, which was scheduled for June 20, 2012, is hereby

adjourned to July 18, 2012 at 11:00 a.m.

For the Court:

Catherine O’Hagan Wolfe

Clerk of Court

Pari Passu Party (on behalf of Anna Gelpern)

https://www.inforuptcy.com/content/pari-passu-party-behalf-anna-gelpern

Pari Passu Party (on behalf of Anna Gelpern)

04/06/12

inShare0

What are you looking for?

For example, creditor information? Debtor's statistics? Help finding a document?

Your Email:

This is Adam Levitin posting for Anna Gelpern. Only the awful illiterative post title is mine. Here's Anna:
Argentina and its most intransigent creditors are duking it out again (or still) in the Second Circuit, reviving the crazy battle over the meaning and import of the pari passu (equal treatment) clause in sovereign debt contracts. For the small but committed contingent of pari passu pointy heads, this is WorldCupOlympicMarchMadnessSuperBowl. For everyone else, this bears watching because an obscure turn in the Argentina story could open the door to enforcement against sovereign debtors in general. (Nope, this is not a closet Eupdate. Pay no attention to the man behind the blue-striped curtain.)
Recap: Argentina defaulted on roughly $100 billion in debt in 2001, then restructured about three-quarters of it in 2005 with a 60%++ haircut, depending on how you count. In 2010, it mopped up most of the rest. However, a small subset of expert holdouts keeps on suing, lobbying, and trying to collect by any means necessary. Last December, the long-suffering SDNY Judge Griesa Download Argentina2012.2011DecPariPassuLiabilityDecision that the Republic breached the pari passu covenant in its debt contracts by (a) paying the holders of its restructured bonds but not the holdouts, and (b) passing a "Lock Law" that bars the government from paying the holdouts. On February 23, the judge issued an injunction, telling Argentina to pay the holdouts pro rata whenever it pays the holders of its restructured bonds. Argentina has appealed, pointing out among other things that paying people who took a massive haircut on par with those who took none was an odd reading of equal treatment. This week, the U.S. Government filed a Statement of Interest, joining the New York Fed and the New York Clearing House at a friend-filled party.
For those who care about neither Argentina nor pari passu, this matters because a broad reading of the February 23 SDNY order would subject countries who pay some creditors, but not others, to injunctions of the sort just slapped on Argentina. Creditors who get paid while the holdouts are not, or even intermediaries routing payments for Argentina, might be exposed as well. Since successful sovereign debt exchanges so far have all relied on a credible threat of stiffing non-participants, upholding the order could spell the end of the prevailing restructuring regime.
A narrow reading of the order would tie the injunctive remedy much more closely to Argentina's "Lock Law." The law can be read as a formal subordination of the holdouts (as distinct from selective payment)—a breach of the pari passu covenant under a reasonably conservative reading of the clause. Because this law is unusual, this would at least limit the effect of the order on the foreign sovereign debt market. But even a narrow reading would not solve the problem raised most forcefully in the U.S. Government brief—that the injunction would give creditors a worldwide remedy beyond the scope of the Foreign Sovereign Immunities Act.
Now some might say that upholding the SDNY order, even broadly, would not be a bad thing: it would jolt a screwed-up legal regime, and might prompt sensible reform. The alternative appears to be effective impunity for sovereigns that, like Argentina, can afford to pay the nuisance tax of never-ending enforcement litigation, and bear what reputational cost it does in the markets. The argument obviously loses force with poor countries that cannot afford to stay out of the markets and live in court for a decade, and must choose between clean water and holdout creditors. Yet others might say that the persistence of Argentina and the revival of pari passu as an enforcement device show again the cost to the international system of having no sovereign bankruptcy regime.
I would not go so far. But even if the SDNY order were totally wrong (and I think it is), there is something quite dysfunctional about a market where the contracts do not map onto the background legal regime. Normal-looking clauses turn into arrant nonsense when you stick them in sovereign IOUs. This is because private debt contracts are presumptively enforceable (even if not always enforced), and can be restructured in bankruptcy. Substituting immunity for bankruptcy in the sovereign context destabilizes, and occasionally eviscerates, the meaning of the contract text.
Pari passu is the reigning poster child for this proposition: because sovereigns cannot file for bankruptcy, there is never a moment of agreed insolvency or a waterfall of asset distribution. Instead, creditors owed on Monday might get paid, but those owed on Thursday might not. Is that subordination, or luck of the draw? The one agreed way to breach the covenant is to shout out "I subordinate"—but who does that?? (OK, maybe Argentina ... I don't think the Greek "Retro-CAC" Law is comparable.)
The bigger mystery, given such apparent dysfunction, is why the brilliant lawyers who draft these contracts don't just fix the provision once and for all, so that it would make sense. Smart people have offered thoughtful explanations. I suspect the answer has something to do with the weirdness of writing a totally, utterly, certainly unenforceable debt contract. That’s just not what upstanding lawyers do—or is it?
Finally, there is a weird political/PR dynamic at play here. Argentina and Greece, represented by the same law firm and threatened by the same holdout creditors, have polar opposite PR strategies. For Argentina, they key is to hitch its case to the European caravan, to demonstrate that ruling against Argentina would bring on global financial apocalypse. Hence the reference to Greece, Portugal, Spain, and Ireland as potential victims in the Argentina brief. In contrast, the last thing Greece wants is to have the spectre of Argentina hover over its still-pending debt exchange. The holdouts want some combination of both -- they want Greece to feel threatened by the potential outcome in Argentina, but not so threatened that the US and EU establishment get scared too and join the battle full force on Argentina's side.



All this for pari passu? Stay tuned for geek party of the century

The government will seduce the bondholders

The government will seduce the bondholders

La Nacion

The government will seduce the bondholders

Monday, June 18, 2012

By Martin Dinatale

Perhaps due to the avalanche of discomfort that is coming from the U.S. business world or, maybe, as a preventative tactic before an eventual chain-reaction from the world crisis, before leaving for the G-20 summit in Mexico, Cristina Kirchner gave an order to her ministers and diplomats yesterday in this city: “to completely rebuild” relations with the United States.

The strategy to rebuild relations with Washington covers various axes. The newest one is the intention of the President to re-establish a dialogue with the bondholders subject to the vulture funds and, eventually, show them there is an intention by the government to go back and negotiation a payment on that debt, which today comes to US$6.8 billion. It’s estimated that half of that debt would be in the hands of the vulture funds, of which Dart, Elliott and NML are the main ones.

 

The other plans for “clearing up the clouds” with Washington, as the president likes to say, has to do with moving ahead on agreements with the oil sector to add them as partners in YPF and the chance of getting a commitment from the White House to lift the barriers on imports of beef and lemons from Argentina.

"It’s clear that the bondholders won’t get anywhere with pressure and that they will have to listen. But it’s likely that now would be the time to reopen negotiations to eventually head towards an agreement,” two qualified government sources that were in the presidential party which defended the Malvinas cause in this city before the UN, to LA NACION.

In fact, before leaving for Mexico, Cristina Kirchner spent all afternoon on Saturday shut in to the 54th floor of the Hotel Mandarin in Manhattan, together with Economy Minister Hernan Lorenzino; Legal and Technical Secretary Carlos Zannini; Foreign Minister Hector Timerman and Argentina’s ambassador in the United States, Jorge Arguello, to move forward with the legal scheme that would allow for opening the door for a renegotiation with the bondholders.

To resume the dialogue with the American bondholders that today are subject to the investment vulture funds will not be an easy task because there are lawsuits pending and precedents of rejecting a proposal with a debt haircut. But it would seem that the President’s intention is to make an attempt and so she ordered as much her officials.

 

During the government of Nestor Kirchner a payment proposal was rejected that was made to the bondholders and, since then, everything has been tied up in the courts. But this is no longer the days of Nestorism, and the world changed with the 2008 crisis.

The vulture funds

Among other things, the President saw in raw terms during her brief stay in New York that the Task Force group that is made up of the vulture funds are much more powerful than she thought. They have a big influence not only in the American Congress but also among the business community. Also, today they represent a real barrier for Argentina when asking for credits. For their lawsuits, risk agencies still have the country in the default category. For internal policy, the judicial rulings for these funds have generated problems for Cristina Kirchner’s administration in paying salaries for diplomats abroad or the freezing of accounts.

In her message to the American businessmen that met at the Council of the Americas, the President gave some signs of wanting to rebuild this situation. Like when she said: “This year the debt on the Boden 2012 will be paid and next year will be more even on the debt issue.” Will that mean that the year in between could be the year for negotiations with the bondholders? Or did she simply try to calm the disquieted companies over the course of the Argentine economy?

 

The president acknowledged before her intimate circle that to unblock the debt with the bondholders would be key to overcoming the trade barriers with the United States, where, according to what the president herself acknowledged Argentine beef has not entered for more than 10 years. It would also be a door through which the American companies Exxon, Conocco and Chevron could enter the Argentine oil market, who already have had dialogue with the government to join, eventually, as partners of YPF in the Vaca Muerte deposit.

Anna Gelpern Professor of Law // Earlier she practiced with Cleary, Gottlieb, Steen & Hamilton in New York and London.

Anna Gelpern

Professor of Law

Office: Room 352
Phone: 202-274-4407
E-mail: agelpern@wcl.american.edu

Professor Gelpern’s research explores the legal and policy implications of international capital flows. She has published articles on financial integration, government debt, and regulation of financial institutions in law and social science journals, and has co-authored a textbook on International Finance with Professor Hal S. Scott. She has contributed to international initiatives on financial reform and sovereign borrowing, most recently as part of the Second Warwick Commission and as an expert for the United Nations Conference on Trade and Development. Professor Gelpern is a visiting fellow at the Peter G. Peterson Institute for International Economics and a fellow at the George Washington University School of Law Center for Law, Economics & Finance; she held a visiting appointment at the University of Pennsylvania Law School in Spring 2011.
Before joining the WCL faculty, she was an Associate Professor at Rutgers School of Law-Newark and Rutgers University Division of Global Affairs. She was an International Affairs Fellow at the Council on Foreign Relations in 2002-2003. Between 1996 and 2002, Professor Gelpern served in legal and policy positions at the U.S. Treasury Department. Earlier she practiced with Cleary, Gottlieb, Steen & Hamilton in New York and London. Professor Gelpern has taught International Finance, Contracts, Commercial Law, Financial Institutions and International Law, and currently serves as Chair of the Financial Institutions and Consumer Financial Services Section of the Association of American Law Schools. She earned an A.B. from Princeton University, a J.D. from Harvard Law School, and a M.Sc. from the London School of Economics and Political

Office: Room 352
Phone: 202-274-4407
E-mail: agelpern@wcl.american.edu

Professor Gelpern’s research explores the legal and policy implications of international capital flows. She has published articles on financial integration, government debt, and regulation of financial institutions in law and social science journals, and has co-authored a textbook on International Finance with Professor Hal S. Scott. She has contributed to international initiatives on financial reform and sovereign borrowing, most recently as part of the Second Warwick Commission and as an expert for the United Nations Conference on Trade and Development. Professor Gelpern is a visiting fellow at the Peter G. Peterson Institute for International Economics and a fellow at the George Washington University School of Law Center for Law, Economics & Finance; she held a visiting appointment at the University of Pennsylvania Law School in Spring 2011.
Before joining the WCL faculty, she was an Associate Professor at Rutgers School of Law-Newark and Rutgers University Division of Global Affairs. She was an International Affairs Fellow at the Council on Foreign Relations in 2002-2003. Between 1996 and 2002, Professor Gelpern served in legal and policy positions at the U.S. Treasury Department. Earlier she practiced with Cleary, Gottlieb, Steen & Hamilton in New York and London. Professor Gelpern has taught International Finance, Contracts, Commercial Law, Financial Institutions and International Law, and currently serves as Chair of the Financial Institutions and Consumer Financial Services Section of the Association of American Law Schools. She earned an A.B. from Princeton University, a J.D. from Harvard Law School, and a M.Sc. from the London School of Economics and Political

http://www.wcl.american.edu/faculty/agelpern/

wikipedia: In law, this term is commonly used jargon. Black's Law Dictionary (8th ed., 2004) defines pari passu as "proportionally; at an equal pace; without preference."

Pari passu

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Pari passu is a Latin phrase that literally means "with an equal step" or "on equal footing." It is sometimes translated as "ranking equally", ^[1] "hand-in-hand," "with equal force," or "moving together,"^{[citation needed]} and by extension, "fairly," "without partiality."

Contents [hide] 1 Description 2 In bankruptcy 3 See also 4 References 5 External links

[edit] Description

• passu is the ablative of the Latin noun passus, "step"
• pari is the ablative singular masculine (since it must grammatically agree with passu) of the adjective par, "equal". If it was nominative, "an equal step" it would simply be par passus.

In law, this term is commonly used jargon. Black's Law Dictionary (8th ed., 2004) defines pari passu as "proportionally; at an equal pace; without preference."
In inheritance, an in pari passu (per capita) distribution can be distinguished from a per stirpes (by family branch) distribution. For example, suppose a testator had two children A and B. A has 2 children, and B has 3. The testator leaves his entire estate to his grandchildren in equal shares in pari passu, each grandchild would inherit one fifth of the estate. If the testator left his entire estate to his grandchildren per stirpes (by family branch), the children of A would share one half of the estate equally between the two of them, and the children of B would share one half of the estate equally amongst the three of them. The problem with an in pari passu distribution in the example given is that, let's assume A dies before B. On A's death a distribution could not be made to his or her children: they would have to await the death of B (B may have more children after A's death) before the share of the estate they are to take could be determined.
In finance, this term refers to two or more loans, bonds, classes of shares having equal rights of payment or level of seniority.^[2] For asset management firms, the term denotes an equal allotment of trades to strategically identical funds or managed accounts.

[edit] In bankruptcy

This term is also often used in bankruptcy proceedings where creditors are said to be paid pari passu, or each creditor is paid pro rata in accordance with the amount of his claim. Here its meaning is "equally and without preference."
There have been cases where decisions were based on different interpretations of the term.^[3][4]

[edit] See also

• Statute of Bankrupts Act 1542, introducing the pari passu principle for creditors of insolvent persons. Pari Passu means treat at par from the previous issue
• Seniority (finance)
• List of Latin Phrases

[edit] References

1. ^ Harriman's Financial Dictionary: Over 2,600 Essential Financial Terms Simon Briscoe, Jane Fuller - 2007 - 348 "Ranking equally, meaning literally 'with equal step'."
2. ^ Investopedia.com
3. ^ Devi Sookun Stop Vulture Fund Lawsuits: A Handbook 2010 p34 2010 "The case succeeded because the court departed from the traditional meaning of the term pari passu. This section looks first at the original case of Elliott Associates v Republic of Peru."
4. ^ Lloyd's maritime and commercial law quarterly 1983 "Obviously Lord Scott, in leaving out the preferential creditors, does not use the term pari passu in its multi-layered sense. Instead, his Lordship was referring to pari passu in its orthodox meaning."

[edit] External links

• Financial Markets Law Committee issue 79 — pari passu clauses
• law.georgetown.edu the pari passu clause in sovereign debt instruments
• An analysis of Section 334 of the Companies Act and its effect on proceedings for the enforcement of Judgments - Section 334 and the pari passu principle

Written Testimony of THEODORE B. OLSON GIBSON, DUNN & CRUTCHER LLP Before the House FiFinancial Services Committee

Written Testimony of
THEODORE B. OLSON
GIBSON, DUNN & CRUTCHER LLP
Before the
House FiFinancial Services Committee
Subcommittee on Capital Markets and Government Sponsored Enterprises
“Investor Protection:
The Need to Protect Investors from the Government”
June 7, 2012
2:00 p.m.
2128 Rayburn House Office Building
Thank you, Chairman Garrett, Representative Waters, for holding this
hearing on an issue of great importance to American investors. My name is
Theodore B. Olson, and I am a partner with the law firm of Gibson, Dunn &
Crutcher in Washington, D.C. My firm and I represent NML Capital Ltd., which is
one of many investors that has won substantial judgments from U.S. courts against
the Republic of Argentina. NML is part of a family of funds that manages capital
for dozens of U.S.-based organizations, including colleges, universities, hospitals,
and pension funds. My firm and I have also recently represented victims of
Hamas-orchestrated and Iranian-supported terror against the government of Iran.
In these representations, I have been troubled by our government’s eagerness
to side with lawless nations against the interests of Americans. For example, just
last month, our government filed a brief in the United States Supreme Court
supporting the position of the government of Iran that it can refuse to disclose to
American victims of Iranian-sponsored terror the location of Iranian assets needed
to satisfy the victims’ judgments.1
I have been particularly troubled by positions our government has taken
against investors in U.S. markets. For example, the government recently
intervened in an appeal in favor of Argentina, in a case where the trial court had
1 Br. for the United States as Amicus Curiae, Rubin v. Islamic Republic of Iran, No. 11-431
(U.S. May 25, 2012).
2
ruled that Argentina must abide by a contractual obligation to treat one set of
bondholders no less favorably than others.2
Although courts often request the government’s views regarding federal law,
that was not the case here. The government intervened without any invitation from
the court, and the issues primarily concerned the enforceability of a contractual
provision in the bonds under New York law. Not only did the government
gratuitously intervene, but it also did so after showing no interest for a year-and-ahalf
as the trial court considered the investors’ claims. Instead of advising the trial
court of its views, the government suddenly emerged for the first time before the
court of appeals. There, it largely repeated Argentina’s arguments, adding only
unsubstantiated and vague assertions that the trial court’s order would hurt U.S.
foreign policy interests.3 The brief was signed by the U.S. Attorney for the
Southern District of New York, an Acting Assistant Attorney General, the General
Counsel for the Treasury Department, and the Legal Adviser to the State
Department. Just one year ago, the United States Court of Appeals for the District
of Columbia Circuit admonished the government that the gratuitous, last minute
2 Br. for the United States of America as Amicus Curiae in Support of Reversal, NML Capital
Ltd. v. Republic of Argentina, No. 12-105 (2d Cir. Apr. 4, 2012).
3 See id. at 28-30.
3
filing of such a brief in an appellate court was “patently unfair” to the litigants and
“disrespectful to the district judge.”4
The broader context of the Argentina case raises grave questions about why
our government would choose to side with Argentina against investors who put
their faith and capital in U.S. securities markets and in the U.S. courts. The case
arises from Argentina’s worldwide default on more than $80 billion of its debt in
2001. That was the largest sovereign default in history.5 It led to a series of
lawsuits and billions of dollars of judgments in favor of investors against
Argentina.
Argentina unquestionably has the ability to pay the investors it is betraying:
It currently sits on $47 billion in foreign currency reserves in a Swiss bank
account.6 Yet it refuses to pay and has used every means imaginable to avoid its
responsibilities. Indeed, Argentina has spirited its assets out of the United States7
4 FG Hemispheres Assoc., LLC v. Democratic Republic of Congo, 637 F.3d 373, 379 (D.C.
Cir. 2011).
5 For a brief overview of Argentina’s history of defaulting on its sovereign obligations, see EM
Ltd. v. Republic of Argentina, 473 F.3d 463, 466 n.2 (2d Cir. 2007).
6 Argentina’s Central Bank has, as of May 24, 2012, $47.154 billion in foreign currency
reserves. Banco Central de la Republica Argentina, Main Variables,
http://www.bcra.gov.ar/index_i.htm (last accessed June 5, 2012). The Argentine government
recently amended the Central Bank’s charter to permit the government greater access to the
Bank’s reserves to service Argentine debt. “Piggy Bank: Rootling Around For Cash,” The
Economist (Mar. 31, 2012).
7 “The Government Is Protecting Itself From Attachment,” La Nación (Feb. 5, 2004).
4
and has now filed more than thirty appeals from rulings in favor of investors.8
Argentina has declared that it would never pay a penny on these debts or in
response to these judgments. Indeed, it took the unprecedented step of enacting a
law that makes it unlawful to pay these obligations.9 According to the federal
judge who has overseen most of this litigation: “What is going on between the
Republic of Argentina and the federal court system is an exercise of sheer willful
defiance . . . of the Republic to honor the judgments of a federal court.”10 Our
government’s decision to invest taxpayer resources in supporting such defiance—
when the courts have not asked for its views—is disappointing to say the least.
It is all the more appalling in light of Argentina’s recent actions. Just since
the start of 2011, Argentina nationalized an oil company owned by the Spanish
firm Repsol,11 defied international arbitral awards of the World Trade
8 See, e.g., NML Capital Ltd. v. Republic of Argentina, No. 12-105 (2d Cir.) (oral argument
pending); NML Capital Ltd. v. Republic of Argentina, No. 11-4065 (2d Cir.) (decision
pending); NML Capital Ltd. v. Republic of Argentina, ___ F.3d ____, 2012 WL 1059073 (2d
Cir. Mar. 30, 2012); NML Capital Ltd. v. Banco Central de la Republica Argentina, 652 F.3d
172 (2d Cir. 2011); NML Capital Ltd. v. Republic of Argentina, 621 F.3d 230 (2d Cir. 2010);
EM Ltd. v. Republic of Argentina, 389 F. App’x 38 (2d Cir. 2010); Aurelius Capital
Partners, LP v. Republic of Argentina, 379 F. App’x 74 (2d Cir. 2010); Seijas v. Republic of
Argentina, 606 F.3d 53 (2d Cir. 2010); Seijas v. Republic of Argentina, 352 F. App’x 519
(2d. Cir. 2009); Aurelius Capital Partners, LP v. Republic of Argentina, 584 F.3d 120 (2d
Cir. 2009); Fontana v. Republic of Argentina, 415 F.3d 238 (2d Cir. 2005); EM Ltd. v.
Republic of Argentina, 382 F.3d 291 (2d Cir. 2004).
9 See Republic of Argentina, Prospectus Supplement, at S-53 (Apr. 28, 2010) (describing the
Lock Law, which prohibits Argentina from paying “any claims or judgments based on”
securities that were not exchanged in 2005 debt restructurings).
10 EM Ltd. v. Republic of Argentina, 720 F. Supp. 2d. 273, 304 (S.D.N.Y. 2010) (emphasis
added).
11 Editorial, “The Argentine Model,” The Wall Street Journal (Apr. 17, 2012).
5
Organization,12 incited tensions with Britain over the sovereignty of the
Falklands,13 and confiscated cargo from a U.S. Air Force transport plane that was
sent to Argentina to train local police to rescue hostages.14 These actions have
drawn the rightful condemnation of the international community, leading to trade
sanctions,15 suits in the WTO,16 and repeated public denouncements from highlevel
governmental officials throughout the world.17
But our government’s legal action in support of Argentina sent the exact
opposite signal to Argentine Finance Secretary Adrian Cosentino. He celebrated
the filing of our government’s brief, declaring that it “validat[es] the arguments
used and the general strategy of the Argentine government against” American
12 See Proclamation 8788 of March 26, 2012, 77 Fed. Reg. 18,889 (Mar. 28, 2012).
13 Eliana Raszewski, “Argentina To Raise U.K. ‘Militarization’ Of Falklands At UN,”
Bloomberg (Feb. 8, 2012).
14 CNN Wire Staff, “Cargo Sparks Dispute Between Argentina, U.S.,” CNN (Feb. 16, 2011).
15 Proclamation 8788, supra note 12 (removing Argentina from the Generalized System of
Preferences).
16 Sebastian Moffett & Tom Miles, “EU Files WTO Suit Over Argentina’s Export
Restrictions,” Reuters (May 25, 2012).
17 See, e.g., Testimony of Marisa Lago, Assistant Treasury Secretary, International Markets and
Development before the House Financial Services Subcommittee on International Monetary
Policy and Trade Holds (Sept. 21, 2011) (“[W]e also share concerns about [Argentina’s]
unwillingness to engage with its creditors, its unwillingness to engage with international
institutions. We find Argentina’s approach particularly troubling because if you look at
Argentina’s per capita income, it falls squarely within the ranks of middle income
countries.”); Jennifer M. Freedman & Jonathan Stearns, “EU Planning WTO Complaint
Against Argentine Import Curbs,” Bloomberg (Apr. 23, 2012) (statement by European Union
Trade Commissioner Karel De Gucht: “I wish to express the EU’s serious concerns about the
overall business and investment climate in Argentina and, in particular, certain recent
decisions by the Argentine government. . . . The situation is now at a point where it risks
jeopardizing our overall trade and investment relations.”).
6
investors.18 The last thing American investors needed was their own government
to encourage Argentina’s lawless intransience.
This incident is not the only time that our government has sided recently
with corrupt nations against investors. The government also backed the
Democratic Republic of Congo against U.S. investors in 2010, arguing that a court
could not hold a foreign government in contempt for disregarding its orders for two
years.19 And recently, it supported another Argentine scheme to evade its
responsibilities, this time by arguing that investors cannot recover money
Argentina owes them from Argentina’s central bank20—even though the Argentine
government itself draws from that bank at will to pay its other debts when it wants
to,21 and even though a federal trial court has ruled that Argentina and its bank
have no separate identities in the eyes of the law.22
The time has come for our government to concern itself with the rights of
American investors, the rule of law, thoughtfully drawn Congressional limits on
sovereign immunity, the enforceability of contracts under U.S. laws voluntarily
entered into by foreign sovereigns to induce our citizens to invest in their
18 “U.S. Treasury, In Favor Of Argentina,” Ambito Financiero (Apr. 9, 2012).
19 Br. of the United States as Amicus Curiae in Support of Appellant at 6, FG Hemispheres
Assoc., LLC v. Democratic Republic of Congo, 637 F.3d 373 (D.C. Cir. Oct. 7, 2010) (No.
10-7046).
20 Br. for the United States as Amicus Curiae at 8, EM Ltd. v. Republic of Argentina, No. 11-
604 (U.S. May 25, 2012).
21 Camila Russo, “Argentina Issued Note Of Up To $5.7 Billion To Central Bank,” Bloomberg
(Apr. 26, 2012).
22 EM Ltd. v. Republic of Argentina, 720 F. Supp. 2d. 273, 301-02 (S.D.N.Y. 2010).
7
indebtedness, and the judgments of U.S. courts. These considerations should not
be overridden by vague, inarticulate, and expedient concepts of foreign policy and
the interests of foreign tyrants, lawless governments and terrorists. The lawful
contractual and statutory rights of our citizens should be paramount over the
unlawful defiance of our laws by governments that have no respect for the rule of
law or the laws of nations.
That concludes my prepared remarks and I welcome your questions.

http://financialservices.house.gov/UploadedFiles/HHRG-112-BA16-WState-TOlson-20120607.pdf