postings by Anna Gelpern
Edge of Reason: Paripassupalooza on Capitol Hill
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.
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.
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