Opinion ID: 2832150
Heading Depth: 2
Heading Rank: 2

Heading: Litigation Against BCRA

Text: On December 15, 2005, Argentina’s President, Néstor Kirchner, issued two emergency executive decrees—Decree 1599/2005 and Decree 1601/2005 (jointly, the “Decrees”)—both of which involved funds held by BCRA.11 The first decree provided that reserves held by BCRA in excess of the amount needed to support Argentina’s monetary base12 could “be used for payment of obligations undertaken with international monetary authorities.”13 The decree labeled these excess reserves “unrestricted reserves.” The second decree directed the Ministry of Economy and Production to take the necessary steps to repay Argentina’s debt to the International Monetary Fund (“IMF”) out of the unrestricted reserves. As we previously noted: 10 Id. at 176 & n.6. Reproductions of Decree 1599/2005 and Decree 1601/2005—in Spanish 11 and English translation—are provided in the J.A. at 579‐88. See BCRA I, 473 F.3d at 468 (defining “monetary base” as being 12 “composed of the monetary circulation of Argentine pesos plus the demand deposits of the financial entities with BCRA, in checking accounts or special accounts”) (citing Law No. 23,928 of 3/27/91 art. 6, as amended by Law No. 25,561 of 1/7/02 art. 4) (internal quotation marks and brackets omitted). 13 Id. at 468 (quoting Decree 1599/2005 art. 1, J.A. at 581). 8 At the time of the Decrees, BCRA had approximately $26.8 billion in reserves and needed $18.4 billion to cover the monetary base; thus, approximately $8.4 billion in reserves became Unrestricted Reserves pursuant to the Decrees. On December 29, 2005, the Ministry issued Resolution No. 49, directing BCRA to repay [Argentina’s] debt to the IMF and providing that, in exchange, [Argentina] would give BCRA a non‐transferrable note.14 Soon after these Decrees were issued, plaintiffs made their first attempt to satisfy their judgments against Argentina by attaching funds held by BCRA. On December 30, 2005, plaintiffs moved in the Southern District of New York for an ex parte order to restrain funds held by BCRA. Plaintiffs asserted that the Decrees had the effect of transferring ownership of certain BCRA assets— including funds held in BCRA’s account with the FRBNY—from BCRA to Argentina. The District Court entered temporary restraining orders with respect to, inter alia, the property held by BCRA in eight garnishee banking institutions, including the FRBNY.15 14 Id. 15 Id. at 469. On January 3, 2006, the BCRA paid Argentina’s debt to the IMF out of the BCRA’s funds. The FRBNY funds that were subject to the restraining notices were not used in connection with that payment, although the parties disputed “whether the funds might have been used for this purpose in the absence of the court‐ordered restraints on the transfer of the funds.” Id. 9 On January 12, 2006, the District Court vacated the temporary restraining orders.16 Plaintiffs appealed the District Court’s decision, maintaining that the Decrees amounted to an expropriation by Argentina of BCRA’s assets in order to pay Argentina’s debt to the IMF, and that, consequently, the funds in BCRA’s FRBNY account had become Argentina’s property. On January 5, 2007, we rejected plaintiffs’ argument and affirmed the District Court’s order, holding that “the Decrees did not alter property rights with respect to the FRBNY Funds” because they “did not create an attachable interest on the part of [Argentina] in the FRBNY Funds.”17 Although we thus rejected plaintiffs’ transfer‐ of‐ownership argument, we noted the difference between two theories of attachment—(1) that “the Decrees transferred to the Republic ownership or control over the assets of BCRA”; and (2) that Argentina controlled “BCRA itself”—i.e., that BCRA was Argentina’s alter ego.18 We concluded that plaintiffs had not established that BCRA’s funds were transferred to Argentina, but we noted that plaintiffs’ allegations regarding Argentina’s “misdeeds . . . might have lent some credence to” the alter‐ego theory.19 That is, we suggested that plaintiffs could potentially argue that BCRA was “so extensively controlled by [Argentina] that a relationship of principal 16 Id. at 470. 17 Id. at 472. 18 Id. at 475 (emphasis in the original). 19 Id. at 480. 10 and agent is created,” or that recognizing BCRA’s separate juridical status would “work fraud or injustice”20—and that, if successful, this claim would subject all of BCRA’s assets to potential attachment by Argentina’s judgment creditors. In September 2006, while BCRA I was pending, plaintiffs commenced a new action seeking a declaratory judgment that, pursuant to First National City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611 (1983) (“Bancec”), BCRA was liable for Argentina’s debts. Specifically, plaintiffs argued that Argentina’s consistent disregard for BCRA’s independence had vitiated any presumption of separateness to which BCRA was entitled, transforming BCRA into Argentina’s “alter ego.” In this new action, plaintiffs also pursued attachment orders against BCRA’s FRBNY funds based on this alter‐ego theory. On April 7, 2010, the District Court granted plaintiffs’ attachment motions and ruled that, at the time of BCRA’s repayment of Argentina’s debt to the IMF (December 2005), BCRA was Argentina’s alter ego.21 The District Court also concluded that the attachment of BCRA’s FRBNY funds did not violate § 1611(b)(1), which immunizes “property . . . of a foreign central bank . . . held for 20 First Nat’l City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611, 629 (1983) (“Bancec”) (internal quotation marks omitted) (applying corporate‐law principles to determine circumstances under which separate juridical status of government instrumentality must be disregarded). See EM Ltd. v. The Republic of Argentina, 720 F. Supp. 2d 273, 302‐04 21 (S.D.N.Y. 2010). 11 its own account.” Accordingly, the District Court authorized the attachment of the $105 million deposited in BCRA’s FRBNY account. This order was appealed and in 2011, in BCRA II, we vacated the attachment on the sole ground that the funds held in BCRA’s FRBNY account were “immune” from execution under § 1611(b)(1).22 We declined to reach the District Court’s alter‐ego determination and instead concluded that these funds were immune from attachment “without regard to whether the [BCRA] is independent from its parent state pursuant to Bancec.”23 We thus intimated no view as to “whether the District Court correctly determined that [Argentina’s] control of BCRA was sufficient to disregard the presumption of juridical separateness under Bancec.”24 Accordingly, we vacated the District Court’s attachment orders with respect to the FRBNY funds and remanded the cause to the District Court for further proceedings.