Sovereign Disobedience: The Role of U.S. Courts in Curtailing the Proliferation of Sovereign Default

Abstract

On December 23, 2001, Argentine President Adolfo Rodriguez Saa declared that Argentina intended to default on more than $95 billion in external debt.1 Prior to being unseated by Greece in March of 2012,2 Argentina’s declaration of default was the largest in history.3 However, the significance of Argentina’s default would not be eclipsed quite so easily. Thanks to the Second Circuit Court of Appeals and its recent decision in NML Capital, Ltd. v. Republic of Argentina,4 not only has the notoriety of Argentina’s default been revitalized, it may soon be acclaimed for predicating substantial developments in the Supreme Court’s sovereign default jurisprudence.5 In NML, the Second Circuit upheld a high-profile injunction imposed by the district court against the country of Argentina.6 The underlying lawsuit was precipitated by Argentina’s default on municipal bonds held by private investors.7 After placing a moratorium on the payment of these bonds, Argentina made the decision to restructure its debt, culminating in a “take it or leave it” offer of new bonds (“Exchange Bonds”) to then-current bondholders.8 The plaintiffs in NML represent a group of “holdout” creditors