On June 16, 2014, the United States Supreme Court ruled that the Foreign Sovereign Immunities Act doesn't forbid or limit post-judgment discovery in aid of execution. Indeed, there is nothing wrong with a judgment creditor seeking discovery in a supplemental proceeding of a sovereign nation's bank accounts and other assets, even if some of the information may not be used. The high court set aside any arguments from both Argentina and the United States Government that the Foreign Sovereign Immunities Act prohibited this type of discovery. In addition, the Supreme Court refused to reverse the order from the Second Circuit Court of Appeals of New York prohibiting Argentina and its agents from disbursing payments to the holders of newly issued, restructured debt unless and until they disburse payments to the holdouts of their pro-rata share of what is owed.
The victory for hedge fund investors who previously refused to accept restructuring of the debt provides precedent for emerging-market bond investors to pressure sovereign nations on future debt restructuring efforts. At least in this instance, holding out may pay off for the holders of approximately $1.5 billion in distressed debt purchased for pennies on the dollar.
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