Hamilton Reserve Bank Ltd. v. The Democratic Socialist Republic of Sri Lanka
- Denise Cote
- 1:22-cv-05199
- U.S. District Court · Southern District of New York
- 7
Hamilton Reserve Bank v. Sri Lanka: Judge Cote granted Sri Lanka’s motion to extend the litigation stay through November 30, 2024.
Sri Lanka received a continued pause in the litigation through November 30, 2024. Hamilton Reserve Bank’s case was delayed, and the court did not decide its claim for payment on the bonds.
What happened
In Hamilton Reserve Bank Ltd. v. The Democratic Socialist Republic of Sri Lanka, Hamilton says it owns more than $240 million in Sri Lankan bonds and is owed principal and interest. Sri Lanka asked the court to pause the case while it completed a major debt restructuring.
The court noted that Sri Lanka had reached agreements with sovereign and private creditors and that earlier pauses had helped its restructuring efforts. Hamilton opposed an indefinite series of pauses and asked for assurance that the restructuring would not affect its right to seek full payment.
Judge Denise Cote granted Sri Lanka’s motion and stayed the case through November 30, 2024. The court did not condition the stay on Sri Lanka providing Hamilton’s requested assurance, and the opinion did not decide Hamilton’s underlying claim.
The detailed version
- Hamilton Reserve Bank Ltd. v. The Democratic Socialist Republic of Sri Lanka · No. 1:22-cv-05199
- Denise Cote
- Nov. 15, 2024
Background
Hamilton Reserve Bank Ltd. filed this action on June 21, 2022. Hamilton asserts that it is the beneficial owner of more than $240 million in principal amount of Sri Lanka’s international sovereign bonds, which were due in July 2022, and that Sri Lanka owes the principal and accumulated interest. Hamilton has not participated in Sri Lanka’s debt-restructuring negotiations and represents that it does not wish to participate.
Sri Lanka sought a third extension of a stay, meaning a temporary pause in the litigation. The case had previously been stayed through February 29, 2024, and then stayed again after an April 23, 2024 order. Sri Lanka’s July 29, 2024 motion requested a four-month stay ending November 30, 2024. Hamilton consented to continuing the stay only through September 30.
The opinion describes Sri Lanka’s economic, political, and humanitarian crisis and its efforts to restructure its debt under a $2.9 billion arrangement approved by the International Monetary Fund. Sri Lanka had reached restructuring arrangements with its official sovereign creditors and the Export-Import Bank of China. It had also reached an agreement in principle with an ad hoc group of private commercial bondholders and was preparing a formal bond exchange and consent solicitation.
Several sovereign creditors, the United States, and the private bondholder committee supported additional time for the restructuring. Hamilton later expressed concern that political developments threatened the restructuring effort. Sri Lanka responded that its authorities continued to support the International Monetary Fund-supported debt program and intended to expedite implementation of the restructuring.
Court’s reasoning
The court applied the standard described in its 2023 stay opinion. It found that Sri Lanka had made substantial progress toward agreements with sovereign and private debt holders, aided by consultations with the International Monetary Fund. The court determined that the factors supporting a stay continued to weigh heavily in favor of pausing the litigation.
The court emphasized that the earlier stays had not been indefinite and that this stay would not be indefinite. It concluded that the stays had assisted Sri Lanka’s complex debt reorganization. The court also noted that, if Hamilton ultimately prevails, any judgment would be subject to prejudgment interest.
The court stated that any future request for another stay would be evaluated on its own merits. It declined to require Sri Lanka to assure Hamilton that any restructuring would not be used to challenge Hamilton’s right to recover the full amount allegedly owed on the bonds.
Disposition
The court granted Sri Lanka’s motion. The action is stayed through November 30, 2024. This order addressed only the temporary pause in the litigation; the opinion did not decide whether Hamilton is entitled to recover the principal or interest it claims.
Read the full 7-page opinion on CourtListener, the free public archive maintained by the Free Law Project.