Bainbridge Fund LTD v. The Republic of Argentina

Background

Bainbridge Fund Ltd. sued the Republic of Argentina to recover amounts due after Argentina defaulted on certain global debt securities. In December 2020, on Argentina’s consent, the Court granted Bainbridge summary judgment on its claim concerning the US040114GG96 Bonds, governed by the 1994 Fiscal Agency Agreement. The Court entered a $95,424,899.38 judgment for principal and interest owed through December 1, 2020.

Bainbridge said it had tried to collect the judgment without success. It moved under Federal Rule of Civil Procedure 69(a)(1) and New York Civil Practice Law and Rules § 5225(a) for an order requiring Argentina to turn over foreign assets sufficient to satisfy the judgment. Bainbridge sought assets held by Argentina’s central bank.

Court’s Authority to Order Turnover

Rule 69(a)(1) requires federal courts enforcing money judgments to follow the procedure of the state where the court is located. Under New York law, a court may order a judgment debtor to pay money or deliver personal property in its possession when that property is sufficient to satisfy the judgment. New York turnover orders can apply to property located outside New York, including outside the United States, when the court has personal jurisdiction over the judgment debtor.

The Court determined that it had personal jurisdiction over Argentina. The agreements governing the bonds included Argentina’s consent to jurisdiction in New York courts and waivers of sovereign immunity to the extent permitted by law.

Foreign Sovereign Immunities Act

The Foreign Sovereign Immunities Act, or FSIA, generally protects foreign-state property from execution in the United States, subject to statutory exceptions. Relying on Supreme Court and Second Circuit decisions, the Court held that the FSIA’s execution immunity provision applies to foreign-state property located in the United States, not merely because the property is located outside the United States. Therefore, the FSIA did not automatically prevent the Court from ordering Argentina to bring assets from outside New York into New York.

The Court nevertheless concluded that it had to determine whether the assets would be protected from execution after being brought into the United States. The relevant FSIA exception, 28 U.S.C. § 1610(a), requires the property to be used for commercial activity in the United States, in addition to other requirements. The Court rejected Bainbridge’s argument that Argentina’s contractual waivers eliminated this requirement. It held that the statutory commercial-activity requirement continued to apply.

Failure to Identify Specific Assets

The Court held that Bainbridge had not met its initial burden of showing that an exception to execution immunity applied. Bainbridge identified broad categories such as “international reserves” and “government deposits” from Argentina’s central bank balance sheet. It did not identify particular accounts or other specific assets.

Because the assets were not specifically identified, the Court could not determine who owned or controlled particular accounts, how those accounts operated, how the funds had been used, or whether the funds were used for commercial activity in the United States. The Court also could not determine whether another FSIA provision, § 1611, protected some or all of the funds.

The Court stated that Bainbridge could not shift the initial burden of identifying specific, recoverable assets to Argentina. It also stated that Bainbridge needed to complete discovery concerning Argentina’s assets and identify the property against which it sought to execute the judgment.

Disposition

Judge Loretta A. Preska denied Bainbridge’s turnover motion without prejudice to renewal if Bainbridge later provides the required evidentiary basis. The Court found that it had the power to order Argentina to bring qualifying foreign assets into New York, but it could not issue that order on the record presented. The Clerk was directed to close the open motion at docket number 51.