Case of the Day: Seijas v. Republic of Argentina

We stick with the Argentina debt debacle for today’s case of the day, Seijas v. Republic of Argentina (2d Cir. 2012), the Second Circuit’s second decision on the subject in a matter of days. In Seijas, the district court had granted summary judgment for Argentina on the creditors’ claim for a declaration that Banco de la Nación Argentina was the Argentine state’s alter ego and thus that its assets could be seized to satisfy the creditors’ judgment against the state. The creditors argued that the judge should not have denied their motion for leave to conduct jurisdictional discovery and should not have entered the summary judgment.

The discovery issue was committed to the judge’s discretion. The creditors argued that although BNA was not an agency or an instrumentality of Argentina, it was its alter ego. But the judge found that the creditors had shown merely that Argentina, by controlling BNA’s board of directors, had made use of its power as BNA’s sole shareholder and that supposedly favorable loans BNA made to Argentina’s allies or to Argentina itself did not affect the bank’s status as an agency or instrumentality of the state. The Second Circuit affirmed, holding that the creditors had failed to make a showing that BNA was not an agency or instrumentality, and thus had failed to show that the court could exercise jurisdiction over it consistent with the FSIA.

The court reviewed the summary judgment de novo, but it made similarly short work of the creditors’ arguments. It noted that the creditors had failed to make the kind of showing that the plaintiffs had made in Kensington Int’l Ltd. v. Republic of Congo (S.D.N.Y. 2007), an unreported decision in which the plaintiffs established that an instrumentality was structured to allow the state to engage in “charades for the purpose of confounding its creditors;” that there was a commingling of assets; etc. “Facts like these, which suggest governmental abuse of the instrumentality’s corporate form, are absent from this record. Rather, when taken in the light most favorable to plaintiffs, the evidence shows only that Argentina exercised its rights as sole shareholder to appoint BNA’s directors, BNA’s lending activity was consistent with Argentinian law and its charter, and BNA arguably could have been more transparent in its accounting practices.”

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