A few weeks ago, I reviewed the Second Circuit’s decision affirming Judge Griesa’s injunction in the NML Capital case requiring Argentina to pay its original bondholders pari passu whenever it makes payments to holder of the reorganized debt Argentina persuaded many of its creditors to accept. The Second Circuit remanded for consideration of which third parties in New York–which intermediary banks–should be bound by the injunction.

In the ordinary course, Judge Griesa’s earlier stay would have remained in effect until the Judge answered the questions the Second Circuit had posed on remand. But unfortunately for Argentina, its high officials made, ah, intemperate statements:

From the moment of the October 26, 2012 Court of Appeals’ decision, the highest officials in Argentina have declared that Argentina would pay the exchange bondholders but would not pay one dollar to holders of the original FAA bonds. President Cristina Kirchner made such a statement. The Minister of Economy, Lorenzino, declared that despite any ruling to come out of any jurisdiction, Argentina would not pay the FAA bondholders.

On November 9, 2012, the court met with counsel and asked the attorney for Argentina if the press reports of the above statements were correct. In response, the attorney turned to other subjects, meaning that the press reports were not denied. At the November 9, 2012 hearing, the court reminded all concerned that Argentina is subject to the jurisdiction of the federal courts in New York, to which Argentina has consented. For the past ten years Argentina has repeatedly submitted matters to the District Court and the Court of Appeals, and received what was undoubtedly fair treatment, since Argentina prevailed in most matters. The court went on to urge that the Argentine government should back away from these ill-advised threats to defy the current court rulings, and that any defiance of the rulings of the courts would not only be illegal but would represent the worst kind of irresponsibility in dealing with the judiciary.

This did not stop the highest Argentine officials who have continued to the present time their inflammatory declarations that the court rulings will not be obeyed.

As a result of Argentina’s defiance, the judge has now vacated the stay on his order pending a resolution of the case on appeal. The upshot is that the bond payments due on the reorganized debt in December 2012 are subject to the injunction, and Argentina’s intermediaries cannot make the payments unless Argentina certifies that it is paying the amounts due to the original bondholders to an escrow. Expect some fireworks.