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EXHIBIT B

Case 1:08-cv-06978-TPG Document 907-3 Filed 02/29/16 of 77

Neutral Citation Number: [2014] EWHC 3662 (Ch)

Case No: HC14B03236IN THE HIGH COURT OF JUSTICECHANCERY DIVISION

Rolls Building, Royal Courts of Justice7 Rolls Buildings, Fetter Lane

London, EC4A 1NL

Date: 06/11/2014

Before :

MR JUSTICE NEWEY- - - - - - - - - - - - - - - - - - - - -

Between :

(1) KNIGHTHEAD MASTER FUND LP(2) RGY INVESTMENTS LLC(3) QUANTUM PARTNERS LP

(4) HAYMAN CAPITAL MASTER FUND LP

Claimants

- and -(1) THE BANK OF NEW YORK MELLON

(2) THE BANK OF NEW YORK DEPOSITARY (NOMINEES) LIMITED

Defendants

- - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - -

Mr Mark Hapgood QC, Mr David Quest QC and Mr David Simpson (instructed byReynolds Porter Chamberlain LLP) for the Claimants

Mr Robert Miles QC and Mr Andrew de Mestre (instructed by Allen & Overy LLP) for the Defendants

Hearing date: 3 November 2014- - - - - - - - - - - - - - - - - - - - -

Approved JudgmentI direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this

Judgment and that copies of this version as handed down may be treated as authentic.

.............................


Approved JudgmentKnighthead Master Fund LP v The Bank of New York Mellon

Mr Justice Newey :

1. I have before me applications by the claimants, who hold securities issued by the Republic of Argentina (“the Republic”), for certain declarations and injunctive relief.

2. During the 1990s, the Republic issued bonds governed by a “Fiscal Agency Agreement” dated as of 19 October 1994 (“the FAA”). The FAA provided, by paragraph 1(c), for the bonds to “rank pari passu and without any preference among themselves” and for the Republic’s payment obligations under the bonds to “rank at least equally with all its other present and future unsecured and unsubordinatedExternal Indebtedness”. The FAA also stated that it was to be governed by, and interpreted in accordance with, the laws of the State of New York. It contained, too, a provision under which the Republic accepted the jurisdiction of the Courts of New York City in respect of any action brought by a bondholder arising out of or based on the bonds or the FAA.

3. In 2001, the Republic defaulted on its debts. In subsequent years, holders of some 93% of the bonds governed by the FAA (“the FAA Bonds”) agreed to exchange those bonds for new ones (“the Exchange Bonds”) at a rate of 25-29 cents in the dollar. They thus agreed to forego between 71% and 75% of the principal payable under theirFAA Bonds.

4. Some of the Exchange Bonds were denominated in US dollars, others in Argentine pesos, and others again in euros. The euro-denominated bonds were issued pursuant to an indenture dated as of 2 June 2005. Under this indenture (“the Indenture”),securities were to be governed by either New York law or, if so stated, English law. Where a series of securities was to be governed by English law, then (under section 12.7, as amended in 2010) the Indenture, the securities and “any non-contractual obligations arising out of or in connection therewith” were to be “governed by and construed in accordance with the laws of England & Wales without regard to principles of conflict of laws, except with respect to authorization and execution by the Republic”, as to which Argentine law was to apply. Further, as regards securities governed by English law, the Republic irrevocably submitted to the jurisdiction of the Courts of England “with respect to any suit, action or proceeding against the Republic or its properties, assets or revenues arising out of or in connection with” the Indenture or the securities.

5. The Bank of New York Mellon (“the Bank”), which is the first defendant to the present proceedings, became the trustee of the euro-denominated Exchange Bonds,which were expressed to be governed by English law. The Indenture provided for the Republic to put the Bank in funds in advance of each payment of interest or principal to bondholders. Section 3.5 of the Indenture dealt with what was to happen to such money. It stated:

“Subject to actual receipt of such funds in accordance with this Section 3.5(a), the Trustee [i.e. the Bank] shall apply such amount to the payment due on such Payment Date. Pending such application, such amounts shall be held in trust by the Trustee for the exclusive benefit of the Trustee and the Holders entitled thereto in accordance with their respective interests and



the Republic shall have no interest whatsoever in such amounts.”

In similar vein, section 3.1 of the Indenture provided:

“All monies (save for its own account) paid to the Trustee under the Debt Securities and this Indenture shall be held by it in trust for itself and the Holders of the Debt Securities in accordance with their respective interests to be applied by the Trustee to payments due under the Debt Securities and this Indenture at the time and in the manner provided for in the Debt Securities and this Indenture.”

6. The securities themselves conveyed the same message. The terms and conditions to be found on the reverse of the securities stated:

“All money paid to the Trustee pursuant to these Terms shall be held by it in trust exclusively for itself and the Holders of the Securities in accordance with their respective interests to be applied by the Trustee to payments due on the Securities or to the Trustee at the time and in the manner provided for in these terms and in the Indenture….”

7. The second defendant, a company associated with the Bank, is the “Holder” (within the meaning of the Indenture) of the bonds governed by the Indenture.

8. As, however, is implicit in what I have already said, the holders of some of the FAA Bonds declined to exchange them (“the Holdout Creditors”). A number of Holdout Creditors brought proceedings against the Republic in the United States District Court for the Southern District of New York, and in December 2011 the Hon. Thomas P. Griesa held that the Republic was required to rank its payment obligations pursuant to the remaining FAA Bonds at least equally with its other external indebtedness. On 23 February 2012, Judge Griesa made a further order (amended on 21 November 2012)requiring the Republic to perform its obligations under the FAA. This order stated thatthe Republic was to make a “Ratable Payment” to the plaintiff (“NML”) whenever it pays any amount due on the Exchange Bonds. Among other things, the orderstipulated as follows:

“d. The Republic is ENJOINED from violating Paragraph 1(c)of the FAA, including by making any payment under the terms of the Exchange Bonds without complying with its obligation pursuant to Paragraph 1(c) of the FAA by concurrently or in advance making a Ratable Payment to NML.

e. Within three (3) days of the issuance of this ORDER, the Republic shall provide copies of this ORDER to all participants in the payment process of the Exchange Bonds (‘Participants’). Such Participants shall be bound by the terms of this ORDER as provided by Rule 65(d)(2) and prohibited from aiding and abetting any violation of this



ORDER, including any further violation by the Republic of its obligations under Paragraph 1(c) of the FAA, such as any effort to make payments under the terms of the Exchange Bonds without also concurrently or in advance making a Ratable Payment to NML.

f. ‘Participants’ refer to those persons and entities who act in active concert or participation with the Republic, to assist the Republic in fulfilling its payment obligations under the Exchange Bonds, including: (1) the indenture trustees and/or registrars under the Exchange Bonds (including but not limited to The Bank of New York Mellon f/k/a The Bank of New York); (2) the registered owners of the Exchange Bonds and nominees of the depositaries for the Exchange Bonds (including but not limited to … The Bank of New York Depositary (Nominees) Limited [i.e. the second defendant]) ….”

The order went on to say this:

“The Republic is permanently PROHIBITED from taking action to evade the directives of this ORDER, render it ineffective, or to take any steps to diminish the Court’s ability to supervise compliance with the ORDER, including, but not limited to, altering or amending the processes or specific transfer mechanisms by which it makes payments on the Exchange Bonds, without obtaining prior approval by the Court.”

“Ratable Payment” was defined in such a way that, if the Republic paid the interest outstanding on the Exchange Bonds in full, it had to pay the totality of all the principal and interest for which the relevant FAA Bonds provided.

9. The Financial Markets Law Committee has expressed the view that the English Courts would construe pari passu clauses differently from Judge Griesa and that they would probably also take a different approach to the grant of remedies (see the Committee’s “Issue 79 – pari passu clauses” and its subsequent memorandum on “Role, use and meaning of pari passu clauses in sovereign debt obligations as a matter of English law”). Whether or not that is right is, however, of little or no significance. The pari passu clause in the FAA has been definitively interpreted in accordance with its governing law by a Court with jurisdiction.

10. The Bank challenged the scope of the injunction granted by Judge Griesa. It contended that “the Court should amend the Injunction as necessary to clarify that it does not apply to [the Bank] in its capacity as indenture trustee under the Indenture”.On 23 August 2013, however, the United States Court of Appeals for the Second Circuit affirmed Judge Griesa’s order in this as well as other respects. Attempts were made to take the matter to the United States Supreme Court, but the appeal was rejected on 16 June 2014. Two days later, the stay to which Judge Griesa’s order had hitherto been subject was lifted.



11. Very shortly after that, on 26 June 2014, the Republic transferred €225,852,475.66 to an account that the Bank holds with Banco Central de la Republica de Argentina in Argentina. The payment was made in respect of interest falling due on the euro-denominated Exchange Bonds on 30 June. There was no attempt to make any payment on the outstanding FAA Bonds.

12. NML returned to Court on 27 June 2014. Its attorney complained to Judge Griesa that the Republic had “defiantly and contemptuously” violated the Judge’s order. The Bank’s attorney submitted that “the money under the indenture is held in trust for the Bank of New York Mellon as trustee and the bondholders”, and an attorney appearing for holders of euro-denominated Exchange Bonds questioned whether the Court had “jurisdiction to issue an order nullifying that payment or perhaps ordering the return of those funds”. Judge Griesa nevertheless considered that “the money should simply be returned to the Republic, simple as that”. The money should, Judge Griesa observed, “never have been paid, and it should be returned”.

13. In the event, the order that the parties submitted to Judge Griesa, and which he approved, did not provide for the money that the Republic had paid to be returned to it. Having recorded that the payment was “illegal and a violation of the Amended February 23 Orders”, the order stipulated that the Bank was to retain the funds pending further order of the Court. The order also stated that the Bank would “incur no liability under the Indenture governing the Exchange Bonds or otherwise to any person or entity for complying with this Order and the Amended February 23 Orders”.While, however, that may excuse the Bank from any liability to holders of euro-denominated Exchange Bonds as a matter of American law, I find it hard to see how it can do so in the eyes of the English Courts, and the bonds in question are governed by English law.

14. In August 2014, certain Holdout Creditors applied to the District Court for an order directing the Bank to “turnover” the funds it held so that judgments they had obtained against the Republic could be satisfied. On 27 October, however, the motions were denied by Judge Griesa. He explained as follows:

“Plaintiffs’ motions are denied because the funds are located outside the United States in [the Bank’s] accounts at BCRA. Federal Rule of Civil Procedure 69 and New York Civil Practice Law and Rules § 5225(b) allow turnover in certain circumstances where, inter alia, a movant shows that the judgment creditor has an interest in the property. However, the Foreign Sovereign Immunities Act, which governs the arrest, execution, or attachment of the property of a foreign sovereign, does not authorize attachment or execution of sovereign property located outside the United States …. Thus, even if plaintiffs show that the republic has an interest in the funds, which the court does not reach, turnover would not be authorized by the FSIA. In dealing with what can be subjected to turnover, the FSIA simply does not mention property located outside the United States.”

15. By now, the Republic had taken steps to replace the Bank as the trustee of the Exchange Bonds governed by the Indenture. In a notice published on 22 September



2014, the Republic said that it had requested the Bank to resign in accordance with section 5.8 of the Indenture and that, if the Bank did not resign immediately, “both the Exchange Bondholders and the Republic of Argentina are entitled to remove it as trustee and appoint another entity as successor trustee, in accordance with Section 5.9 (b) and (c) of the Trust Indenture”.

16. NML once again alleged that the Republic was flouting Judge Griesa’s orders. Judge Griesa found that the Republic was in civil contempt of Court, but deferred consideration of sanctions. The order stated that to purge its contempt:

“The Republic of Argentina will need to reverse entirely the steps which it has taken constituting the contempt, including, but not limited to, re-affirming the role of The Bank of New York Mellon as the indenture trustee and withdrawing any purported authorization of Nación Fideicomisos, S.A. to act as the indenture trustee, and completely complying with the February 23, 2012 injunction”.

In his judgment, Judge Griesa had said:

“Two things are necessary this afternoon. One is this Court to make a very clear ruling that the proposals are illegal: The proposal to displace the indenture trustee, the proposal to move the affairs about these bonds to Argentina, move them away from the United States; and the proposal to make interest payments to the exchange bondholders without recognising the other very important part of the obligations of the Republic and that is obligations to the people who did not exchange and who have the bonds still. The Court holds and rules that those steps, those proposed steps are illegal and cannot be carried out.”

17. As things stand, there appears to be one outstanding motion in the New York proceedings. This was launched on 29 June 2014 by some of the holders of euro-denominated Exchange Bonds. It asks the Court to determine that the injunctions granted by Judge Griesa “do not apply to the foreign parties who process payment onthe Euro Bonds”. I gather that the Court has heard brief oral submissions on the motion, but it has not yet been finally disposed of.

18. It can, perhaps, be observed that if, as the Indenture and securities suggest, money paid to the Bank by the Republic in discharge of its obligations under the Exchange Bonds is held on trust for the second defendant and, ultimately, the bondholders, the present position is rather unfortunate, albeit explicable by the understandable concern of the United States Courts that their orders should be obeyed: the bondholders (who, or whose predecessors, will already have had to agree to take far less than the face value of the FAA Bonds that they will once have held) would be liable to be prevented indefinitely from obtaining access to money that had been due to them contractually and to which they would now be beneficially entitled.

19. The proceedings before me were issued on 21 August 2014. By them, the claimants, who are holders of euro-denominated Exchange Bonds, seek declarations that the €225 million which the Republic paid to the Bank on 26 June 2014 is held on trust for



the second defendant and the beneficial holders of the euro-denominated ExchangeBonds and that the Bank has acted in breach of its obligations under the Indenture by failing to transfer the money to the second defendant. The claimants also ask for orders for, among other things, the distribution of the €225 million to the second defendant and on to the beneficial holders of the relevant bonds and restraining the Bank from dealing with or disposing of the €225 million other than by paying the money to the second defendant.

20. The application with which I am concerned was initiated by an application notice dated 9 October 2014. In the course of argument, Mr Mark Hapgood QC, who appeared with Mr David Quest QC and Mr David Simpson for the claimants, narrowed somewhat the relief sought. By the close of submissions, the claimants were asking for (a) a declaration that the €225 million is held on the English law trust for which section 3.1 of the Indenture provides, (b) a declaration that, as a matter of English conflicts of law, an order of a foreign Court is ineffective in varying a contract governed by English law and (c) an interim injunction restraining the Bank until the conclusion of the trial or further order from dealing with or disposing of the €225 million (or any other funds paid to it by the Republic in respect of the euro-denominated Exchange Bonds) other than by paying the money to the beneficial holders of the bonds or the second defendant. As regards (b), it was proposed, not that the declaration should be granted here and now, but that the application should be adjourned on the footing that notice of it would in the meantime be given to the New York attorneys on the record for Holdout Creditors, and Mr Hapgood accepted that it could make sense to adjourn the application for the other proposed declaration (i.e. (a)) on the same basis. He asked, however, for the injunction to be granted now.

21. Mr Robert Miles QC, who appeared with Mr Andrew de Mestre for the defendants, argued that it could not be appropriate for the Court to grant either of the declarations sought. In support of his submissions, he referred to the judgment of Aikens LJ in Rolls-Royce plc v Unite the Union [2009] EWCA Civ 387, [2010] 1 WLR 318. In paragraph 120, Aikens LJ summarised the principles applicable to the grant of declarations in these terms:

“For the purposes of the present case, I think that the principles in the cases can be summarised as follows.

(1) The power of the court to grant declaratory relief is discretionary.

(2) There must, in general, be a real and present dispute between the parties before the court as to the existence or extent of a legal right between them. However, the claimant does not need to have a present cause of action against the defendant.

(3) Each party must, in general, be affected by the court's determination of the issues concerning the legal right in question.

(4) The fact that the claimant is not a party to the relevant contract in respect of which a declaration is sought is not fatal



to an application for a declaration, provided that it is directly affected by the issue; (in this respect the cases have undoubtedly ‘moved on’ from Meadows).

(5) The court will be prepared to give declaratory relief in respect of a ‘friendly action’ or where there is an ‘academic question’ if all parties so wish, even on ‘private law’ issues. This may particularly be so if it is a ‘test case’, or it may affect a significant number of other cases, and it is in the public interest to decide the issue concerned.

(6) However, the court must be satisfied that all sides of the argument will be fully and properly put. It must therefore ensure that all those affected are either before it or will have their arguments put before the court.

(7) In all cases, assuming that the other tests are satisfied, the court must ask: is this the most effective way of resolving the issues raised? In answering that question it must consider the other options of resolving this issue.”

22. With respect to the proposed declaration that the €225 million is subject to a trust, Mr Miles pointed out that it is not in dispute between the claimants and the Bank that the €225 million is held on trust on the terms of the Indenture. That being so, Mr Miles said, sub-paragraph (2) of Aikens LJ’s summary of the law is in point: there is no “real and present dispute between the parties before the court as to the existence or extent of a legal right between them”. Further, a declaration would serve no useful purpose.

23. For his part, Mr Hapgood drew attention to a passage from the judgment of Neuberger J in Financial Services Authority v Rourke [2002] CP Rep 14 which has been quoted approvingly in subsequent cases. Neuberger J said:

“It seems to me that, when considering whether to grant a declaration or not, the court should take into account justice to the claimant, justice to the defendant, whether the declaration would serve a useful purpose and whether there are any other special reasons why or why not the court should grant the declaration.”

Here, Mr Hapgood suggested, the declaration claimed would both dispose of part of the relief sought in the claim form and be helpful to the New York Courts. In this connection, Mr Hapgood relied on AWB (Geneva) SA v North America Steamships Ltd [2007] EWCA Civ 739, [2007] 2 CLC 117, where Thomas LJ (with whom Chadwick and Latham LJJ agreed) expressed the view (in paragraph 38) that, on the facts of that case, it would be “very helpful” to a Canadian Court “to have the decision on the interpretation of the ISDA Master Agreement by the Commercial Court which has the jurisdiction to adjudicate on these issues in accordance with English law”.



24. Mr Miles queried whether the United States Courts would find a declaration on the trust point helpful. He argued that the New York Courts are already familiar with the proposition that the €225 million is the subject of a trust and (which I entirely accept)that they are perfectly capable of dealing with points of foreign law.

25. Even so, I have in the end been persuaded that a declaration from an English Court that the €225 million is held on trust for the holders of the euro-denominated Exchange Bonds and the second defendant (and, correspondingly, that the Republic has no beneficial interest in the money) is likely to be of interest to an American Court having to consider issues relating to the funds. It is noteworthy that, when he denied the turnover motions, Judge Griesa did so by reference to the Foreign Sovereign Immunities Act, not on the basis that the Republic could have no interest in the funds, an issue which he did “not reach”. Had there been a ruling from an English Court, the Judge might have felt able to proceed on the basis that the Republic could have no interest in the €225 million. Again, Judge Griesa might not have thought in terms of the money simply being returned to Argentina (as he did at the hearing on 27 June 2014) had it been evident from an English order that it was held on trustexclusively for the holders of the relevant bonds and the second defendant.

26. I might add that the very fact that the Bank has thought it worth opposing the making of the declaration (while not disputing its substance) tends to confirm me in the view that the declaration would serve a useful purpose. Why would the Bank bother if the declaration would do no more than record what everyone concerned already knows full well to be the case?

27. I do have a concern that, as matters stand, the Holdout Creditors have not had achance to challenge either of the declarations that I am asked to make. The fact that the Republic agrees that the €225 million is held on trust is, as it seems to me, of no real significance: it is in its own interests that that should be so. It is the Holdout Creditors who might want to dispute the existence or terms of a trust and contend that the Republic has a continuing interest in the money.

28. In the circumstances, the best way forward is, as it seems to me, to adjourn the application for the trust declaration to give Holdout Creditors the chance to put forward any arguments they might wish in opposition to it. That can, I think, appropriately be done by informing the attorneys on the record for Holdout Creditors in New York that it is open to their clients to intervene in these proceedings. My provisional view is that, provided the attorneys are given notice of that this week, (a) the relevant Holdout Creditors should be required to inform those acting for the parties to these proceedings by, say, Friday 21 November if they propose to advance submissions on whether the declaration should be made and (b) the application should be adjourned to the hearing already scheduled for 17, 18 or 19 December 2014. Should any or all of the Holdout Creditors argue that the €225 million is not subject to the trust alleged by the claimants, the Court hearing the matter will be reassured that both sides of the argument have been fully ventilated. If no Holdout Creditor choosesto make representations, the Court may still be able to take comfort from the fact that those with an interest in opposing the declaration have had an opportunity to put forward any available arguments.

29. The case for the other declaration that the claimants ask for is, I think, weaker. Mr Hapgood argued that it is an uncontroversial statement of English law, reflecting the



AWB case and earlier authorities such as National Bank of Greece and Athens v Metliss [1958] AC 509 and Adams v National Bank of Greece and Athens [1961] AC 255, and that it would be of great use to the New York Courts in understanding the potential effects of their orders. As it stands, however, the proposed declaration may be open to objection on grounds of both ambiguity and, perhaps more importantly,abstraction. As Mr Miles said, it is expressed as a general point of law, not tied to specific facts.

30. Even so, it seems to me that the right course is to treat the application for this declaration in the same way as that for the other declaration. In other words, the attorneys on the record for Holdout Creditors will be informed that they can intervene in the proceedings and the application will come back before the Court at the December hearing. It will then be a matter for the Judge conducting that hearing to decide whether it is appropriate to grant both, one or neither of the declarations sought. I should add that I am not intending to prevent Mr Miles from repeating the objections to the declarations that he voiced before me.

31. Turning to the application for an injunction, the case for this was, as Mr Hapgood recognised, stronger before the turnover motions were denied. Now that they have been, there can, I think, be no sufficient justification for the grant of injunctive relief at this stage. As Mr Miles pointed out, the order made following the 27 June hearing provided for the Bank to retain the €225 million pending further order of the Court; the only outstanding application at present is one made by holders of euro-denominated Exchange Bonds; and there is no reason to believe that the claimants would not learn in advance of any suggestion that the Court should order the Bank to do anything other than retain the money. It is significant in this context that the Bank has confirmed through its solicitors that it will notify the claimants as soon as reasonably practicable if it becomes aware of any application in the Courts of New York, or any decision of those Courts, that could result in the €225 million being paid out otherwise than to the second defendant or the beneficial holders of the euro-denominated bonds.

32. In short, I decline to grant any injunctive relief, but I shall adjourn the applications for the two declarations mentioned in paragraph 20 above to the hearing already scheduled for 17, 18 or 19 December 2014, with directions for the attorneys on the record for Holdout Creditors to be notified that their clients can intervene in the proceedings if they wish to oppose the making of the declarations. I shall hear counsel further as to the precise terms of the directions that I should give.


EXHIBIT C


Neutral Citation Number: [2015] EWHC 270 (Ch)

Case No: HC-2014-000704IN THE HIGH COURT OF JUSTICECHANCERY DIVISION

Royal Courts of JusticeRolls Building,

Fetter Lane, London, EC4A 1NL

Date: 13 February 2015

Before :MR JUSTICE DAVID RICHARDS

- - - - - - - - - - - - - - - - - - - - -Between :

(1) Knighthead Master Fund LP (2) RGY Investments LLC(3) Quantum Partners LP

(4) Hayman Capital Master Fund LPClaimants/Applicants

- and -(1) The Bank of New York Mellon

(2) The Bank of New York Depositary (Nominees) Limited

Defendants/Respondents

- - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - -

Mark Hapgood QC, David Quest QC and David Simpson(instructed by Reynolds Porter Chamberlain LLP) for the Claimants/Applicants

Robert Miles QC and Andrew de Mestre(instructed by Allen & Overy LLP) for the Defendants/Respondents

Hearing date: 18 December 2014- - - - - - - - - - - - - - - - - - - - -

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

.............................


Approved JudgmentKnighthead v Mellon

Mr Justice David Richards:

Introduction

1. The claimants in these proceedings are four investment funds which hold or are interested in euro-denominated debt securities issued by the Republic of Argentina(the Republic) in 2005 and 2010. These securities are subject to the terms of a trust indenture dated as of 2 June 2005 (as amended) (the trust indenture) and both the securities and the trust indenture, as it applies to the securities, are governed by English law.

2. The first defendant, The Bank of New York Mellon (the trustee), is the trustee with respect to the relevant debt securities. It is a company formed under the laws of the State of New York and its registered office is in New York. It has a registered place of business in England. The second defendant, The Bank of New York Depository (Nominees) Limited, is a company incorporated under the laws of England and Wales and is a wholly-owned subsidiary of the trustee. It is the registered holder of the global securities issued in respect of each series of the relevant debt securities.

3. On the present application, the claimants seek two interim declarations, as to the status of funds held by the trustee and as to the obligations under English law of the trustee, and also a direction to the trustee to bring the terms of such declarations, if made, to the attention of courts in the United States.

The exchange bonds

4. The securities held by the claimants are among the debt securities (the exchange bonds) issued in exchange for securities previously issued by the Republic under a Fiscal Agency Agreement made in 1994 and governed by New York law (the FAA bonds). The Republic defaulted on the FAA bonds in 2001 when it declared a“temporary moratorium” on the payment of principal and interest on debt in excess of US $80 billion. Since then, the Republic has not made any payments on the FAA bonds.

5. In 2005 the Republic made an offer to the holders of FAA bonds to exchange those bonds for new unsecured bonds at a very significant discount. Some 76% of the holders of the FAA bonds with an aggregate par value of some US $62.3 billion accepted the offer. A second exchange offer was made on materially the same terms in 2010 and was accepted by the holders of a further 15% of the original FAA bonds. Accordingly, some 91% of the FAA bonds have been exchanged. The terms of theFAA bonds did not include a collective action clause enabling a majority to bind the minority, so the holders of the remaining FAA bonds are not bound by the restructuring and they have become known as the Holdout Creditors.

6. The exchange bonds were issued in a number of different series and in three different currencies: Argentine pesos, euros and US dollars. So far as relevant for present purposes, they are governed by the trust indenture and by the terms endorsed on the relevant global securities.



7. The present proceedings are concerned only with the euro-denominated exchange bonds (euro debt securities). As noted above, the euro debt securities are governed by English law and section 12.7 of the trust indenture (as amended in 2010) provides,so far as relevant:

“In respect of Debt Securities of a Series governed by English law, this Indenture, such Debt Securities and any non-contractual obligations arising out of or in connectiontherewith shall be governed by and construed in accordance with the laws of England and Wales without regard to principles of conflicts of laws, except with respect to authorisation and execution by the Republic, which shall be governed by the laws of the Republic.”

The words in bold were added in 2010.

8. By section 12.8, so far as relevant, the Republic irrevocably submits to the jurisdiction of the courts of England and of the Republic with respect to any proceedings arising out of or in connection with the indenture as it relates to debt securities governed by English law.

9. By section 3.1 of the trust indenture, the Republic covenants to pay the principal of and interest on the exchange bonds to the trustee, at the places and times and in the manner provided in the debt securities and the trust indenture. Section 3.1 continues:

“All monies (save for its own account) paid to the Trustee under the Debt Securities and this Indenture shall be held by it in trust for itself and the Holders of Debt Securities in accordance with their respective interests to be applied by the Trustee to payments due under the Debt Securities and this Indenture at the time and in the manner provided for in the Debt Securities and this Indenture.”

10. Section 3.5 provides that any sums due are to be paid to the trustee no later than the business day prior to each interest payment date or principal payment date. It continues by providing that the trustee shall apply the amounts so received in paymentof the sums due on the relevant payment date and:

“Pending such application, such amounts shall be held in trust by the Trustee for the exclusive benefit of the Trustee and the Holders entitled thereto in accordance with their respective interests and the Republic shall have no interest whatsoever in such amounts.”

11. In the case of the euro debt securities, payment is made in euros to an account in the name of the trustee at Banco Central de la República Argentina (the Central Bank) in Buenos Aires.

12. The structure created by the trust indenture and the terms of the euro debt securities are therefore clear and straightforward. Payments made by the Republic to the trustee in respect of the euro debt securities are to be held by the trustee on the trusts



of the trust indenture and for the purpose of making payments due on the euro debt securities of principal and interest. Once received by the trustee, the funds are held on those trusts and the Republic has no interest in them. It may however be noted that payment is not deemed to be made on the euro debt securities until the relevant sums are received by the Holder: paragraph 2 of the terms and conditions of the euro debt securities.

13. In the context of the present proceedings, it is also relevant to note that save in one respect, these arrangements involve no connection at all with the United States. The euro debt securities, and the trust indenture so far as it relates to them, are governed by English law, and the Republic has submitted to the jurisdiction of the English courts. Payments are made in euros and are made to an account in the Republic for onward transmission to those ultimately entitled to them, through the systems operated by Euroclear Bank SA/NV (Euroclear) and Clearstream Banking SA(Clearstream) under Belgium and Luxembourg law respectively. The one connection with the United States is that the trustee is incorporated under New York law and has its registered office in New York. This is not a coincidence. The criteria for appointment as trustee are set out in section 5.8 of the trust indenture and include requirements that the trustee:

“has its Corporate Trust Office in the Borough of Manhattan, the City of New York and is doing business in good standing under the laws of the United States or of any State or territory thereof or the District of Columbia that is authorised under such laws to exercise corporate trust powers (including all powers and related duties set forth in this Indenture), and subject to supervision or examination by federal, or state authority.”

14. Any trustee that ceases to be eligible in accordance with the provisions of section 5.8 is required to resign immediately. No successor trustee may accept appointment unless at the time of such acceptance it is eligible under the terms of Article 5.

The US proceedings

15. The background to the present proceedings, and the reason for them, are the proceedings brought by some Holdout Creditors in the United States and orders made in those proceedings.

16. Proceedings were brought by different groups of Holdout Creditors in the US District Court for the Southern District of New York (the District Court). As a result of the failure of the Republic to pay interest due under the FAA bonds, events of default were declared and the full amount of the principal of those bonds became due and payable. Judgments have been entered in the District Court in favour of Holdout Creditors for the full amount of their bonds.

17. For example, NML Capital Limited commenced proceedings in November 2003 in the District Court to recover the principal and interest due under the FAA bonds held by it. The Republic appeared and defended the proceedings. On 18 December 2006, NML obtained judgment in a sum of a little over US $284 million on a motion for summary judgment. NML has brought proceedings in England for judgment on the



District Court’s judgment and the Supreme Court has held that the Republic is not entitled to rely on state immunity: NML Capital Ltd v Republic of Argentina [2011] UKSC 31; [2011] 2 AC 495.

18. The Holdout Creditors have relied on a term of the FAA bonds to argue that no payment of interest may be made on the exchange bonds without making a rateable payment of the amount due on the FAA bonds. As the full amount of principal of the FAA bonds is due and payable, this means that if, for example, the Republic wishes to pay the full amount of interest due on the exchange bonds on a particular interest payment date, it must simultaneously pay the full amount due on the FAA bonds. The provision in question, known as a pari passu clause, reads so far as relevant as follows:

“The Securities will constitute (except as provided in Section 11 below) direct, unconditional, unsecured and unsubordinated obligations of the Republic and shall at all times rank pari passu and without any preference among themselves. The payment obligations of the Republic under the Securities shall at all times rank at least equally with all its other present and future unsecured and unsubordinated External Indebtedness (as defined in this Agreement).”

19. In 2012, the District Court held in favour of the Holdout Creditors’ construction of the pari passu clause, a decision which was subsequently upheld on appeal by the Court of Appeals for the Second Circuit (the Court of Appeals). The US Supreme Court has declined to hear an appeal against this. This construction is controversial but, as Newey J said in a judgment to which I will later refer, this is of little or no significance because the clause has been definitively interpreted in accordance with its governing law by a court of competent jurisdiction.

20. On 23 February 2012, on an application by NML Capital Limited and other Holdout Creditors, and having heard the Republic in opposition, the District Court granted an injunction (the injunction) that enjoined the Republic from making payment of any percentage of the amount due under the exchange bonds without concurrently or in advance making payment of a similar percentage of amounts due under the FAA bonds. The Republic was also required to provide copies of the order to all persons and entities who act in active concert or participation with the Republic to assist the Republic in fulfilling its payment obligations under the exchange bonds, who “shall be bound by the terms of this order” and who were prohibited from aiding and abetting any violation of the order.

21. On 26 October 2012, the Court of Appeals affirmed the order but remanded the case to the District Court for more precise definition of the third parties to which the injunction would apply. That clarification was provided by the District Court on 21 November 2012, specifically identifying certain third parties including the trustee who were subject to the terms of the order. Other third parties include the registered owners of the exchange bonds and nominees of the depositories for the exchange bonds (including the second defendant in these proceedings), Clearstream and Euroclear, trustee paying agents and transfer agents for the exchange bonds. The order provides that any non-party that has received proper notice of the order and that requires clarification as to its duties, if any, under the order may apply to the District



Court on notice to the Republic and NML. On 23 August 2013, the Court of Appeals affirmed the order and refused leave to appeal to the US Supreme Court. On 16 June 2014, the US Supreme Court denied the Republic’s petition for a writ of certiorari, thus lifting the previously ordered stay of the injunction.

22. On 26 June 2014 the Republic transferred the funds necessary to make the payment of interest due on the exchange bonds on 30 June 2014 to the trustee’s account at the Central Bank. This included €225 million for interest on the euro debt securities (the euro funds). The following day the Republic published a notice addressed to holders of its bonds stating that it had made this payment. On the same day NML and other Holdout Creditors filed a motion before the District Court alleging that the payment was a breach of the injunction. A hearing took place that day at which other parties,including the trustee and the claimants in the present proceedings and other holders of euro debt securities, were represented and made submissions. The judge stated that the funds should “simply be returned” to the Republic and invited counsel for NML to draft an order.

23. On 29 June 2014, the claimants and other holders of euro debt securities (euro bondholders) filed an emergency motion seeking clarification of the injunction. The clarification sought was that the injunction does not apply to the third parties that processed payments on the euro debt securities.

24. On 6 August 2014 the District Court entered an order in terms which had been submitted by Holdout Creditors on 1 August 2014. By the order, the court declared that the payment by the Republic of funds, including the funds in euros, made to the trustee on 26 June 2014 “was illegal and a violation of” the injunction. The trustee was ordered to retain the funds in its account at the Central Bank pending further order of the court and was restrained from making or allowing any transfer of the funds unless ordered by the court. The Republic was restrained from taking any steps to interfere with the trustee’s retention of the funds in accordance with the order. The order further provided that the trustee’s retention of the funds pursuant to the terms of the order should not be deemed a violation of the injunction and that the trustee “shall incur no liability under the Indenture governing the Exchange Bonds or otherwise to any person or entity for complying with this Order” and the injunction.

25. On 15 August 2014 the euro bondholders issued an appeal against this order but on 22 October 2014 the Court of Appeals declined jurisdiction to hear the appeal.

26. In August 2014, two groups of Holdout Creditors filed motions in the District Court seeking orders that the trustee pay over to them the funds transferred to the trustee by the Republic on 26 June 2014, including the euro funds, or so much of them as was sufficient to satisfy their judgments together with post-judgment interest (the turnover motions). In September 2014, the trustee filed briefs in opposition to the turnover motions, as did NML and other Holdout Creditors.

27. By an order issued on 27 October 2014, the District Court denied the Turnover Motions on the grounds that the euro funds were located outside the United States. The court’s reasoned judgment stated that even if the plaintiffs could show that the Republic maintained an interest in the euro funds, a point “which the court does not reach”, a turnover order would constitute an attachment or execution of the property



of a foreign sovereign located outside the United States, which is not authorised under the terms of the Foreign Sovereign Immunities Act.

28. In early November 2014, appeals were filed with the Court of Appeals against the order denying the turnover motions. The trustee filed with the Court of Appeals a motion for leave to intervene as a non-party appellee, although the attorneys for some of the Holdout Creditors stated that such leave was not necessary. In any event on 28 January 2015, the Court of Appeals granted this motion. A similar motion filed by the euro bondholders was denied by the Court of Appeals which instead granted them leave to file amicus curiae briefs. As I understand it, reasons were not given for the denial of the euro bondholders’ motion.

29. I have been supplied with the appellants’ briefs in the appeals against the refusal of the turnover motions in two sets of proceedings, both briefs being dated 22 December 2014. The foundation of the turnover motions is that the payment of sums to the trustee by the Republic on 26 June 2014 was in breach of the injunction issued by the District Court and was therefore “illegal”. This, it is said, gives the Holdout Creditors with judgments a better claim to the funds than the trustee or those for whom it otherwise holds the funds. In the brief submitted on behalf of the appellant in Dussault v Republic of Argentina, the plaintiff’s submission in support of the turnover motion is summarised as follows:

“the plaintiff maintained that because the transfer of funds to BNY was in direct contravention of the February 23, 2014order, the transfer gave BNY possession and custody, but not title to or control of the funds. The Republic thus undoubtedly had an interest in the funds. … The Republic is thus effectively entitled to possession and control of the funds which, as the District Court acknowledged, will have to be returned to the Republic. In addition, the plaintiff maintained that as a judgment creditor its rights to the funds were greater than BNY’s rights to the funds as a mere trustee or custodian.”

30. The brief records the basis of the trustee’s opposition, being that the trust indenture provided that the funds were held for the benefit of the bondholders and the trustee.The Republic had opposed the motion on the grounds that it had no interest in the funds held in the trustee’s accounts, which belonged to the bondholders. The euro bondholders who had submitted opposition as non-parties had claimed title to that portion of the funds held for payment of interest on the euro debt securities, the ownership of which was governed by English law.

31. In reply, the plaintiff had submitted that since the transfer of funds to the trustee was illegal, the Republic retained an interest in the funds. She disputed that the euro funds belonged to or were held ultimately for the benefit of the euro bondholders, noting that by its terms the Indenture Trust does not apply to illegal transfers of money. In any event, relying on relevant provisions of US law, she submitted that where funds have been transferred from or by the judgment debtor, the judgment creditor’s rights to the property are superior to those of the transferee.

32. By way of summary of her position on the appeal the plaintiff’s brief states:



“Finally, although the district court did not reach this issue, it is clear that the funds currently on deposit in BNY’s account are subject to execution within the scope of the provisions of New York Civil Practice Law and Rules (“CPLR”) §5225(b) because the Republic retains actual control of the funds. Indeed, only the Republic can give the directive for the funds to be paid out in accordance with the district court’s and this Court’s directives, failing which, as the district court has indicated, the funds will have to be returned to the Republic. In any event, as a judgment creditor, Plaintiff’s right to the funds is greater than BNY’s right to the funds as a trustee on behalf of bondholders. Accordingly, BNY should be directed “to pay the money, or so much of it as is sufficient to satisfy the judgment to the judgment creditor.” CPLR §5225(b). (Point III).”

33. In her brief, the plaintiff repeats and expands on the submissions made to the District Court. She submits that “[t]here is no question that the Republic has an interest in the funds currently being held by BNY.” The brief goes on to state that “[i]t is also clear that the Republic is entitled to possession of the funds currently being held by BNY.During the June 27, 2014 and July 22, 2014 hearings before the district court it was made clear that the transfer made by the Republic was illegal and the transferred amount should be returned to the Republic.” It is further submitted that “it cannot be gainsaid that as a judgment creditor the Plaintiff’s right to the funds are superior to those of BNY, which as a trustee has no personal right to the funds, but rather has possession of the fund for the benefit of others.” Specifically addressing submissions made by the euro bondholders, it is submitted:

“First, the district court’s order precluding a distribution of the funds to the bondholders raises serious questions as to whether or not they have any right or claim to the funds improperly transferred to BNY. The plaintiff’s rights as a judgment creditor are certainly superior to the bondholders’ rights to receive an interest payment under the bonds. This is particularly true since any payment to the bondholders would violate the injunction issued by the district court.”

34. I have cited at some length from this appeal brief because it gives some idea of the nature of the claims being made by Holdout Creditors with judgments as regards the euro funds currently held by the trustee and the basis on which it is said that those claims are superior to the claims of the beneficial owners of the funds under the terms of the trust indenture.

Declarations

35. The terms of the declarations sought by the claimants have undergone a number of changes but I take them now to be in the following form:

1) A declaration that the sum of €225 million transferred by the Republic of Argentina to the account of the trustee with Banco Central de la RepúblicaArgentina and still held to the credit of that account is held on the trusts



declared by a Trust Indenture between the Republic as Issuer and The Bank of New York as trustee dated as of 2 June 2005 and subsequently amended, such trust being governed by English law, (as would be any other funds paid to it in attempted satisfaction of the Republic’s payment obligations under the Euro Debt Securities).

2) Subject to the terms of the Trust Indenture, and any other defences available under English law, the obligations and liabilities of the Bank of New York Mellon under the Trust Indenture and the Euro Debt Securities (including the obligation under clause 3.5(a) of the Trust Indenture and clause 2 of the Euro Debt Securities to transfer the Euro Funds to the Second Defendant) areunaffected by the New York Injunction, whether or not the First Defendant is subject to that injunction as a matter of US law.

The first declaration

36. As regards the first interim declaration which is sought on this application, the trustee does not dispute that it holds the funds received by it on 25 June 2014 on the trusts of the trust indenture and it does not oppose the making of such declaration, provided that the court is satisfied in accordance with well-established principles that it is appropriate to make a declaration in these circumstances.

37. Whether in the circumstances it is appropriate to make this declaration was an issue addressed by Newey J when this application was before him in November 2014. Having considered the relevant authorities, he concluded that it would be appropriate to do so: see [2014] EWHC 3662 (Ch) at [21]-[26]. It is not necessary for me to consider this question afresh but in any event I agree with the conclusion of Newey J and, in circumstances where there is so much dispute surrounding the attempt by the Republic to pay sums due on the exchange bonds, I consider that a declaration, authoritatively stating the position under the governing law of the trust indenture and the euro debt securities, is helpful.

38. It was a matter of concern to Newey J that the Holdout Creditors had not had an opportunity to challenge the proposed declaration. As he observed, it is they who might want to dispute the existence or terms of a trust and contend that the Republic had a continuing interest in the funds held by the trustee. He therefore adjourned the application to give the Holdout Creditors the chance to put forward any arguments that they might wish to make in opposition. He directed that notice should be given to the attorneys acting in the US proceedings for the Holdout Creditors that it was open to them to intervene in these proceedings. As he observed, if any of the Holdout Creditors were to argue that the funds were not subject to the trust asserted by the claimants, the court hearing the matter would be reassured that both sides of the argument had been fully ventilated.

39. Notice was duly given to the attorneys acting for the Holdout Creditors in proceedings before the District Court and nine firms requested copies of the documents filed in these proceedings. No Holdout Creditors have applied to intervene and to make representations to the court.

40. Nonetheless, attorneys acting for a number of Holdout Creditors sought to make their views known to the court. A letter dated 5 December 2014 from Dechert LLP and



three other firms to the claimants’ solicitors was copied to the court. Duane Morris, attorneys acting for another group of Holdout Creditors, wrote directly to the court on 19 November 2014.

41. There are difficulties in this way of proceeding. First, it is clear that the opportunity provided by the order of Newey J was to enable Holdout Creditors wishing to make submissions to intervene in the English proceedings and make submissions to the court. In this way, the court would have the benefit of submissions from different parties responding to each other and would have the opportunity of probing those submissions with counsel advancing them.

42. Secondly, the claimants and the trustee are agreed that, at any rate, the letter from Duane Morris contains some important errors. The claim made by them that the issue of the exchange bonds has been ruled illegal by the US courts is wrong. The US courts have never ruled or even suggested that the exchange bonds were illegal. The injunction granted by the District Court is concerned with compelling payments to Holdout Creditors in conjunction with payments under the exchange bonds, not in any sense with the legality or otherwise of the exchange bonds themselves. Further, it is wrong to suggest that the trust indenture has been “abrogated or suspended” by the injunction granted by the District Court or that the injunction created a constructive trust which superseded the trust indenture.

43. The fundamental point made in both letters is that the English court is not the proper forum to determine the matters raised by the claimants’ application. It is pointed out that the claimants and other persons entitled to the benefit of euro debt securities have appeared in the proceedings in the District Court and the Court of Appeals and have made submissions to the effect that the injunction granted by the District Court does not or should not extend to payments on the euro debt securities, albeit not as parties to the proceedings in the United States. They further point out, as is obviously the case, that the District Court is well able to determine issues of foreign law, including the English law of trusts, and that the claimants could have introduced evidence of English law in the District Court.

44. This court is, of course, very concerned not to intrude improperly into matters which are before the US courts. But the making of a declaration in the terms sought by the claimants would not, in my judgment, do so. The declaration would establish the status of the funds held by the trustee as a matter of English law. As the letter dated 5 December 2014 states, issues of English law have not been raised before the District Court. A declaration as to the effect of a trust indenture governed by English law is in my view peculiarly within the proper jurisdiction of this court.

45. The declaration sought by the claimants does not in any way interfere with or impede the US courts in their consideration of the issues before them. They are concerned with the effect of the breach by the Republic of the injunction granted by the District Court. Because the trustee is subject to the personal jurisdiction of the District Court, it can properly be the subject of any orders which that court considers appropriate. It would be quite wrong for this court to make, and I do not make, any comment on such orders as may be appropriate and their effect as a matter of US law. The only comment I would make is that, as a matter of English law, I can see no basis on which any such order could of itself give either the Republic or the Holdout



Creditors any proprietary interest in the funds held by the trustee with the Central Bank.

46. More problematic is the state of “paralysis”, as leading counsel for both the claimants and the trustee described it, in the operation of the trust caused by the injunction. A continuing state of paralysis may have a number of consequences in English law. Such consequences may not arise, at this time at any rate, and they have not been the subject of any submissions to the court. They are at most issues which may arise in the future. For the present, I consider that the first proposed declaration accurately sets out the position under English law.

47. Accordingly, I consider that it is appropriate for the court to make the first declaration sought by the claimants.

The second declaration

48. The second declaration raises rather different issues. The main purpose of the declaration is to establish that the injunction provides no defence to a claim to enforce the terms of the trust indenture, including the obligation under clause 3.5(a) to transfer the euro funds to the second defendant. At the same time the opening words of the proposed declaration, referring to the terms of the trust indenture and any defences under general trust law, keep open the position that, because the trustee is subject to the personal jurisdiction of the US courts, it may as a matter of English law be able to rely on the injunction as a proper ground for non-compliance with what would otherwise be its obligations under the trust indenture.

49. It is clearly right to keep those matters open. It is highly arguable that the terms of section 5.2(xvi) and (xx) would relieve the trustee of its obligations under the trust indenture to the extent that they were prohibited from performing them by the injunction. It is also arguable that where a trustee is subject to a legal inhibition, preventing it from performing its obligations as trustee, that too can provide a defence to a claim for breach of trust under general principles of law: see Concord Trust v The Law Debenture Trust Corporation Plc [2004] EWHC 1216 (Ch) at [33]. In my judgment, a declaration which is qualified in these terms, as this declaration must be, serves no useful purpose. It would be, in short, a declaration that the trustee would be in breach of trust unless it had a defence. No-one is assisted by a declaration in those terms. Accordingly, I shall decline to make the second proposed declaration.

Direction to the trustee

50. Finally, the claimants seek an order that the trustee bring the declaration that I have made to the attention of any relevant court before which it appears in the United States. The claimants are critical in some respects of the conduct of the trustee in the US proceedings. I do not propose to enter into a discussion of those criticisms. I am in no doubt that the trustee is conscious of its obligations as trustee but equally it is conscious, as it must be, of the delicate position in which it finds itself as a trustee subject to the personal jurisdiction of the US courts. In presenting its case on behalf of itself and those interested in the exchange bonds, the trustee and its attorneys have to take fine decisions as to the most effective way of dealing with it. No doubt there can be different views as to the best way in which the case can be presented, but I am



not satisfied that the trustee’s conduct of the litigation has been outside the reasonable range of possible approaches.

51. I do not think that it would assist if I were to give the direction sought. It is a matter for the trustee to decide, with its attorneys, the proper time and way, if at all, to bring this judgment and order to the attention of the US courts. In any event, it is of course open to the claimants, who have permission to file non-party briefs in the Court of Appeals, to bring the judgment and order to the attention of that court.

Conclusion

52. Accordingly, for the reasons given in this judgment, I shall make the first interim declaration sought but I shall not make either the second interim declaration or a direction that the trustee bring this judgment and order to the attention of the US courts.


EXHIBIT D


EXHIBIT E


Free translation

Commercial Court of Brussels Public hearing – 10th Chamber – Room B

R.G.: 5650/13

Free translation

Knighthead Capital Management LLC e.a. / S.A. The Bank of New York Mellon / S.A. Euroclear / S.A. Euroclear Bank

(…)

I. THE MAIN FACTS

Confronted with a financial crisis during the 90s, the Republic of Argentina issued bonds in 1994 (hereinafter: the “old bonds”).

At the beginning of 2000s, the Republic of Argentina was in default of payment and did not pay the international investors which bought these old bonds.

The “bankruptcy” of the Republic of Argentina conducted its government to restructure its debt with an exchange offer to the bondholders in 2005. A similar operation was conducted in 2010. The Republic of Argentina offered to the holdouts to exchange their old bonds against new bonds (hereinafter: the “new bonds”), with a much less value (the exchange brought about a reduction of the value of the securities of approximately 70%). A majority of bondholders (93%) agreed to exchange their old bonds against new bonds. In exchange, the Republic of Argentina committed to honour the payment of the new bonds, which it did not do since it defaulted. The Republic of Argentina has, therefore, paid the holders of the new bonds with bi-annual interests, although the holdouts who refused the exchange continued not to be paid.

The new bonds issued were governed by a contract titled Trust Indenture concluded on 2 June 2005 between the Republic of Argentina, as the issuer, and The Bank of New York Mellon (hereinafter: “BNYM New York”), a US bank headquartered in New York, as Trustee.

The Plaintiffs content that they hold new bonds issued in Euros for an amount of EUR 1,06 billion. Contrary to the new bonds issued in US dollars that are governed by the law of the State of New York, the new bonds issued in Euros (hereinafter: the “Eurobonds”) are governed by laws of England.

These new Eurobonds meet the following three references:

ISIN: XS02055375 – COMMON CODE: 02055375 ISIN: XS02055458 – COMMON CODE: 02055458 ISIN: XS05011951 – COMMON CODE: 05011951

As Trustee, the main tasks of BNYM New York are to receive the payments made by the Republic of Argentina under the new bonds and organize their distribution to the bondholders.


Free translation

The chain of the transfer of the sums due by virtue of the new bonds as provided in the Trust Indenture could be summarized as follows:

- the Republic of Argentina transfers the funds to a deposit account in the name of BNYM New York opened at Banco Central de la Republica de Argentina in Buenos Aires;

- The funds transferred by the Republic of Argentina are then transferred by BNYM New York to an account opened in the name of SA The Bank of New York Mellon (hereinafter: “BNYM Brussels”) in the books of Deutsche Bank in Frankfurt;

- Under the instructions of BNYM New York, BNYM Brussels then transfers the funds to S.A. Euroclear Bank (hereinafter: “Euroclear Bank”), in order to be credited on the accounts of the banks participating in the Euroclear System (hereinafter: “the Participants”) which held new bonds in the books of Euroclear Bank;

- When they received the funds on the cash-accounts, the Participants of Euroclear Bank which hold new bonds on behalf of their clients distribute the funds received between the holders of the new bonds.

Euroclear Bank is a credit institution of Belgian law which managed a clearing and settlement system of financial instruments (the “Euroclear System”), one of the largest platform in the world.

The Participants deposit for themselves or on behalf of their own clients, financial instruments (bonds, investments funds, etc) on settlement accounts opened in the books of Euroclear Bank as depository. The clearing and settlement system managed by Euroclear Bank authorises the purchases, sales or other transfers of financial instruments to occur without physical movements of the underlying financial instrument: the operation is performed solely by crediting and debiting the settlement account owned by the relevant investor’s financial intermediary with Euroclear Bank.

Each settlement account has a related cash-account used for the payments on the transactions of securities performed by the Participant or in favour of the Participant (e.g. payment of the sale price or payment of interest or dividend).

Some investment funds that purchased old bonds at a very cheap price (and, therefore, suffered from the moratorium on the payments of the old bonds), among which NML Capital, lodged judicial proceedings in order to obtain the reimbursement of the face value of their bonds by the Republic of Argentina.

These proceedings were grounded on the pari passu provision contained in the contract governing the old bonds. This agreement was governed by the laws of the State of New York and submitted to the jurisdiction of the Courts of New York City.

With an injunction of 23 February 2012, rendered at the request of NML Capital, the United States District Court Southern District of New York (hereinafter: “the District Court”) prohibited Argentina to pay the holders of the new bonds without making a simultaneous and ratable payment to NML Capital and the other holders of old bonds according to the face value of their bonds.


Free translation

Through an injunction of 21 November 2012 aiming at clarifying the scope of the Injunction dated 23 February 2012, the District Court indicated that all the participants in the payment chain of the new bonds will be bound by the terms of this injunction in compliance with Rule 65(d)(2) and that they will be prohibited from aiding or contributing to the violation of this order.

At point 2.f of this injunction, it is indicated that: “Participants refer to those persons and entities who act in active concert or participation with the Republic, to assist the Republic in fulfilling its payment obligations under the Exchange Bonds, including (1) the indenture trustee and/or registrars under the Exchange Bonds (including but not limited to The Bank of New York Mellon f/k/a/ The Bank of New York); (2) the registered owners of the Exchange Bonds and nominees of the depositaries for the Exchange Bonds (including but not limited to Cede & Co. and The Bank of New York Depositary (Nominees) Limited) and any institutions which act as nominees; (3) the clearing corporations and systems, depositaries, operators of clearing systems, and settlement agents for the Exchange Bonds (including but not limited to the Depository Trust Company, Clearstream Banking S.A., Euroclear Bank S.A./N.V. and the Euroclear System); (4) trustee paying agents and transfer agents for the Exchange Bonds (including but not limited to The Bank of New York (Luxembourg) S.A. and The Bank of New York Mellon (including but not limited to the Bank of New York Mellon (London)); and (5) attorneys and other agents engaged by any of the foregoing or the Republic in connection with their obligations under the Exchange Bonds.”

By an interim injunction of 28 November 2012, the US Court of Appeals for the Second Circuit (hereinafter: the “Court of Appeals”) decided that the effects of the injunction of 23 February 2012 as amended on 21 November 2012 be stayed until it rendered its decision. Consequently, the interveners in the payment chain could transfer the payments made by the Republic of Argentina at the end of June and December 2013 to the account of Euroclear Bank which has then credited the accounts of its Participants.

Questioned by the Plaintiffs in May 2013, Euroclear Bank and BNYM Brussels did not want to confirm that they would continue, as in the past, to transfer the amounts received from the Republic of Argentina in the payments chain for the benefit of the Eurobond holders.

Due to the risk of impediments of the payments for the next instalments, the plaintiffs introduced an expedite proceeding before the President of the Commercial Court of Brussels in order to enjoin BNYM Brussels, Euroclear and Euroclear Bank, as far as each of them is concerned, to transfer immediately to the plaintiffs as Eurobond holders, the funds which will be paid by the Republic of Argentina on 30 June 2013, in compliance with their contractual and legal obligations, and to rule that the order will be effective until the decision on the merits is adopted and, in any event, until the next payment date, i.e. 30 September 2013.

At the same time, the Plaintiffs introduced an action against the same three defendants. This is this proceeding.

Through an order of 28 June 2013, the President of the Commercial Court stated that the action is inadmissible because it was manifestly premature.

Through a judgment dated 23 August 2013, the Court of Appeals finally dismissed the action introduced against the orders of 23 February 2012 and 21 November 2012.


Free translation

The Republic of Argentina filed an appeal against the decision of 23 August 2013 before the US Supreme Court. The Court of Appeals having stayed the effects of the injunction of the District Court, the transfers of payments to the holders of the new bonds could be made without any impediment.

On 18 June 2014, the US Supreme Court rejected the appeal of Argentina. The Court of Appeals, therefore, lifted the stay previously granted. On 18 June 2014, the injunction of the District Court became thus fully enforceable.

On 26 June 2014, Argentina transferred USD 231 million and EUR 226 million to the account of BNYM New York at the Banco Central de la Republica de Argentina, corresponding to the interests accrued on 30 June 2014 for certain new bonds, including Eurobonds. Argentina did not notify that it made a ratable payment to the benefit of the holdouts, the District Court, in an order of 6 August 2014, noted that the transfer of funds was made in breach of the orders of 23 February 2012 (the prohibition order) and 21 November 2012 (the clarification order) and requested BNYM New York to retain the funds in its accounts at the Banco Central until further notice. BNYM New York complied with this injunction.

On 30 July 2014, the Republic of Argentina was declared in technical default, since the payments that it made were not transferred to the holders of the new bonds.

Given that BNYM New York did not execute its obligations under the Trust Indenture, the Republic of Argentina has adopted a new law authorising to dismiss it of its functions as trustee. In compliance with this law, the Republic of Argentina has requested BNYM New York to resign from its functions, but it refused to do so. At the same time, the Republic of Argentina appointed Nacion Fideicomisos S.A. as new trustee.

In an injunction dated 29 September 2014, the District Court, seized by NML Capital, declared Argentina in “Civil Contempt of Court”, but reserved its decisions on the issue of sanctions. In a second order, it indicated that, to purge the Contempt, Argentina should, among other things, re-affirm BNYM New York as indenture trustee.

On 29 June 2014, the Plaintiffs, who were not parties to the New York proceeding, introduced a Motion for Clarification to the District Court, whereby they requested the New York Court to clarify that the order of 21 November 2012 did not apply to third foreign entities that proceed on the payment on Eurobonds. Euroclear Bank submitted to the New York Court a declaration in support of this motion.

By an order of 25 November 2014, the District Court refused to grant the requested Motion for Clarification, considering that “to do so would start making important exceptions to the basic ruling and Injunction, which was issued by the Court and affirmed by the Court of Appeals for the Second Circuit”.

On 21 August 2014, some of the Eurobond holders, i.e. Knighthead Master Fund LP, RGY Investments LLC, Quantum Partners LP and Hayman Capital Master Fund LP, introduced an action to the High Court of Justice, Chancery Division (hereinafter: “the High Court”) in London.


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The defendants are BNYM New York, as trustee, and The Bank of New York Depositary (Nominees) Limited (hereinafter: “BNYM Depositary”) a wholly-owned subsidiary of the trustee, as registered owner of the global bonds issued for every issuance of the securities concerned.

In their writ of summons, the plaintiffs requested the High Court:

(1) an injunction requiring among other things (i) BNYM New York to transfer the funds paid by the Republic of Argentina to BNYM Depositary and (ii) BNYM Depositary to transfer the funds to the Eurobondholders and (iii) to prohibit BNYM New York and BNYM Depositary to transfer the funds in another way than in paying to BNYM Depositary;

(2) a declaration that the funds are held by BNYM New York in trust for the Eurobond holders;

(3) a declaration that BNYM New York has acted in breach of its obligations under the trust in refusing to transfer the funds to BNYM Depositary.

In waiting the full trial that still to be stand, the plaintiffs requested the High Court two requests in interim relief:

- a declaration that the sum of EUR 225 million transferred by the Republic of Argentina to the account of the trustee with the Banco Central de la Republica de Argentina and still held to the credit of that account is held on the trusts declared by the Trust Indenture between the Republic of Argentina as issuer and BNYM New York as trustee dated 2 June 2005 and subsequently amended, such trust being governed by English law (as would be any other funds transferred to it in attempted satisfaction of Argentina’s payment obligations under the Euro Debt Securities);

- subject to the terms of the Trust Indenture, and any other defences available under English law, the obligations and liabilities of BNYM New York under the Trust Indenture and the Euro Debt Securities (including the obligation under clause 3.5(a) of the Trust Indenture and clause 2 of the Euro Debt Securities to transfer the Euro Funds to BNYM Depositary) are unaffected by the injunction of the District Court of New-York, whether or not BNYM New York is subject to that injunction as a matter of US law.

In its decision of 13 February 2015, the High Court judged appropriate to grant the first declaration, since it accurately sets out the situation under English law and does not interfere with or impede the US Courts in their consideration of the issues before them. Indeed the High Court is willing not to interfere improperly in the cases pending before the US Courts.

However, the High Court refused to grant the second declaration whereby it would be stated that the Trustee is in breach with its obligations under the Trust unless it has defences. According to the High Court, such declaration would not help anyone.


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II. THE REQUEST

Before this Court, the request currently aims at requiring the defendants, as far as each of them is concerned, not to impede in any way the transfer of payments in the contractual time-limit as from the day they will received those payments that are intended to the plaintiffs and to continue to actively and loyally participate in those transfers.

It tends also to the condemnation of the defendants which would not execute the request to pay a penalty of EUR 500,000 for each day of delay in transferring the funds in the payment chain, as from the date of the formal service of the judgment.

It tends also to the condemnation of the defendants to the provisional payment of EUR 1 as reparation for damage caused by any delay in the transfer of payment on the proper date, the surplus of the damage being reserved.

The defendants request the inadmissibility and, subsidiary, the dismissal of the claim as unfounded.

As a counter-claim, Euroclear SA requests the condemnation in solidum of the Plaintiffs to the payment of EUR 10,000 for damages for frivolous and vexatious proceedings.

III. DISCUSSION

A. THE CAUTIO JUDICATUM SOLVI

In a judgment of 7 October 2014, this Court noted that the fourth, night and tenth plaintiffs agreed to deposit the amount requested by the defendants as cautio judicatum solvi, i.e. EUR 76,000.

At the beginning of the hearings, it has been confirmed that this amount has effectively been wired at the Caisse des dépôts et consignations.

B. THE WITHDRAWAL FROM THE PROCEEDING

The sixth and seventh plaintiffs, i.e. Silver Point Capital Fund L.P. and Silver Point Capital Offshore Fund Ltd, request this Court to declare their withdrawal from the proceeding without being condemned to the payment of the indemnity of proceedings, as agreed by the defendants.

In the absence of any opposition from the defendants, the requested withdrawal from the proceeding is accepted.

C. THE ADMISSIBILITY

1) The admissibility of the claim for lack of personal and direct interest

The defendants argue that the exhibits submitted by the plaintiffs do not prove that each of them is effectively the owner of the Eurobonds. To the contrary, these exhibits show that, for the first, second and third plaintiffs, i.e. Knighthead Capital Management, Redwood Capital


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Management and Perry Capital, the Eurobonds are held by other entities from their respective groups. In the absence of proof of holding as owner of the concerned bonds, the plaintiffs do not have a personal and direct interest to request the claim.

The plaintiffs submit statements of holding coming from banks participating in the Euroclear System and statements of deposit coming from Euroclear Bank. These statements sufficiently prove that the other plaintiffs are owner of a substantial number of Eurobonds in the Euroclear System, bought in their name and of their behalf by the financial institutions that they have chosen as Participants in the System.

These statements also show (more specifically plaintiffs’ exhibits 8.1, 8.2 and 8.3) as Eurobondholders, Knighthead Capital Management S.à.r.l., that states to hold them on behalf of Knighthead Master Fund LP, RGY Investments LLC, and Redwood Master Fund Ltd.

The statements from the managers of these entities sufficiently prove that Knighthead Capital Management LLC acts in this proceeding on behalf of Knighthead Master Fund LP, Redwood Capital Management LLC acts on behalf of Redwood Master Fund Ltd and Perry Capital LLC acts on behalf of RGY Investments LLC.

This is in the framework of a power of representation (“convention de prête-nom”) that the first, second and third plaintiffs introduced this claim in their name but on behalf of their principals (“mandants”).

The conclusion of a power of representation (“convention de prête-nom”) for the performance of an action in Court is illegal provided that it affects the rights of the other party or constitutes a fraud in law (Belgian Supreme Court, 25 November 1993, Pas., 1993, I, p. 990).

In this case, it does not appear that the power of representation affects the rights of the defendants. It has to be noted that the operators concerned are well-known by the defendants. The plaintiffs in this case have introduced, as interested non-parties, before the District Court in New-York, a Motion for Clarification regarding the order of 21 November 2012, and Knighthead Master Fund LP and RGY Investments LLC are two out of the four plaintiffs in the proceedings pending before the High Court in London.

Furthermore, the exhibits 8.2.1., 8.2.2., 8.4.1., 8.4.2., 8.7.2. and 8.7.3. submitted by the plaintiffs at the hearing of 20 March 2015 (to the defendants in a redacted version and to the Court in an unredacted version) indicate that, at the date of the introduction of this proceeding, every plaintiffs and/or their authorized representatives owned Eurobonds from at least one series issued by Argentina in the course of the restructuration of its debt in 2005 and 2010 and that each of them owned Eurobonds from the same series on 13 March 2015.

In light of the above, the plaintiffs have a personal and direct interest.

2) The inadmissibility of the claim for lack of current and actual interest

“The interest must be current and actual” (Judicial Code, Art. 18, first indent). “The action should be admitted, even in a declaratory manner, in order to prevent the violation of a right seriously threatened” (Judicial Code, Art. 18, second indent).


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According to the defendants, if this is not required, for having a current and actual interest, that the prejudice actually exists at the time of the introduction of the claim, the existence of the prejudice should appear, at the time of the introduction of the claim, as an unavoidable consequence. The realisation of the prejudice could intervene later, but should intervene with certainty.

They note that it belongs to BNYM New York, which is not involved in this proceeding, to determine whether the funds should be transferred to BNYM Brussels. They argue, however, that BNYM New York would never execute any transfer that would breach the prohibition to participating in the violation of the injunction made on Argentina, i.e. not making any payment to the holders of the new bonds without making a ratable payment to NML Capital and the other holdouts. Such a transfer by BNYM New York is furthermore excluded given the order of 6 August 2014 of the District Court requiring to retain the funds paid by Argentina on 26 June 2014.

They also note that, on 1st October 2014, Argentina attempted to make a payment of USD 161 million to the local intermediary that it appointed to replace BNYM New York, and that attempt conducted the District Court to indicate, in a new order, the stringent requirements for Argentina to purge the Contempt, - among which re-affirming BNYM New York as trustee and integrally complying with the prohibition order of 23 February 2012-, and that this payment was finally not transferred to Euroclear Bank.

They deduct that, no more at the date of the introduction of the claim than today, the plaintiffs do not have a current and actual interest to obtain a condemnation to transfer the payments that the defendants never received and will probably never received as long as the prohibition and clarification orders are in force. The interest to act is therefore hypothetical and the claim useless since the requested condemnation, even granted, will not improve in any way their situation.

Article 18, second indent, provides that “the action should be admitted where it is introduced, even in a declaratory manner, to prevent the violation of a right seriously threatened”. This provision thus authorises – as an exception to the existence of a current and actual interest to introduce an action to the Court – the declaratory and ad futurum actions, i.e. actions whereby debate, which only appears as possible, should immediately be resolved before the Court or tend to avoid, by immediate measures, a danger or damage that could exist in the future. The common feature of these actions is to obtain from the Court that it rules on the validity or materiality of a legal situation, independently of any actual and current damage (C. De Boe, “Le défaut d’intérêt né et actuel”, Annales de droit de Louvain, 2006, p. 119).

Article 18, second indent, of the Judicial Code authorises to refer before the Court provided that two conditions – for both the declaratory and ad futurum actions – are fulfilled:

1. The plaintiff should prove the existence of serious and grave threat able to create currently a precise trouble;

2. The judicial decision should be able to offer the plaintiff not a pure theoretical satisfaction but a determined and concrete utility. It should clarify the situation, put an end to the threat that justified the action, recognize the existence or inexistence of a right (C. De Boe, op. cit., pp. 122-123).


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The threat should be grave and serious to create a precise trouble. It is not required that the prejudice that the plaintiff wants to prevent “intervenes with certainty”.

As noted by the plaintiffs, this Court is seized with two questions, i.e. (1) whether or not BNYM Brussels, when credited with the payments intended to the plaintiffs, as Eurobond holders, could refuse to transfer these payments given the New-York injunction; and (ii) whether or not Euroclear and Euroclear Bank could in the same manner and for the same reason impede the payments transferred by BNYM Brussels for the same goal, i.e. in favour of the Eurobond holders.

The defendants refuse to confirm that they will continue, like in the past, to transfer in the payment chain the amounts they will receive from Argentina for the benefit of the Eurobond holders. They have adopted this position before the introduction of the action. Since then, these positions are not modified.

Consequently, the plaintiffs, pretending having a subjective right to obtain the transfer of every payments on the Eurobonds made by Argentina for their benefit, without any impediment from one or the other defendant, have seen this right seriously threatened.

On 21 June 2013, they introduced this action on a two-fold basis that (1) the end of the stay of the New-York injunction was expected in the short-tem, event which actually became concrete with the decision of the Court of Appeals on 18 June 2014 and (2) the answers from the defendants were likely to create a threat of impediment of the payments benefiting to the plaintiffs.

The decision requested is not likely to provide a mere theoretical satisfaction. As indicated earlier, the High Court is currently seized by the Eurobondholders in order to declare that BNYM New York acts in breach of its obligations under the Trust Indenture in refusing to transfer the funds paid by Argentina and that this obligation of transfer is not affected by the injunction of the New York Court. If the High Court decides in favour of the plaintiffs, the transfer of funds to the defendants would be the logical consequence.

Taking into account this possibility, it appears that the requested decision has a concrete utility and that the plaintiffs have a real interest to obtain a judicial title in order to proceed immediately to its execution, without wasting time to introduce a proceeding the day where the funds would be transferred to the defendants.

Consequently, the requirement of a current and actual interest is fulfilled.

3) The inadmissibility of the action regarding Euroclear SA

The second and third defendants claim that Euroclear SA does not play any role in the payment chain of the funds regarding the new bonds and does not conduct any operational activities in the Euroclear System. This System is managed solely by Euroclear Bank, the intervention of Euroclear SA being limited to the back-up assistance for the operation and management of the IT systems. Euroclear SA is not concerned by this proceeding, and the action should be rejected as inadmissible regarding Euroclear SA.

According to the plaintiffs, the fact that Euroclear SA provides Euroclear Bank logistic and IT services in order to allow Euroclear Bank to provide its clearing services and, consequently,


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contributes directly in the realisation of the object of its subsidiary justifies that the action is introduced against it.

It does not follow from the elements submitted that Euroclear SA would participate in the clearing and settlement system on financial instruments managed by Euroclear Bank. The existence of a legal link between Euroclear SA and the defendants is, therefore, not established.

This is not because Euroclear Bank would be, in absence of Euroclear SA, in the technical and operational incapacity to realise its object that Euroclear SA can automatically(“ipso facto”) be considered as having the quality to respond to the action introduced against it.

The fact that Euroclear SA, with its logistical and IT interventions, would play a role in the performance of the measure requested, if granted, is not relevant in the issue of admissibility of the action.

Euroclear SA is therefore out from this proceeding, the action introduced against it is inadmissible.

The action against Euroclear SA is not introduced in a frivolous and vexatious manner.

The elements put forward do not prove that the plaintiffs have introduced an action against Euroclear SA with a culpable irresponsibility or following an error of appreciation so obvious that it should be seen and avoided.

Therefore, the damages requested by Euroclear SA in its counter-claim should not be granted.

D. REGARDING THE SUBSTANCE OF THE CLAIM

1) BNYM Brussels

The Plaintiffs argue that by refusing to transfer their payments, BNYM Brussels would commit a violation of the Trust Indenture and also of Article 9 of the Law dated 28 April 1999.

BNYM Brussels argues that the Trust Indenture provides no obligation vis-à-vis BNYM Brussels and that the prohibition of any blockage defined by Article 9 of the Act dated 28 April 1999 does not apply to the payments that BNYM Brussels receives from BNYM New York.

When BNYM Brussels receives a payment from BNYM New York in accordance with the Trust Indenture, it is with the instruction to transfer the payment within the Euroclear system.

As paying agent of the Trustee, BNYM Brussels is under the obligation to transfer immediately the funds to the next intermediary in the payment chain defined by the trust.

The Trust Indenture is governed by the law of England as far as the Euro-bonds are concerned. It is thus the High Court that is due to decide the dispute between BNYM as a Trustee, and certain Eurobond Holders.


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If, at the end of this procedure, BNYM New York transfers the funds to its Belgian subsidiary, it will be most likely because the High Court will have decided in favor of the Eurobond Holders after rejecting the Trustee’s arguments grounded on the law of England, including the causes of excuse contained in Article 5.2 of the Trust Indenture raised by BNYM Brussels before our Court.

If BNYM Brussels refrains from transferring the sums of money that it will have received from BNYM New York as a result of the judgment of the High Court, it will violate the rules defined in the Trust Indenture, as interpreted by the English court.

The provisions of the Trust Indenture, indeed, do not authorize BNYM New York Brussels (ndlr:Sic) to depart from the instructions given by the Trustee.

BNYM Brussels argues that if it transfers a payment made by the Republic of Argentina in violation of the injunction of prohibition dated 23 February 2012 of the District Court, it infringes the injunction of clarification dated 21 November 2012 of that same District Court that expressly refers to the paying agents, and it is, therefore, at risk of being found in contempt of Court by the New York Court, which would expose it to civil sanctions (to compensate the harm suffered by the original bond holders from the violation of the injunction) and criminal (with possible consequences regarding banking licenses).

For BNYM Brussels, the mere existence of the injunction of clarification makes it not conceivable to comply with the request of the Plaintiffs.

The Plaintiffs answer that the injunction of the District Court has no effect in the Belgian legal order and that it may not, therefore, justify the refusal of BNYM New York to transfer the payments relating to the Eurobonds.

BNYM Brussels argues that Article 29 of the International Private Code (IPC) authorizes the Court to take into account the injunction of clarification of the District Court and to take note that if the Court would decide in favor of the Plaintiffs, it would put BNYM Brussels in a situation where it would be forced to violate the content of the injunction of clarification.

Article 29 IPC provides that, “the existence of a foreign judicial decision or an authentic act may be taken into account absent any verification of the conditions necessary to be recognized and accepted, for a declaration of its ability to constrain or to be used as valid evidence.”

This provision recognizes the de facto effect of foreign judicial decisions. The judgements and foreign acts are seen as legal facts that impose as such their existence in Belgium with no further conditions.

The de facto effect of a judgment does not consist so much in recognizing the efficiency of a foreign judgment, but rather the consequences that it causes. As emphasized by some French authors, it does not mean “prolonging in France the effects that the decision has in the country where it comes from, but to take into account the interplay of a material rule as a fact” (D. Holleaux, J.Foyer et G. Geouffre de la Pradelle, Droit International privé, Paris, masson, 1987, n°899).

A foreign public act may obtain a de facto effect through the theory of the” fait du prince” (ndlr: act of government) in the contractual domain.


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The “fait du prince” is, as a foreign cause, a reason to free from some obligations when it constitutes an insuperable obstacle to execute such an obligation and when no fault exists on the part of the debtor in the creation of the obstacle (Cass. 18 November 1996, Pas., 1996, I, p. 121).

The obstacle must be irresistible and must, therefore, make the execution of the obligation absolutely impossible: it means not only the physical impossibility but also the legal impossibility (P. Van Omeslaghe, “Clauses de force majeure et d’imprévision dans les contrats internationaux”, Rev. dr.intern. et comp., 1980, p.29).

For example, a Belgian supplier of products coming from the United States may raise a cause of force majeure when a prohibition decided by the US authorities makes it impossible to export the products.

The actual situation in the present case is quite different. When the payments come in the hands of BNYM Brussels, there is no physical or legal obstacle to transfer them downstream in the payment chain.

If BNYM Brussels could fear the consequences of such a transfer under US law, such a fear does not constitute an insuperable obstacle to the execution of its obligations as paying agent, when, as in the contemplated situation, BNYM New York transfers it the payments received in the context of the Trust Indenture.

The risk of being found in Contempt of Court by the New York Courts may not be considered as a legal fact existing as such in Belgium as a result of Article 29 IPC. BNYM Brussels may, thus, not rely on this legal provision.

It results that BNYM Brussels may not refuse to transfer the payments relating to the Eurobonds that will be made by the Republic of Argentina to the benefit of the Plaintiffs.

The request that BNYM Brussels continue to transfer to the Plaintiffs any current or future payments made by the Republic of Argentina to the plaintiffs must, therefore, be declared grounded.

Regarding the financial constraint requested by the Plaintiffs, the defendants rely on Article 1385bis, alinea 1 of the Judicial Code that prohibits the use of financial constraint in case of condemnation to the payment of some financial amount.

The plaintiffs consider that the present case does not refer to such a situation. The condemnation concerns an obligation not to create any obstacle to the transfer of payments coming from the Republic of Argentina, as soon as they are transferred by the Trustee - BNYM New York -, and received by BNYM Brussels. In their view, it is different from a condemnation to the payment of some financial amount.

The distribution by the Trustee of the financial amounts due to the beneficiaries identified in the Trust is indeed an obligation to pay some financial amounts.

Therefore, the injunction made to the agent mandated by the Trustee not to create any obstacle to the transfer of payments and to participate actively and with loyalty to these transfers so that they can reach their benefici aries must be analyzed as a condemnation to the payment of some financial amount.


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In compliance with Article 1385bis, alinea 1 of the Judicial Code, the condemnation may thus not be accompanied by a financial constraint.

The request concerning the provisional condemnation to one euro to compensate the harm resulting from the delay in the transfer of the payments on the due date must be declared not grounded, the existence of such a harm being not demonstrated.

2) Euroclear Bank

The plaintiffs ground their claim vis à vis Euroclear Bank on Article 9 of the Act dated 28 April 1999, transposing the Directive 98/26/CE of 19 May 1998 on settlement finality in payment and securities settlement systems (hereinafter, the “Finality Act”).

They argue that this provision, - that aims at preventing that the settlement accounts and the transfer of money to these accounts be subject to some seizure, escrow, or any other measure of blockage-, prohibits Euroclear Bank from creating any obstacle to the transfer of interest payments due to the Eurobond Holders. The Finality Act is of international public order, and has a wide erga omnes scope that tolerates no exception.

Euroclear Bank rejects that Article 9 of the Finality Act imposes a specific conduct. If it is correct that the prohibition injunction of the District Court dated 23 February 2012 would lead most likely to a violation of that Belgian law provision (to the extent that Eurolcear Bank would be prevented from receiving the cash payments relating to the restructured bonds, and from transferring these payments to the accounts of its Participants), Article 9 of the Finality Act creates no obligation for the operator of the System. This provision applies only to those who want to obtain some blockage measure but not to those – specifically the operator of the system-, who would be enjoined to execute a blockage measure.

Article 9 of the Finality Act provides that: “ any settlement account with the operator or with the settlement body of the system used for depositing funds, as well as any transfer of funds by a Belgian or foreign credit institution to any such settlement account, may not be seized, put under escrow, or blocked in any way by a participant, a counterparty or a third party other than the operator of the system. “

The Finality Act is of public order. Its violation may thus be invoked by any person with an interest to rely on it.

As illustrated by the title of the Act, the later transposes in the Belgian legal system the Directive 98/26/CE of 19 May 1998 relating to the settlement finality in payment and securities settlement systems.

The Directive 98/26/CE has two objectives. Firstly, it forces the Member States to make sure that their internal legal system provides the necessary legal security to insure the good functioning of the payments (for example, by providing, regardless of the bankruptcy or any other situation of creditors registration, the efficiency of compensation resulting from payment and settlement of securities as long as the instructions to transfer be recorded in the system, according to the rules of the system, before that bankruptcy or creditors registration, or after as long as the system operator ignored such a situation). Secondly it protects the transactions made within the clearing and settlement systems, from the consequences of the national rules regulating the insolvency of the participants to these systems that are often cross border.


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By contrast with other provisions of the Finality Act, Article 9 does not transpose a provision of Directive 98/26/CE. It introduced a novelty compared to the directive.

The purpose of Article 9 is to avoid that repeated, or even abusive, seizures paralyze completely the functioning of a clearing and settlement system, through the seizure of the money credited on the settlement account of a financial institution with the Belgian National Bank or with any other clearing and settlement operator identified by the law (Recitals draft act, Ch., 1999/1 – 98/99, pp. 24-25).

The sentence “as well as any transfer of funds by a Belgian or foreign credit institution to any such settlement account” was added to the original text. It results from a modification brought by an Act adopted on 19 November 2004.

The reason of this modification is as follows. In 2003, a hedge fund, that purchased sovereign bonds issued by Nicaragua, attempted to circumvent the prohibition contained in Article 9 by asking through an expedite proceeding filed with the President of the Brussels commercial Court, an order enjoining Euroclear Bank not to receive any payment from the Trustee, or, at least, to block them when received, to avoid that any credit be recorded in the accounts operated by the Euroclear system. The hedge fund wanted to impose on Euroclear Bank to take all necessary measure so that all transfer or payment orders be prevented from entering into the system unless they are associated with proportional payments to the hedge fund in compliance with the pari passu provision contained in the bond agreement.

To avoid this type of maneuvers, it became necessary to give Article 9 its “full effect” and clarify that the prohibition of any seizure, escrow, or blockage did also apply to any transfer of money to a settlement account via an intermediary acting as a cash correspondent (i.e., a Belgian or foreign credit institution). (Doc. Parl. Ch;, 2003-2004, 51, 1157/001, p.64).

The transfer of payments through BNYM Brussels to be credited, via Euroclear Bank , to the accounts of the Participants who hold restructured bonds on behalf of the plaintiffs, fall within the scope of Article 9 of the Finality Act. BNYM Brussels itself acknowledges that fact (p.40 of BNYM Brussels’ last written pleadings).

In accordance with Article 9, these transfers of payments must thus be protected from seizure and similar measures of blockage.

Euroclear Bank argues that this prohibition of blockage does not apply to the Bank. It refers first to wording of Article 9 that provides expressly that the prohibition of blockage does not apply to “the operator or settlement institution within the system”.

It refers also to the New York prohibition injunction that has a binding effect and that the Plaintiffs attempt to circumvent by obtaining from the Belgian court what they could not obtain from the US court.

It refers also to the terms and conditions regulating the relationships between Euroclear Bank and its Participants (“Terms and Conditions governing the use of Euroclear”, that provides in Article 7 :

“We [Euroclear bank] are not required to conduct a transaction (or take any other action) upon your request or by following your instructions under the general Conditions:

i. To the extent that :


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(y) it would violate any law, decree, regulation or order of a government or a government body or an international regulatory authority (including any court or tribunal”.

The Plaintiffs argue that Article 9 of the Finality Act applies to Euroclear Bank like to any other person causing a blockage of a settlement account. The argued threat resulting from the New York injunction on Euroclear Bank may not create an obstacle to the unconditional prohibition of any blockage of the system as provided under Article 9. The protection resulting from this provision is indeed granted not to Euroclear Bank, legal person, but to the system of clearing and settlement operated by Euroclear Bank to the benefit of the users of this platform in order to protect the good functioning of the Belgian and international financial market.

Regarding Article 7 of the Terms and Conditions regulating the relationships between Euroclear Bank and its Participants, the Plaintiffs argue that Euroclear Bank is not entitled to rely on it to refuse the transfer of the payments relating to the Eurobonds. A contractual provision whereby the operator of the system gives himself the right to block the transfer of payments based on its sole personal assessment and absent any approval in compliance with the Belgian legal order is, indeed, contrary to the prohibition of blockage provided under Article 9 of the Finality Act and the court may not apply it.

According to Article 9 of the Finality Act, any seizure, escrow or blockage by a participant, a counterparty or a third party “ other than the operator or the settlement institution of the system” is prohibited.

This possibility for the operator of the system to block it is explained by the preparatory work of the Act dated 28 April 1999 as follows: “Independently from a seizure, a settlement account with the National Bank or any other institution in charge of a settlement system must not be blocked either by a blockage order of any kind, unless this measure ( a closure, for example) is decided by the operator of the system in the books of whom the settlement account is opened, for example in a situation of bankruptcy of the participant owning the account”. (Exposé des Motifs, CH.? 1999/1 – 98/99, p.25; See also D.Devos “ Protection juridique des systems de paiements et de règlements titres en Belgique (après la loi du 28 avril 1999)” Revue de la Banque “, who clarifies that “the Act confers expressly the blockage of the account on the system operator itself in order to avoid the execution of payments after the opening of a bankruptcy proceeding”.

In light of the preparatory works, Article 9 of the Finality act excludes clearly the system operator from the persons targeted by the prohibition of blockage.

It results from the above that the provision whereby Euroclear Bank has the right, in certain situations, not to follow the instructions of the Participants downstream in the payment chain (who are the only person with whom it has a contractual commitment) is not in itself illicit.

The plaintiffs are wrong when they argue that interpreting Article 9 of the Finality Act as giving Euroclear Bank the possibility to block the transfer of the payments relating to the Eurobonds, would be contrary to the principle of interpretation whereby the national court


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must interpret its own law in light of the European law in order to give it its largest possible effect.

As indicated above, by contrast with the other provisions of the Finality Act, Article 9 of the Act does not result from the transposition of a provision of the directive 98/26/CE. There is no such provision in the Directive 98/26/CE, even since the changes brought by Directive 2009/44/CE dated 6 May 2009. There is thus no reason to depart from the clear wording of the Act because it would hamper the objective of Directive 98/26/CE.

The margin of maneuver of Euroclear Bank, is not, however, without limitation. Given its central role in the good functioning of the foreign securities market in Belgium, it is with great care that it must use its contractual right not to make a transfer that would violate the injunction of a foreign court.

It would commit a fault if, by blocking the transfer of the payments, it was looking to comply with an order without any value under international law, or to avoid sanctions that would have no significant effect on it or that would be purely hypothetical.

It is not the case here.

As shown by the injunctions of the District Court dated 28 February 2012 and 23 November 2012, Euroclear Bank, as an intermediary in the payment chain, could be held liable on the ground of Rule 65 (2) of the US Federal Civil Procedural Code if it contributed to the violation by the Republic of Argentina, of the injunction ordered against the Republic.

Article 65 (d) (2) provides that the persons acting together or participating actively with the persons that have been subject to an injunction or a prohibition, may be bound by the injunction or prohibition as long as they were duly informed of it.

The injunctions of the District Court dated 28 February 2012 and 23 November 2012 have thus a binding effect on Euroclear Bank. If it contributes to the transfer of the funds to the holders of restructured bonds, it can be sued for having contributed to the violation of the prohibition injunction.

At that moment, of course, it will be possible for Euroclear Bank to argue the lack of jurisdiction of the US courts. But, as a matter of fact, the District Court has already indicated that it has jurisdiction over all the intermediaries participating to the payment chain, and refused to exclude foreign intermediaries executing the payments relating to the Eurobonds. When it had to decide on the case, the Court of Appeals did not challenge the position of the District Court. Finally, it is apparent from the recent US case law commented by the parties, that it would be highly hazardous to conclude that the US Courts would not decide that they have jurisdiction over Euroclear, at least based on the “specific jurisdiction”.

It is, therefore, clear that Euroclear Bank faces the risk to be found in Contempt of Court like the Republic of Argentina, the actual addressee of the injunction.

If found in Contempt of Court, the District Court has a wide range of sanctions civil, criminal or administrative. A decision condemning Euroclear Bank could be executed in the US where Euroclear Bank owns assets and an office of representation with some ten people.

Today, given the serious risks that the injunctions of the District Court dated 28 February 2012 and 23 November 2012 cause for Euroclear Bank in case of violation of the pari passu


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provision as interpreted by the District Court, it must be concluded that Euroclear Bank does not trespass its right when refusing to transfer to its Participants’ bank accounts, the payments that it would receive from the Republic of Argentina through the chain of intermediaries.

The action towards Euroclear Bank must therefore be rejected as not grounded.

E. COSTS AND EXPENSES

For Euroclear Bank and Euroclear S.A, given that it is certain that the disputed amounts are higher than € one million, the procedural indemnity for the actions that can be valued in money must be granted to the party whose action or defense has succeeded.

For the Plaintiffs, the procedural indemnity must, by contrast, be calculated by reference to the cases that cannot be valued in money. What is requested is an order not to do, and not a condemnation to the payments of some amounts of money.

The action asking an injunction not to create any obstacle to the transfer of payments and to actively participate with loyalty to these transfers so that they can reach the Participants in the Euroclear system, is an action that aims at the payment of sum of money.

If it is true that the funds to be transferred are not identified, it also true that their value is, without any doubt, above € 1.000.000.

For a proceeding relating to a request that can be valued in money, it is the procedural indemnity for that type of action that must be retained.

Euroclear Bank and Euroclear SA claim that the indemnity be defined to it maximum amount, i.e., € 33.000. To justify this amount, they raised the complexity of the case and the unreasonable nature of the situation.

The first criterion is undisputable, the case offering manifestly a high level of complexity, not only due to the level of complexity of the arguments exchanged, but also as a result of the number of elements in dispute. The procedural indemnity for Euroclear Bank and Euroclear SA must thus be increased compared to the basic amount.

Given that certain disputed points were defense arguments that the defendants lost, the indemnity can be defined at € 20.000.

This amount may be withdrawn from the cautio judicatum solvi with the Caisse des dépôts et consignations, the rest of the money must return to the Plaintiffs as soon as they ask for it.

F. PROVISIONAL EXECUTION OF THE JUDGMENT

In the absence of a written explanation justifying the request, there is no reason to grant the provisional execution requested by the parties.

ON THESE GROUNDS,

The Court,

Ruling after a debate between the parties,


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States the withdrawal of action of Silver Point Capital Fund L.P. and Silver Point Capital Offshore Fund Ltd (the sixth and seventh plaintiffs) without being condemned to pay the indemnity of proceedings.

Regarding Euroclear SA

States the action inadmissible.

States the counter-claim of Euroclear SA admissible and unfounded.

Regarding The Bank of New York Mellon SA

States the action admissible and founded as follows:

Orders The Bank of New York Mellon not to impede in any way the transfer of payments in the contractual time-limit as from the date it will receive these payments intended to the plaintiffs as Eurobondholders and to continue to actively and loyally participate in these transfers.

Condemns The Bank of New York Mellon SA to the undetermined costs of the plaintiffs.

Regarding Euroclear Bank SA

States the action admissible and unfounded.

Condemns the plaintiffs, except those withdrawn from the proceeding, to the costs of Euroclear Bank and Euroclear, decided as follows:

- Indemnity of proceeding: EUR 20,000.

(…).


exhibits b through eargentine.shearman.com/sitefiles/11607/exhibits b-e.pdf · reynolds porter...

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