UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
EM LTD. and NML CAPITAL, LTD.,
Plaintiffs,
x
08 Civ. 7974 (TPG)
V.
THE REPUBLIC OF ARGENTINA and BANCO DE LA
NACION ARGENTINA,
Defendants.
x
(additional captions continued on next page )
MEMORANDUM OF LAW OF THE REPUBLIC OF ARGENTINA IN SUPPORT OF
MOTION TO VACATE THE 2010 ORDERS AND IN OPPOSITION TO PLAINTIFFS'
MOTIONS (i) TO CONFIRM THE 2010 ORDERS; (ii) FOR RECONSIDERATION OF
ALTER EGO DECISION; AND (iii) TO AMEND ALTER EGO COMPLAINT
CLEARY GOTTLIEB STEEN & HAMILTON LLP
One Liberty Plaza
New York, New York 10006
(212) 225-2000
Attorneys for the Republic of Argentina
Of Counsel:
Jonathan I. Blackman
Carmine D. Boccuzzi
Christopher P. Moore
Case 1:07-cv-01910-TPG Document 223 Filed 07/30/10 Page 1 of 24
(captions continued from previous page)
EM LTD.,
Plaintiff,
x
03 Civ. 2507(TPG)
V.
THE REPUBLIC OF ARGENTINA,
Defendant
x
NML CAPITAL, LTD.,
Plaintiff,
V.
THE REPUBLIC OF ARGENTINA,
Defendant.
x
03 Civ. 8845 (TPG)
05 Civ. 2434 (TPG)
06 Civ. 6466(TPG)
07 Civ. 191 0 (TPG)
07 Civ. 2690 (TPG)
07 Civ. 6563 (TPG)
08 Civ. 2541 (TPG)
08 Civ. 3302 (TPG)
08 Civ. 6978 (TPG)
09 Civ. 1707 (TPG)
09 Civ. 1708 (TPG)
Case 1:07-cv-01910-TPG Document 223 Filed 07/30/10 Page 2 of 24
TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES....................................................................... ii
PRELIMINARY STATEMENT................................................................... 1
BACKGROUND.................................................................................... 3
A. The 2008 Alter Ego Action And BNA4 LI............................................ 3
B. The 20l10 Orders....................................................................... 5
ARGUMENT ........................................................................................ 5
I. THE 2010 ORDERS IMPERMISSIBLY REACH PROPERTY THAT IS
NOT "USED FOR A COMMERCIAL ACTIVITY" IN THE UNITED
STATES ..................................................................................... 5
II. BNA AND ITS PROPERTY ARE ENTITLED TO IMMUNITY UNDER
THE FSIA, AND THAT IMMUNITY WAS NEVER WAIVED ..................... 8
A. The Republic's Waiver Of Immunity Does Not Provide A Basis For FSIA
Jurisdiction Over BNA Or Its Property.............................................. 8
B. The Alter Ego Allegations Against BNA Do Not Provide A Basis
For FSIA Jurisdiction ................................................................. 9
Ill. PLAINTIFFS CAN NEITHER PLEAD NOR ESTABLISH A PLAUSIBLE
CLAIM OF ALTER EGO................................................................. 12
CONCLUSION...................................................................................... 16
Case 1:07-cv-01910-TPG Document 223 Filed 07/30/10 Page 3 of 24
TABLE OF AUTHORITIES
Page(s)
Cases
Af-Cap Inc. v. Chevron Overseas (Congo) Ltd.,
475 F.3d 1080 (9th Cir. 2007)...................................................................... 5
Alejandre v. Telefonica Larga Distancia de Puerto Rico, Inc.,
183 F.3d 1277 (1 1th Cir. 1999) ................................................................. 11, 14-15
Am. Fuel Corp. v. Utah Energy Dev. Co., Inc.,
122 F.3d 130 (2d Cir. 1997)........................................................................ I11
Amoco Corp. v. Comm'r of Internal Revenue,
138 F.3d 1139 (7th Cir. 1998).......................................................................11
Argentine Republic v. Amerada Hess Shipping Corp.,
488 U.S. 428 (1989)............................................................................... 8
Ashcroft v. Iqbal,
129 S. Ct. 1937 (2009).............................................................................. 12
Bayer & Willis Inc., v. Republic of Gambia,
283 F. Supp. 2d 1 (D.D.C. 2003) ................................................................. 12-13
Bell Atl. Corp. v. Twombly,
55o U.S. 544 (2007)............................................................................... 12
Bridas S.A. P.LI C. v. Gov 't of Turkmenistan,
447 F.3d 411 (5th Cir. 2006)....................................................................... I11
Butler v. Sukhoi Co.,
579 F.3d 1307 (11Ith Cir. 2009) .................................................................... 9
Casale v. Comm'r of Internal Revenue,
247 F.2d 440 (2d Cir. 1957)........................................................................ 14
Colella v. Republic ofArgentina,
No. 07-80084 WIIA, 2007 W~L 1545204 (N.D. Cal. May 29, 2007)........................... 6
Conn. Bank of Commerce v. Republic of Congo,
309 F.3d 240 (5th Cir. 2002) ...................................................................... 5-6
EM Ltd. v. Republic of Argentina,
473 F.3d 463 (2d Cir. 2007), cert. denied, 128 S. Ct. 109 (2007) .............................. 6
EM Ltd. v. Republic ofArgentina,
No. 08 Civ. 7974 (TPG), 2009 WL 3149601 (S.D.N.Y. Sept. 30, 2009) ("BNA 1") ........ passim
ii
Case 1:07-cv-01910-TPG Document 223 Filed 07/30/10 Page 4 of 24
PageOs)
EM Ltd. v. Republic ofArgentina,
No. 03 Civ. 2507 (TPG), 20 10 WL 1404119 (S.D.N.Y. Apr. 7, 201 0),
appeal docketed, 10- 148 7-cv(L) (2d Cir. Apr. 21, 201 0) ....................................... 14
EM Ltd. v. Republic ofArgentina,
No. 06 Civ. 7792 (TPG), 2010 WL 2399560 (S.D.N.Y. June 11, 2010),
appeal withdrawn and dismissed, 10-2929-cv (2d Cir. July 23, 201 0) .......................... 2, 6-7
First National City Bank v. Banco Para El Comercio Exterior de Cuba,
462 U.S. 611 (1983) ("Bancec") ................................................................. passim
Hercaire Int'l, Inc. v. Argentina,
821 F.2d 559 (11Ith Cir. 1987) .................................................................... 9,13
Letelier v. Republic of Chile,
748 F.2d 790 (2d Cir. 1984)....................................................................... 11, 15
LNC Invs., Inc. v. Republic of Nicaragua,
11 5 F. Supp. 2d 3 58 (S.D.N.Y. 2000), aff'd sub nom., LNC Invs., Inc. v. Banco Central
de Nicaragua, 228 F.3d 423 (2d Cir. 2000)....................................................... 9
Pravin Banker Assocs., Ltd. v. Banco Popular del Peru,
9 F. Supp. 2d 300 (S.D.N.Y. 1998) ............................................................... 14
Saudi Arabia v. Nelson,
507 U.S. 349 (1993)................................................................................. 8
US. Fid. & Guar. Co. v. Braspetro Oil Senvs. Co.,
369 F.3d 34 (2d Cir. 2004) ........................................................................ 10-11
World Wide Minerals, Ltd. v. Republic of Kazakhstan,
296 F.3d 1154 (D.C. Cir. 2002).................................................................... 10
Rules and Statutes
28 U.S.C. § 1603(a) ................................................................................. 8
28 U.S.C. § 1603(b) ................................................................................. 8
28 U.S.C. § 1605(a)(1)................................................................................. 8
28 U.S.C.§ 1610(a) ................................................................................... 1, 5
28 U.S.C. § 1610(a)(1)................................................................................. 8
28 U.S.C. § 1610(d) ..................................................................................
iii
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Page(s)
28 U .S.C. § 1610(d)(1) ......................................... ........... 8
N.Y. C.P.L.R. 62 12(a).............................................................................. 12
Other Authorities
FJ.R. Rep. No. 94-1487 (1976), reprinted in 1976 U.S.C.C.A.N. 6604 ........................ 9
iv
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Defendant the Republic of Argentina (the "Republic") respectfuilly submits this
memorandum of law in support of defendants' motions to vacate attachment orders dated May
28, 20 10 and modified on June 1 1, 201 0 (the "201 0 Orders"), and in opposition to plaintiffs'
motions (i) to confirm the 20 10 Orders; (ii) for reconsideration of the Court's decision in EM,
Ltd. v. Republic ofArgentina, 08 Civ. 7974 (TPG), 2009 WL 3149601 (S.D.N.Y. Sept. 3 0, 2009)
("BNA I") which, inter alia, dismissed the alter ego complaint against Banco de la Naci6n
Argentina ("BNA"); and (iii) for leave to amend the alter ego complaint against BNA.
PRELIMINARY STATEMENT
To avoid burdening the Court by repeating BNA's arguments, the Republic joins
in the motion and memorandum of law filed today by BNA. The Republic writes separately on
three particular grounds requiring vacatur of the 201 0 Orders and denial of plaintiffs' motions.
First, the 201 0 Orders must be vacated because they are overbroad and reach
property that is not used by the Republic for a commercial activity in the United States, as required
under the FSIA, 28 U.S.C. § 16 10(a). The 2010 Orders reach:
* BNA's Asset Pledge Account at FISBC (the "Asset Pledge Account"'), which is
not property of the Republic, and which, at the time the 20 10 Orders were
issued, was already attached and restrained by orders obtained by plaintiffs in
2008;
• An account of the Argentine Ministry of Science, Technology, and Productive
Innovation (the "ANPCT Account"), which was also already attached and
restrained at the time the 20 10 Orders were issued;
• BNA property held at HSBC and JPMorgan Chase. This property, like the
Asset Pledge Account, is plainly not property of the Republic, much less
property being used by the Republic for a commercial activity in the United
States.
The first two accounts above - the Asset Pledge Account and the ANPCT Account
- have been frozen since September 2008, when plaintiffs first obtained ex parte attachment and
Case 1:07-cv-01910-TPG Document 223 Filed 07/30/10 Page 7 of 24
restraining orders (the "2008 Orders") in connection with their alter ego action. After the Court
issued the BNA I decision dismissing plaintiffs' alter ego complaint and vacating plaintiffs'
attachments and restraints except with respect to the restraining order directed to the ANPCT
account, the 2008 Orders remained in place by agreement of the parties pending plaintiffs' motion
for reconsideration. That motion remains pending.
Because the Asset Pledge Account and ANPCT Account were frozen at the time
the 201 0 Orders were issued, the funds were not being "used" for any purpose - let alone for a
commercial activity - at the time the 201 0 Orders were issued, and the attachments must be
vacated. As the Court recently held in denying plaintiffs' attempt to re-attach $1 00 million of
Banco Central de la Repfiblica Argentina ("BCRA") funds that were "first attached on December
30, 2005, and [had] been frozen by stipulation since January 9, 2006": To hold that "frozen
assets were 'used for a commercial activity' for FSIA purposes would be inconsistent with the
Second Circuit's recent holding in [Aurelius Capital Partners, LP v. Republic ofArgentina, 584
F.3d 120, 130-31 (2d Cir. 2009), cert. denied, 130 S. Ct. 1691 (2010)]." See EM Ltd. v. Republic
ofArgentina, No. 06 Civ. 7792 (TPG), 2010 WL 2399560, at *4 (S.D.N.Y. June 11, 2010), appeal
withdrawn and dismissed, 10-2929-cv (2d Cir. July 23, 201 0).
Insofar as the 201 0 Orders reach additional BNA property held at HSBC and
JPMorga~n, they must be vacated because, in addition to the reasons stated by BNA and infra,
such property is not property of the Republic and is not being "used" by the Republic at all.
Second, plaintiffs' motions must be denied and the attachments must be vacated
because the Republic's waiver of immunity does not extend to BNA. In the bond documentation
at issue the Republic waived only the immunity that it could claim for itself and its property.
This Court does not have jurisdiction under the FSIA over plaintiffs' claim against BNA and its
2
Case 1:07-cv-01910-TPG Document 223 Filed 07/30/10 Page 8 of 24
property based upon the Republic 's waiver in the bond documentation. Plaintiffs allege no facts
establishing that BNA, directly or through the Republic, somehow waived its immunity with
respect to this alter ego claim.
Third, plaintiffs have not pled, and cannot establish, that BNA is the alter ego of
the Republic - either as of 2008 or 201 0 - under Bancec's "fraud or injustice" doctrine. See
First National City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611 (1983)
("Bancec"). As an agency or instrumentality of the Republic, BNA is entitled to a presumption
of separateness under Bancec and its progeny. None of plaintiffs' allegations with respect to
BNA are related to rights derived from the bonds or the Republic's default, and therefore cannot
provide a ground to equate BNA with the Republic as to the particular claims at issue.
At bottom, the latest round of motions by plaintiffs should fail, just as they did in
September 2009. The Court was absolutely correct in BNA Ito reject plaintiffs' alter ego claims
against BNA, a large commercial bank with its own assets, liabilities, and creditors. The mere
additional fact that loans have been made by the bank to the Republic (and repaid by the
Republic) is an insufficient basis for revisiting the Court's conclusions concerning BNA, and
would require a drastic departure from the FSIA and alter ego precedent.
BACKGROUND
A. The 2008 Alter Ego Action And BNA I
On September 12, 2008, plaintiffs filed a complaint seeking a declaratory
judgment that BNA was the alter ego of the Republic and therefore liable for the Republic's
debts. Plaintiffs also obtained ex parte attachment orders and restraining notices directed at
property of BNA and property of the Republic held at BNA (Ex. B).1 Following a sweep of
I All exhibits are attached to the Declaration of Carmnine D. Boccuzzi, dated July 30, 2010.
3
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more than 3,000 institutions in New York, plaintiffs identified three accounts that they sought to
attach and restrain: (1) the BNA Asset Pledge Account at HSBC, (2) an account at BNA's New
York branch of the Instituto Nacional de Tecnologia Agropecuaria, an entity separate from the
Republic (the "INTA Account"), and (3) the ANPCT Account at BNA's New York branch. See
Letter of K. Sywak to Plaintiffs' Counsel, dated Sept. 26, 2008 (Ex. U); Garnishee Statement of
BNY, New York Branch, dated Sept. 25, 2008 (Ex. F).
On September 3 0, 2009, the Court held in BNA I that plaintiffs' allegations "did
not add up to a degree of de facto ownership or control of BNA's funds sufficient to justify an
alter ego ruling," and that "evidence about the expanded power of the Republic to borrow from
BNA is not sufficient to justify holding that BNA was or is the alter ego of the Republic." 2009
WL 3149601, at **6..7. The Court therefore granted the motions by BNA and the Republic to
dismiss plaintiffs' complaint for a declaratory judgment against BNA, and vacated all
attachments or restraints directed at property of BNA, including those directed at the Asset
Pledge Account. Id. at *8.
The Court also vacated plaintiffs' restraints as to the INTA Account.2 The Court
granted, however, plaintiffs' motion to confirm their restraints as to the ANPCT Account, based
on its determination that the account was used for a commercial activity. Id.
Plaintiffs moved for reconsideration of BNA Ion October 15, 2009. The parties
agreed to maintain freezes on the accounts pending a decision on plaintiffs' motion for
2 The 2008 Orders resulted in the freezing of approximately $2,000 in the INTA Account. In BNA
I, the Court vacated the attachments and restraints of the INTA Account, holding that INTA "is
an independent entity" from the Republic. 2009 WVL 3149601 at *7. The Court also denied
plaintiffs' request for further discovery regarding INTA. Id. Although the attachments and
restraints remain in place pending plaintiffs' motion for reconsideration, plaintiffs have not
argued for reconsideration of the denial of the attachments and restraints of the INTA Account,
nor do they argue, because they cannot, that the lINTA Account should now be re-attached.
4
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reconsideration. See Letter of D. Hranitzky to J. Griesa, dated Oct. 19, 2009 (Ex. K); Letter of
R. Cohen to J. Griesa, dated Nov. 4, 2009 (Ex. L).
B. The 2010 Orders
On May 28, 201 0, with the accounts still frozen, plaintiffs obtained ex parte
orders of attachment over the same property that had been frozen in 2008, along with other
property held by BNA at JPMorgan Chase and HISBC. See 20 10 Orders (Ex. M); Garnishee
Statement of BNA, New York Branch, dated June 7, 201 0 (Ex. N). The 201 0 Orders were
modified on June I11, 201 0. See June I11, 201 0 Stipulation and Order (Ex. 0).
Plaintiffs now move to confinn the 201 0 Orders. Plaintiffs also argue that they
should be permitted to amend their complaint to take into account new alter ego allegations as of
201 0, while simultaneously continuing to urge the Court to reconsider its conclusion that BNA
was not the alter ego of the Republic as of 2008.
ARGUMENT
POINT I
THE 2010 ORDERS IMPERMISSIBLY REACH PROPERTY THAT IS NOT "USED
FOR A COMMERCIAL ACTIVITY" IN THE UNITED STATES
The 20 10 Orders must be vacated because they reach accounts that are not "used
for" a commercial activity by the Republic in the United States, a requirement for attachment of
foreign state property under the FSIA. See 28 U. S.C. § 161 10(a) & (d). To satisfyr the FSIA
6 used for" test, "the property in question [must be] put into action, put into service, availed or
employedfor a commercial activity, not in connection with a commercial activity or in relation
to a commercial activity." Af-Cap Inc. v. Chevron Overseas (Congo) Ltd., 475 F.3d 1080, 1091
(9th Cir. 2007); see also Conn. Bank of Commerce v. Republic of Congo, 309 F.3d 240, 254 (5th
Cir. 2002) (" [T]he phrase 'used for' in § 161 10(a) is not a mere syntactical infelicity that permits
5
Case 1:07-cv-01910-TPG Document 223 Filed 07/30/10 Page 11 of 24
courts to look beyond the 'use' of property, and instead try to find any kind of nexus or
connection to a commnercial activity in the United States."). Plaintiffs must further establish
commercial activity based on the "actual, not hypothetical, use." EM Ltd. v. Republic of
Argentina, 473 F.3d 463, 484 (2d Cir. 2007), cert. denied, 128 S. Ct. 109 (2007); see also
Colella v. Republic ofArgentina, No. 07-80084 WIJA, 2007 WL 1545204, at **5..6 (N.D. Cal.
May 29, 2007) (the "used for a commercial activity" exception should be "strictly construed";
finding that the Argentine presidential airplane was "employed for strictly non-commercial
activities" even when undergoing maintenance and servicing necessary to achieve its
governmental use).
Critically here, as this Court recognized in its June I1, 201 0 opinion concerning
the "re-frozen" reserves of the Central Bank of Argentina, property that is sought to be attached
or restrained under the FSIA "must have been 'used for a commercial activity' at the time the
writ of attachment or execution is issued." EM, 2010 WL 2399560, at *3 (quoting Aurelius, 584
F.3d at 130) (emphasis in original)). The funds in the ANPCT Account and the Asset Pledge
Account were already attached and restrained on May 28, 20 10, when plaintiffs obtained the
201 0 Orders, and had been so attached and restrained since the Court issued plaintiffs' first
orders to BNA in September 2008. See Letter of D. Hranitzky, dated Oct. 19, 2009 (Ex. K).
Thus, like the BCRA reserves at issue in the Court's June- 1 1 opinion in EM, these accounts were
by definition not being "used for a commercial activity" - or for anything at all - at the time the
20100Orders were issued. See EM, 2010 WL 2399560, at *4("[I]t is difficult to see how asum
of money frozen by stipulation and thereby entirely unavailable to defendants for more than four
years has been 'used' for any activity at all, commercial or not."); id. (" [B] ecause the FRBNY
funds have been frozen for the past four years, neither BCRA nor the Republic has had the
6
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opportunity to use the funds for commercial activity throughout that time . . ."). As this Court
has already held, "to hold ... that frozen assets were 'used for a commercial activity' for FSIA
purposes would be inconsistent with the Second Circuit's recent holding in Aurelius, 584 F.3d at
130-3 1." EM, 2010 WL 2399560, at *4.
Re-attachment of the ANPCT Account is also improper not only because the
account was already frozen, but because the account - which is used to promote the development
of scientific research in Argentina by facilitating the proper disbursement of grant funds received
from the Inter-American Development Bank - was not used for commercial activity by the
Republic even at the time of the original 2008 Orders. See Declaration of Rodolfo Ariel Blasco,
dated Oct. 28, 2008, ¶¶ 3-5 (Ex. H). The Republic hereby repeats and incorporates the
arguments made as to the ANPCT in its memorandum of law, dated October 31, 2008, its reply
memorandum of law, dated January 16, 2009, and in the October 28, 2008 Blasco Declaration
(Exs. H_ j-
Finally, the BNA property held at HSBC and JPMorgan Chase is not property of
the Republic, much less property being used by the Republic for a commercial activity in the
United States. For the reasons below and those discussed by BNA - and as the Court properly
concluded in BNA I, 2009 WL 3149601 at * 6 ("The Republic does not control the day-to-day
operations of this large commercial bank"; plaintiffs' allegations "[do] not add up to a degree of
de facto ownership or control of BNA's funds sufficient to justify an alter ego ruling") - the
property of BNA cannot be attached by plaintiffs.
3 The Republic incorporates and relies on all of its filings to date in 08 Civ. 7974 (TPG), which are
listed in the attached Addendum.
7
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POINT II
BNA AND ITS PROPERTY ARE ENTITLED TO IMMiUNITY UNDER THE FSIA,
AND THAT IMMUNITY WAS NEVER WAIVED
The attachments of BNA property - the Asset Pledge Account and the property
held at HSBC and JPMorgan Chase - must be dissolved, and plaintiffs' repeat attempts to
proceed against BNA must fail as a matter of law, because BNA is entitled to immunity from suit
and its property is immune from attachment under the FSIA.
A. The Republic's Waiver Of Immunity Does Not Provide A Basis For FSIA
Jurisdiction Over BNA Or Its Property
It is fundamental that the FSIA "is the sole basis for obtaining jurisdiction over a
foreign state in the courts of [the United States]." Argentine Republic v. Amerada Hess Shipping
Corp., 488 U.S. 428, 443 (1989). It also cannot be disputed that BNA is an "agency or
instrumentality" of the Republic as defined in 28 U.S.C. § 1603(b). Accordingly, BNA is a
"foreign state" entitled to a presumption of separate legal status from the Republic, see 28 U.S.C.
§ 1603(a); Bancec, 462 U.S. at 628, and it is also "presumptively immune from the jurisdiction
of United States courts." Saudi Arabia v. Nelson, 507 U.S. 349, 355 (1993).
Plaintiffs are not entitled to rely upon the Republic's waiver of its immunity to
overcome the presumption of immunity of BNA. BNA did not waive its immunity from suit in
the United States under § 1605(a)(1) or immunity from judgment execution or pre-judgment
attachment under § § 16 1 0(a)( 1) or (d)( 1). In the 1994 Fiscal Agency Agreement ("FAA") in
connection with which the securities entitlements purchased by plaintiffs were issued, the
Republic waived only its own immunity from suit and consented to the jurisdiction of New York
courts in connection with claims based upon the bonds. See FAA § 22 (Ex. A). The bonds
issued pursuant to the FAA further provided that to the extent that "the Republic or any of its
8
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revenues, assets or properties" shall be entitled to immunity, the Republic waived such
immunity, to the extent permitted by law. See, e.g., Global Note for Bond US0401 14AR 16 at A-
1 5(Ex. D) (emphasis added).
It is clear from the plain language and context of the Republic's waiver that it was
not intended to apply to BNA or BNA's property, or to any other Republic-owned entity or
public entity. Indeed, the waiver was made years before plaintiffs even claim that BNA became
the alter ego of the Republic. As the legislative history of the FSIA confirms, "the foreign state
may waive the immunity of its political subdivisions, agencies or instrumentalities," but such a
waiver on behalf of instrumentalities is not implied from the foreign state's explicit waiver of
immunity only on its own behalf. H.R. Rep. No. 94-1487, at 18 (1976), reprinted in 1976
U.S. C. C.A.N. 6604, 6617 (emphasis added).4 Because the immunity of BNA has not been
waived by contract, this Court lacks jurisdiction over BNA and its property.
B. The Alter Ego Allegations Against BNA Do Not Provide A Basis For FSIA
Jurisdiction
As the Eleventh Circuit squarely held, plaintiffs' claim that BNA is the
Republic's alter ego, "even if substantiated .. . does not bring the claim within one of the
statutorily-enumerated exceptions either to pre-judgment or post-judgment immunity under the
MSA." Butler v. Sukhoi Co., 579 F.3d 1307, 1313 (11Ith Cir. 2009). Plaintiffs nevertheless
maintain that the Republic's waiver of immunity for itself and its property should be imputed to
4 As the caselaw demonstrates, when states intend to waive not only their own immunity, but also
that of their agencies and instrumentalities, they select words that do so. For example, in LNC
Invs., Inc. v. Republic of Nicaragua, 115 F. Supp. 2d 358, 361 (S.D.N.Y. 2000),a fdsub nom.,
LNC Invs., Inc. v. Banco Central de Nicaragua, 228 F.3 d 423 (2d Cir. 2000), Nicaragua waived
sovereign immunity " [t] o the extent that the Republic or any Government Agency has or hereafter
may acquire any immunity from jurisdiction of any court" (emphasis added). Similarly,
Argentina contractually waived "its sovereign immunity and that of its agencies" in the
agreement at issue in Hercaire Int'l, Inc. v. Argentina, 821 F.2d 559, 561 (11Ith Cir. 1987)
(emphasis added).
9
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BNA, based on the alleged alter ego relationship between the Republic and BNA. See, e.g., Pls.'
Mem. of Law in Supp. of Mot. to Confirm Attachment Orders, dated June 3 0, 201 0, at 22. The
logical flaw in this theory is that waivers of sovereign immunity are transaction-specific and
cannot be imputed even to the same entity for purposes of an unrelated claim, let alone to
presumptively separate entities. 5
Here, plaintiffs' claim against BNA has no factual or legal nexus to the bonds or
the Republic's waiver in the bond documents. Cf World Wide Minerals, Ltd. v. Republic of
Kazakhstan, 296 F.3d 1154, 1162-63 (D.C. Cir. 2002) (Kazakhstan waived jurisdictional
immunity under the FSIA for some counts asserted in the complaint but not for others because
the waivers by their terms did not extend to the plaintiff s other claims). The Republic's waiver
by its terms applies to litigation "arising out of or based on the Securities or the [FAA]," and
plaintiffs' claim against BNA and its property does not fall within that scope. Plaintiffs' claim
against BNA and its property are not supported by any allegations establishing BNA's liability
under the bonds, but only by allegations that the Republic controls BNA.
Neither Bancec nor its progeny lends authority to the proposition that, based upon
an alter ego allegation, a sovereign state and its corporate instrumentality can be deemed one and
the same entityfor any and all purposes, so that whatever is done by one could be freely imputed
to the other. Case law establishes the opposite: an "alter ego" relationship is always limited to a
specific context. See, e. g., U S. Fid & Guar. Co. v. Braspetro Oil Servs. Co., 3 69 F. 3d 3 4, 73
n.3 1 (2d Cir. 2004) (the "alter ego" finding made at an earlier stage of the litigation pertained
Plaintiffs have established jurisdiction over their claims against the Republic based on the
Republic' s waiver of sovereign immunity in the bond agreements. This would not eliminate,
however, the requirement that plaintiffs separately establish subject matter jurisdiction in some
other action against the Republic. For instance, if plaintiffs sue on a different contract executed
by the Republic, which contains no waiver provision, the Republic's immunity for purposes of
that claim is preserved, and the United States courts would have no jurisdiction.
10
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only to "the limited context" of overruling a jurisdictional defense under the commercial activity
exception to the FSIA, not to "the larger context of the case as a whole"); Amoco Corp. v.
Comm 'r of Internal Revenue, 138 F.3d 1139, 1147-1149 (7th Cir. 1998) ("for tax purposes the
Government of Egypt and [its instrumentality] EGPC should be treated here as a unitary entity,
even if in other contexts it would be appropriate to recognize EGPC as a separate corporate
body"). The alter ego doctrine must be considered for purposes of a specific dispute and
"4applies only if... the owner exercised complete control over the corporation with respect to the
transaction at issue" and "such control was used to commit a fraud or wrong" that gave rise to
the plaintiff's claim. Bridas S.A.P. C. v. Government of Turkmnenistan, 447 F.3d 411, 416 (5th
Cir. 2006) (emphasis added) (citation omitted); see also Am. Fuel Corp. v. Utah Energy Dev.
Co., Inc., 122 F.3d 130, 134 (2d Cir. 1997) (same).6
Applying the Bancec standards to the facts of this case makes it clear that BNA is
not the Republic's alter ego for purposes of FSIA jurisdiction arising from the bonds. Even
assuming that BNA "is so extensively controlled" by the Republic in terms of BNA providing
financing to the Republic that "a relationship of principal and agent is created" in that context -
which, as the Court correctly held in BNA I, 2009 WL 3149601 at *7, it is not - no such
relationship exists in the context of the bond agreements. Bancec, 462 U.S. at 629.
6 See also Letelier v. Republic of Chile, 748 F.2d 790, 794-95 (2d Cir. 1984) (separate status of
instrumentality not disregarded based on agency prong of Bancec because instrumentality did not
act as agent in the context of the relevant events giving rise to the government's liability);
Alejandre v. Telefonica Larga Distancia de Puerto Rico, Inc., 183 F.3d 1277, 1286-89 (11Ith Cir.
1999) (same).
1 1
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POINT III
PLAINTIFFS CAN NEITHER PLEAD NOR ESTABLISH A
PLAUSIBLE CLAIM OF ALTER EGO
The Court correctly concluded in BNA I that the "power of the Republic to borrow
from BNA is not sufficient to justify holding that BNA was or is the alter ego of the Republic."
2009 WL 3149601, at **6-7. Plaintiffs' new allegations about entirely legitimate loans from
BNA to the Republic in 2009 and 201 0 do nothing to alter that conclusion. In short, plaintiffs
have not pled, and cannot establish, a plausible alter ego claim against BNA, and accordingly the
motions for reconsideration and for leave to amend must be denied. See Ashcroft v. Iqbal, 129 S.
Ct. 1937, 1949-50 (2009); Bell Ati. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (plaintiffs must
plead enough facts "to raise a right to relief above the speculative level"). Nor are plaintiffs
likely to succeed on the merits of their claims against BNA as required for an order of
attachment under CPLR 62 12(a). See N.Y. C.P.L.R. 62 12(a) (McKinney's 2010) ("On a motion
for an order of attachment, or for an order to confirm an order of attachment, the plaintiff shall
show ... that it is probable that the plaintiff will succeed on the merits.").
As explained by BNA, plaintiffs' allegations do not amount to the day-to-day
control over BNA necessary to establish alter ego under the first prong of Bancec (i.e., the
agency prong). Nor does the second prong of the Bancec test - which requires plaintiffs to state
a plausible claim that recognizing BNA's separate status "would work fraud or injustice" -
provide a basis for the 2010 Orders or for any alter ego claim against BNA. The "fraud or
injustice" exception to the presumed separateness of a foreign state instrumentality has been
narrowly construed to apply to situations where the instrumentality "was the vehicle through
which the foreign state incurred the liability," so that it would be unfair to allow the
instrumentality to hide behind a corporate veil from a liability that is essentially its own. Bayer
12
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& Willis Inc., v. Republic of Gambia, 283 F. Supp. 2d 1, 6 (D.D.C. 2003) (citing Alejandre, 183
F.3d at 1286-87; Hercaire, 821 F.2d at 563).7 That is not the case here: BNA did not issue
Argentine bonds, nor was it involved in the Republic's default on plaintiffs' debt. It is therefore
" manifestly unfair" to subject BNA and its property to plaintiffs' claims. Hercaire, 821 F.2d at
565.
Nothing in Bancec itself establishes otherwise. In Bancec, the Cuban
Governm-ent seized and expropriated Citibank's assets. Bancec, the Cuban state-owned bank,
sued Citibank on a letter of credit, and Citibank sought a setoff as compensation for its
confiscated property, the value of which exceeded the amount of Bancec's claim. The Cuban
Govermnment dissolved Bancec, splitting its assets between various entities controlled by the
Government. The Supreme Court allowed Citibank's setoff, finding that the dissolution of
Bancec by the Cuban Government during the litigation and the free disposal of its assets by the
same government thus meant that Bancec was the government's alter ego for purposes of the
litigation. Bancec, 462 U.S. at 631-32. The Supreme Court found that Cuban Government had
caused an injustice by using Bancec "to obtain relief in our courts that it could not obtain in its
own right without waiving its sovereign immunity and answering for the seizure of Citibank's
assets." Id. at 632.
There is no allegation that BNA played any such role here. BNA did not sue
plaintiffs in a U.S. court, nor was it used by the Republic in any action against plaintiffs.
Likewise, plaintiffs do not, and cannot, allege that BNA was either created or dissolved by the
Republic for a specific purpose of avoiding the district court's jurisdiction or avoiding liability.
7 Another potential situation of "fraud or injustice" is where the "corporate form" of the
instrumentality "is interposed to defeat legislative policies." Bancec, 462 U.S. at 629-30.
Plaintiffs do not and cannot make any such allegations here.
13
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Given no allegation of involvement by BNA in the relevant events underlying
plaintiffs' actions based on their security entitlements, there can be no basis for a finding that
BNA acted as the Republic's alter ego in this litigation, or that respecting BNA's presumptive
immunity from the Republic's debts on the bond instruments would "work fraud or injustice."
Cf. Pravin Banker Assocs., Ltd. v. Banco Popular del Peru, 9 F. Supp. 2d 300, 305 (S.D.N.Y.
1998) (finding that the record did "not establish the type of injustice that motivated the Court in
[Bancec]" given no allegation that Peru's instrumentality "was responsible for the underlying
conduct giving rise to Peru's liability" or that "Peru brought an action in this Court seeking to
enforce its rights, while simultaneously seeking to avoid the consequences"); see also Casale v.
Comm 'r of Internal Revenue, 247 F.2d 440, 443 (2d Cir. 1957) ("Despite the use of 'sham' and
other phrases to characterize the particular transaction under review, the record does not indicate
any contention by the Commissioner that the Corporation itself is a sham or alter ego for all
purposes.").
That plaintiffs may not be able to enforce their j udgments against the Republic is
a plainly insufficient basis to disregard BNA's separate legal personality. 8 As the Alejandre
court held: while the "concern about the injustice of preventing plaintiffs from collecting their
judgment is understandable," it is "not the type of injustice that concerned the Bancec Court,"
8 The Court's decision in EM Ltd. v. Republic of Argentina, No. 03 Civ. 25 07 (TPG), 201 0 WYL
1404119 (S.D.N.Y. Apr. 7, 20 10), appeal docketed, No. 10-1487-cv(L) (2d Cir. Apr. 21, 20 10)
involved different alleged facts and does not change this analysis. See id. at *29. Moreover, the
Republic's full disclosure of the limitations on enforcement of judgments against a foreign state
and plaintiffs' undeniable awareness of these restrictions under the FSIA when they purchased
the bond interests at steep discounts, either after or in anticipation of the Republic's default,
defeats any claim of "fraud or injustice." The Republic repeatedly disclosed in the underlying
bond documentation that "[tlhe Republic of Argentina is a foreign sovereign state. Consequently,
it may be difficult for investors to obtain or realize upon judgments of courts in the United States
against the Republic." See, e.g., Prospectus for Global Bond USOlI 104AR16, dated Jan. 6, 1997,
at 2 (Ex. B), Prospectus Supplement for Global Bond USOl1 104ARI16, dated Jan. 22, 1997, at S-2
(Ex. C). Plaintiffs do not even argue (because they cannot) that the Republic's disclosure
provides a basis for finding "fraud or injustice."
14
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i.e., "the injustice that would result from permitting the foreign state to reap the benefits of our
courts while avoiding the obligations of international law." 183 F.3d at 1286 & n.22 (quoting
Bancec, 462 U.S. at 632-34). The concern about collection is "present in every case in which the
plaintiff seeks to hold an instrumentality responsible for the debts of its related government," and
"[a] llowing the Bancec presumption of separate juridical status to be so easily overcome would
effectively render it a nullity." Id. at 1286-87. Consistent with this reasoning, the Alejandre
court found no "injustice" in preserving the separate status of the government's instrumentality
in "the absence of any evidence that [it] was involved in the violation" that gave rise to the
lawsuit. Id. at 1287; accord Letelier, 748 F.2d at 791 ("We reverse although we recognize that
our decision may preclude the plaintiffs from collecting on their judgment. . . . To rule
otherwise here would only illustrate once again that hard cases make bad law.").
The same result is required here: BNA's lack of connection to the Republic's
bond default defeats any claim that BNA's property is subject to plaintiffs' claims. Indeed,
disregarding the corporate separateness of BNA would work an injustice on the bank itself, as
well as its third party creditors - e.g., customers, employees, vendors, service providers - who
are owed money and should be paid. Id., 748 F.2d at 795 n. 1 (expressing concern for non-party
creditors of LAN in case where "no equitable set-off [was] involved ... as the net result [would]
be an out-of-pocket loss to LAN"; "To adopt a rule facilitating an easy piercing of the corporate
veil threatens the interests of such unsuspecting third parties.").
15
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CONCLUSION
For the foregoing reasons and the reasons stated by BNA, the Court should grant
defendants' motions to vacate the 2010 Orders, and deny plaintiffs' motions (i) to confirm the
201 0 Orders, (ii) for reconsideration of BNA I, and (iii) for leave to amend the alter ego
complaint against BNA.
Dated: New York, New York Respectfully submitted,
July 30, 2010
CLEARY T/7IEB STEEN & MLTON LLP
By: _______________
Jonathan I. Blackman (jblackmnan~cgsh.com)
Carmine D. Boccuzzi (cboccuzzi~cgsh.com)
Christopher P. Moore (cmoore~cgsh.com)
One Liberty Plaza
New York, New York 10006
(212) 225-2000
Attorneys for the Republic of Argentina
16
Case 1:07-cv-01910-TPG Document 223 Filed 07/30/10 Page 22 of 24
ADDENDUM
1. Memorandum of Law of the Republic of Argentina in Support of Motion to
Vacate Ex Parte Restraining Orders and Orders of Attachment and in Opposition
to Plaintiffs' Motion to Confirm, dated Oct. 31, 2008
2. Declaration of Amy Chung, dated Oct. 31, 2008, and exhibits
3. Declaration of Rodolfo Ariel Blasco, dated Oct. 28, 2008
4. Declaration of Carlos Alberto Paz, dated Oct. 30, 2008
5. Reply Memorandum of Law of the Republic of Argentina in Further Support of
Motion to Vacate Ex Parte Restraining Orders and Orders of Attachment and in
Opposition to Plaintiffs' Cross-Motion for Issuance of Writ of Execution Against
Certain Property Subject to the Orders, dated Jan. 16, 2009
6. Memorandum of Law of the Republic of Argentina in Support of Its Motion to
Dismiss Pursuant to Rule 12(b)(6), dated Apr. 8, 2009
7. Declaration of Amy Chung, dated Apr. 8, 2009, and exhibit
8. Reply Memorandum of Law of the Republic of Argentina in Further Support of
Its Motion to Dismiss Pursuant to Rule 12(b)(6), dated May 29, 2009
9. Memorandum of Law of the Republic of Argentina in Opposition to Motion for
Reconsideration, dated Nov. 5, 2009
Case 1:07-cv-01910-TPG Document 223 Filed 07/30/10 Page 23 of 24
CERTIFICATE OF SERVICE
I, Richard V. Conza, an attorney admitted to practice in the State of New York
and the Managing Attorney of the firm of Cleary Gottlieb Steen & Hamilton LLP, hereby certify
that:
On the 30Oth day of July 201 0, I have caused service of the Memorandum of Law
of the Republic of Argentina in Support of Motion to Vacate the 201 0 Orders and in Opposition
to Plaintiffs' Motions (i) to Confirm the 20 10 Orders; (ii) for Reconsideration of Alter Ego
Decision; and (iii) to Amend Alter Ego Complaint, dated July 30, 2010, to be made by Federal
Express and by electronic filing with the Clerk of the Court using the CMIECF System, which
will send a Notice of Electronic Filing to all parties with an e-mail address of record, who have
appeared and consent to electronic service in this action.
Dated: New York, New York
July 30, 2010
Case 1:07-cv-01910-TPG Document 223 Filed 07/30/10 Page 24 of 24
