BUENOS AIRES, Argentina — Argentina filed a long-shot appeal to the U.S. Supreme Court on Tuesday asking the justices in Washington to avert an "economic catastrophe" by overturning lower court rulings that could force the South American government to default on billions of dollars in debts.
Making Argentina pay cash in full to investors who didn't accept bond swaps in exchange for defaulted debt could destabilize the global economy by making other voluntary debt restructurings "substantially more difficult, if not impossible," the petition said.
"Full payment of the holdouts would cut Argentina's reserves approximately in half, an unimaginable result for any nation," Argentina's lawyers argued. "Any sovereign would protest if a foreign court issued an extraterritorial order threatening its creditors and citizens and coercing it into turning over billions of dollars from its immune reserves."
By ignoring the federal sovereign immunity law that normally protects other countries' assets from seizure outside the United States, the lower court decisions also could make U.S. assets overseas vulnerable to similar seizures by other governments, the petition said.
Hedge fund billionaire Paul Singer won a judgment of $1.3 billion plus interest in the debt dispute, but has never been able to collect despite sending lawyers around the world to try to seize Argentine assets.
The courts in New York accepted his argument that Argentina has been a deadbeat nation and a serial violator of U.S. court rulings.
But Argentina's lawyers said the lower courts' remedy is deeply flawed, because it gives Argentina two equally devastating choices:
— Argentina could pay cash in full to plaintiffs led by Singer's Cayman Islands-based NML Capital Ltd. as the courts ordered and then watch holders of more than "$15 billion in defaulted debt and accrued interest" rush to make similar claims on Argentina's dwindling reserves.
— Or Argentina could stand firm against what the petition calls a violation of its sovereignty and see a New York judge block its regular payments on $24 billion in debt held by the 92 percent of bondholders who accepted new Argentine bonds at steep discounts in 2005 and 2010.
"The Second Circuit recognized that it could not directly command Argentina to pay, but held that it could achieve the same result by giving Argentina a choice: pay Respondents or suffer a calamity," the petition said.
"The 'choice' between satisfying a monetary obligation ... and defaulting on $24 billion of exchange bond debt — threatening draconian consequences for the Argentine people — is no choice at all, let alone something a district court can impose on a foreign sovereign," the petition added.
The Supreme Court already agreed to hold an April 21 hearing on a ruling enabling NML to force several banks to disclose Argentine assets. But that's just a side issue — Tuesday's request asks the justices to examine the heart of the case, which will set a precedent for all the remaining interests that hold debts Argentina hasn't paid since its 2001 crisis.
A negotiated settlement could head off a crisis, but there have been no formal talks.
Lawyers for NML on Tuesday denied media reports in Argentina suggesting that Singer would not talk with the Argentine government until the Supreme Court rules.
"It is a complete fabrication and totally false — an unsourced, made-up story apparently desperate to explain why Argentina still refuses to negotiate a resolution with its creditors," said Matthew D. McGill, a partner at Gibson, Dunn & Crutcher. "NML has said numerous times, publicly and privately, that it is ready and willing to negotiate a resolution whenever Argentina is ready to come to the table."
Associated Press writer Mark Sherman in Washington contributed to this report.