Nat'l Union Fire Ins. v. People's Republic of Congo, 729 F. Supp. 936, 944, n.5 (S.D.N.Y. 1989), (quoting "Address By Secretary of the Treasury Nicholas F. Brady to the Brookings Institution and the Bretton Woods Committee") (emphasis added).
As this Court noted in Pravin I, the limited record before the Court suggests that the Clinton Administration policy endorses the Brady Plan's approach to foreign debt restructuring. The record also indicates, however, that the Brady Plan is essentially a call for voluntary participation by creditor banks in negotiations with foreign debtor nations to restructure their debt. The Brady Plan does not abrogate the contractual rights of creditor banks, nor does it compel creditors to forbear from enforcing those rights while debt restructuring negotiations are ongoing, or prohibit them from "opting out" of settlements resulting from such negotiations. See A.I. Credit Corp. v. Government of Jamaica, 666 F. Supp. 629 (S.D.N.Y. 1987).
As further evidence of a shift in United States policy on international debt since Allied was decided, Defendants direct this Court's attention to the Department of Justice's amicus brief in the action CIBC Bank and Trust Co. (Cayman) Ltd., v. Banco Central Do Brasil, Banco Co Brasil, S.A. and Citibank, N.A., 886 F. Supp. 1105, 94 Civ. 4733 (S.D.N.Y. 1995) (the "CIBC Statement of Interest"). The CIBC Statement of Interest notes that the dramatic increase in the number of secondary market purchasers of sovereign debt since Allied was decided has created a climate in which sovereign debtors can no longer count on their creditors being like-minded, similarly situated financial institutions susceptible to peer pressure to negotiate debt restructuring. Noting that purchasers of sovereign debt on the secondary market do not have the same long-range interests as the commercial bank creditors who were the original lenders, the Justice Department expressed concern that the processes that have evolved to deal with sovereign debt problems could be harmed by the attempts of secondary market purchasers to use litigation to extract concessions from sovereign debtors that they were unable to obtain from them through negotiation.
On the other hand, the CIBC Statement of Interest notes that the new class of secondary market purchasers of sovereign debt "plays an important and useful role in the ongoing efforts to deal with sovereign debt by providing added market liquidity." In addition, the CIBC Statement of Interest notes "the Brady Plan's insistence that contractual terms of debt instruments be honored" and emphasizes that "the Brady Plan does not condone a debtor's unilateral repudiation of the stipulated value of a contract or any of the terms of a contract."
Most importantly, however, the CIBC Statement of Interest addresses a factual situation distinguishable from the facts of the instant case. The plaintiff in CIBC sought to accelerate its Brazilian debt holding notwithstanding an agreement among Brazil and its creditors that the debt could only be accelerated at the request of banks holding more than 50% of the aggregate unpaid principal. The plaintiff's request to accelerate the debt was thus "premised on an attempt to read into the contract a term restricting the rights of another creditor. . ." CIBC Statement of Interest at 19. The CIBC Statement of Interest emphasizes that "the United States does not wish to see a creditor use United States courts as a means of amending the terms of sovereign debt contracts." CIBC Statement of Interest at 17 (emphasis added). In contrast, Pravin is not seeking an amendment of the terms of its debt instrument but, rather, enforcement of that instrument as written.
In addition, it appears from the limited facts of the CIBC case presented to this Court, that the plaintiff/creditor in CIBC had participated in the negotiations leading to, and had signed, together with the majority of Brazil's international commercial creditors, a general debt restructuring agreement, but then sought, through litigation, to amend the terms of the restructuring agreement. In contrast, Pravin has never signed a general debt restructuring agreement, has not participated in any restructuring negotiations and is not represented on the Bank Advisory Committee. In light of this fact, the CIBC Statement of Interest's observation that secondary market sovereign debt purchasers often have divergent interests from original lender creditors cuts in favor of Pravin. Because Pravin's interests may well diverge from those of the creditor banks comprising the Bank Advisory Committee, the Committee does not provide Pravin with a forum in which to exert influence on the negotiations affecting the restructuring of short term working capital debt.
The most that can be inferred from the CIBC Statement of Interest with reference to the circumstances at issue here is that since the relief sought by Pravin does not exceed the four corners of the Letter Agreement, and as long as any potential harm to the debt restructuring being negotiated predominantly by primary creditors is less than the salutary effect that enforcement would have on the secondary market by indicating that similar foreign debt agreements remain enforceable, enforcement of such agreements comports with present United States policy.
There is yet another reason why the CIBC Statement of Interest is, at best, inconclusive insofar as it may pertain to the policy interests at stake in the instant action. It is the prerogative of the executive branch to intervene, pursuant to 28 U.S.C. § 517,
when significant United States interests may be affected by the outcome of a particular action. As the CIBC Statement of Interest notes, "It is within the discretion of the Attorney General to determine when interests of the United States are presented and whether to file a Statement of Interest on behalf of the United States."
In light of the Executive Branch's discretion to determine when United States interests are at stake, this Court takes notice of the fact that the Department of Justice has not submitted a statement of interest in the instant action. In the absence of an authoritative statement of policy from the Executive Branch, this Court remains bound by the authority of the Second Circuit's decision in Allied Bank Int'l v. Banco Credito Agricola, 757 F.2d 516 (2d Cir. 1985). Where there is a controlling legal standard for adjudicating a claim, this Court should not interpret silence on the part of the Executive Branch as grounds for judicial abstention on grounds of international comity.
The Assignment From Mellon Bank to Pravin is Valid
Defendants also contend that Mellon Bank's assignment to Pravin is invalid under the terms of the Letter Agreement. In support of this argument Defendants refer to paragraph 5 of the Letter Agreement, which provides in relevant part:
This letter agreement shall be binding upon you [Banco Popular], your successors and assigns, and shall inure to the benefit of us [Mellon], our successors, transferees and assigns. We [Mellon] may assign all or any part of our interest in this letter agreement to any financial institution; . . .
Defendants argue that Peru, by assenting to this language,
"wanted to limit the parties to which its state-owned entities were indebted and to which it was providing its guarantee." Defendants further contend that Pravin is not a "financial institution" within the meaning of the Letter Agreement. As an initial matter, Defendants' contention (on page 2 of their Supplemental Reply Memorandum) that the assignment is void because Pravin is not a "financial institution" is contradicted by their statement (on page 4 of Defendants' Supplemental Reply Memorandum) that "Peru is not contending that Pravin cannot ever enforce this assignment, just that enforcement should be postponed. . ."
Under New York law, where "clear language is used, and the plainest words have been chosen," parties may prohibit the assignment of a contract. Allhusen v. Caristo Constr. Corp., 303 N.Y. 446, 103 N.E.2d 891 (1951); Macklowe v. 42nd Street Dev't. Corp., 170 A.D.2d 388, 566 N.Y.S.2d 606, 606-07 (1st Dep't 1991). In the absence of clear language expressly prohibiting assignment, however, contracts are freely assignable. See Sullivan v. Int'l Fidelity Ins. Co., 96 A.D.2d 555, 465 N.Y.S.2d 235, 238 (2d Dep't 1983) (assignment of contract was valid because contract did not contain language indicating that assignments made without consent shall be void). Paragraph 5 of the Letter Agreement does not contain any express words of limitation on assignability. Moreover, none of the parties to the Letter Agreement undertook to define "financial institution," indicating that the term, as used in paragraph 5, is one of general description rather than a precise restriction on the type of party that may be an assignee of Mellon under the Letter Agreement. This Court concludes that the assignment was proper.
In any event, both Peru, through its agent Banco de la Nacion, and Banco Popular, were duly notified on December 12, 1990 of the assignment from Mellon to Pravin. By fax to Pravin dated December 20, 1990, Banco Popular acknowledged both Mellon's assignment to Pravin and Pravin's subsequent assignments to its assignees. Thereafter, Banco Popular made interest payments on the debt directly to Pravin. These actions would suffice to raise an estoppel against defendants even if this Court were to conclude, which it does not, that the assignment was improper at the time it was made.
For all the reasons stated above, Defendants' motion to dismiss or stay this action is hereby denied. Pravin's motion for summary judgment in its favor regarding the enforcement of Defendants' obligations under the Letter Agreement and the Guaranty is hereby granted.
It is so ordered.
New York, N. Y.
August 24, 1995
ROBERT W. SWEET