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Capital Ventures International v. Republic of Argentina

January 13, 2009; as amended March 19, 2009

CAPITAL VENTURES INTERNATIONAL, PLAINTIFF-APPELLANT,
v.
REPUBLIC OF ARGENTINA, DEFENDANT-APPELLEE.



SYLLABUS BY THE COURT

Appeal from a judgment of the United States District Court for the Southern District of New York (Griesa, J.) dismissing, for lack of subject matter jurisdiction, those claims of plaintiff-appellant Capital Ventures International that relate to bonds issued by defendantappellee Republic of Argentina under German law, and denying Capital Ventures International's request for statutory prejudgment interest on unpaid interest payments that would have come due on United States dollar denominated bonds issued by the Republic after the acceleration of those bonds. We affirm in part and vacate in part, finding that there is subject matter jurisdiction over the claims relating to the German bonds because Argentina explicitly waived its sovereign immunity to suit in United States courts on those claims, and that the district court correctly determined that no interest payments became due on the United States bonds after they had been accelerated.

The opinion of the court was delivered by: Katzmann, Circuit Judge

Argued: November 10, 2008

Before SOTOMAYOR, KATZMANN, and HALL, Circuit Judges.

This case calls upon us in principal part to determine whether the Republic of Argentina explicitly waived its sovereign immunity from suit in the United States as to claims relating to bonds issued by Argentina under German law.

Plaintiff-appellant Capital Ventures International ("CVI") appeals from a judgment of the United States District Court for the Southern District of New York (Griesa, J.) dismissing, for lack of subject matter jurisdiction, those of CVI's claims that relate to bonds issued by defendant-appellee Republic of Argentina ("Argentina" or "the Republic") under German law, and denying CVI's request for statutory prejudgment interest on unpaid interest payments that would have come due on United States dollar denominated bonds issued by the Republic after the acceleration of those bonds. We find that there is subject matter jurisdiction over the claims relating to the German bonds because Argentina explicitly waived its sovereign immunity to suit in United States courts on those claims, and that the district court correctly determined that no interest payments became due on the United States bonds after they had been accelerated. Accordingly, we affirm in part and vacate in part.

FACTUAL BACKGROUND

CVI is the beneficial owner of certain bonds issued by the Republic of Argentina. One group of the bonds owned by CVI is governed by German law, and these bonds are denominated in Deutsche Marks and Euros ("the German bonds"). Each German bond was issued pursuant to its own offering circular. Section 13 of the offering circulars provides in part:

(3) The Republic hereby irrevocably submits to the non-exclusive jurisdiction of the District Court (Landgericht) in Frankfurt am Main and any federal court sitting in the City of Buenos Aires as well as any appellate court of any thereof [sic], in any suit, action or proceeding against it arising out of or relating to these Bonds. The Republic hereby irrevocably waives -- to the fullest extent it may effectively do so -- the defense of an inconvenient forum to the maintenance of such suit or action or such proceeding and any present or future objection to such suit, action or proceeding whether on the grounds of venue, residence or domicile. The Republic agrees that a final judgment in any such suit, action or proceeding in the courts mentioned above shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or any other method provided by law.

(4) To the extent that the Republic has or hereafter may acquire any immunity (sovereign or otherwise) from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise), with respect to itself or its revenues, assets or properties, the Republic hereby irrevocably waives such immunity in respect of its obligations under the Bonds to the extent it is permitted to do so under applicable law.*fn1 The remainder of the bonds owned by CVI are denominated in United States dollars ("the U.S. bonds") and were issued pursuant to a Fiscal Agency Agreement ("FAA"). The FAA provides that Argentina will "pay interest" on the principal of the U.S. bonds "until the principal . . . is paid." It also sets forth periodic dates on which interest is due. The FAA contains an acceleration provision, which does not specify whether or not interest is due on the periodic dates after any acceleration.*fn2

In December 2001, Argentina declared a moratorium on the payment of principal and interest on its foreign debt and stopped paying principal and interest on the bonds at issue here. In response to the default, on various dates in 2005 and 2006, CVI accelerated the bonds it owned, making the principal immediately due.

The instant lawsuit was filed in the Southern District on April 25, 2005. After various preliminary proceedings, the district court granted summary judgment in favor of CVI on the claims related to the U.S. bonds on May 17, 2006. Subsequently, on February 15, 2007, the district court held an oral argument on various open issues, including Argentina's motion to dismiss the claims related to the German bonds for lack of subject matter jurisdiction and CVI's request for statutory prejudgment interest on certain interest payments it claimed were due after acceleration of the U.S. bonds.

At the oral argument, the district court ruled that it lacked subject matter jurisdiction over the claims relating to CVI's German bonds because Argentina was entitled to sovereign immunity with respect to those claims; the district court accordingly dismissed the German bond claims. Construing section 13(3) and (4) of the offering circulars, the district court concluded that Argentina had not explicitly waived its sovereign immunity in U.S. courts in section 13. Instead, it held that subsection 3 was a limited submission to the jurisdiction of courts in Frankfurt and Buenos Aires. The district court reasoned that "whatever [subsection 4] means it should not be read as reading out of this instrument the reference to Frankfurt and the city of Buenos Aires." Accordingly, while acknowledging that the language of subsection 4 was "very broad," the district court ultimately held that "where there is an expressed grant of jurisdiction in specific places . . . a general waiver of sovereign immunity [such as in subsection 4] does not mean that . . . suit can be brought any place in the world." Having found that Argentina did not waive its sovereign immunity to suit in U.S. courts, the district court dismissed the German bond claims and concomitantly denied CVI's motion for summary judgment on those claims.

As to CVI's request for prejudgment interest, the district court found that the FAA did not require the continued payment of interest after the principal was accelerated, because the act of accelerating the principal so that "[i]t is due now" is inconsistent with interest that "continue[s] to accrue quarterly" where the contract does not specifically provide that contractual interest continues to accrue. Accordingly, the district court only awarded prejudgment interest, at the contractual rate, for the ...


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