The recent case of Knighthead Master Fund is another that arises out of payment defaults by the Republic of Argentina (see our June 2014 update for details of the US proceeding). This proceeding involved payments by the Republic to a bond trustee that were held on trust for bondholders in accordance with the terms of a trust indenture that was governed by English law. 

An injunction had previously been granted by a New York court restraining the trustee from paying the bondholders. Bondholders applied to the English Court for a declaration that the funds transferred to the trustee's account were held on trust for the bondholders and that, because the trust was governed by English law, the trustee's obligations were unaffected by the New York court's injunction. 

The High Court held that on the plain construction of the trust indenture and terms and conditions of the bonds, the payments made to the trustee were held on trust for the bondholders.  The Court emphasised that it was "very concerned not to intrude improperly into matters which are before the United States' Courts" but concluded that its decision did not do so because it related to the status of the funds as a matter of English law and issues of English law had not been raised before in the New York court.

See Court decision here.