Republic of Argentina v. NML Capital Ltd., No. 12-842, 573 U.S. ___ (2014) [click for opinion]

The Foreign Sovereign Immunities Act (“FSIA”) replaced an executive-driven, factor-intensive, loosely common-law-based immunity regime with a comprehensive statutory framework for resolving any claim of sovereign immunity. The FSIA starts with the presumption that a foreign sovereign is immune from suit unless there is a statutory exception to immunity. In NML, the Supreme Court had the opportunity to address the issue of immunity in the context of post-judgment discovery.

After Argentina defaulted on its bonds, NML, one of Argentina’s bondholders, prevailed in eleven debt-collection actions that it brought against Argentina in the Southern District of New York. In 2010, in order to locate Argentina’s assets and accounts, learn how Argentina moves its assets through New York and around the world, and accurately identify the places and times when those assets might be subject to attachment and execution in the U.S. or elsewhere, NML served subpoenas on two non-party banks, Bank of America and Banco de la Nación Argentina.

The district court granted NML’s motions to compel compliance with the subpoenas and stated that it would serve as a “clearinghouse for information” in NML’s efforts to find and attach Argentina’s assets. The Second Circuit affirmed.

Likewise did the Supreme Court. As the court explained, the FSIA confers on foreign states two kinds of immunity. The first, jurisdictional immunity, was waived in the bonds themselves. The second, execution immunity, generally shields from attachment, arrest, and execution the property in the United States of a foreign state. The FSIA does not, the Supreme court noted, contain a third provision forbidding or limiting discovery in aid of execution of a foreign-sovereign judgment debtor’s assets.

Argentina argued that discovery of assets that do not fall within an exception under the FSIA to execution immunity -- plainly true of a foreign state’s extraterritorial assets -- is forbidden. Put another way, if a judgment creditor may not ultimately execute a judgment against certain property, then it should have no right to pursue discovery of information pertaining to that property. The Supreme Court rejected the argument for the simple reason that there was a need for the subpoenas because NML did not yet know what property Argentina has and where it is, let alone whether it is executable under the relevant jurisdiction’s law. Accordingly, the discovery relating to Argentina's assets was permitted.