Republic of Argentina v. Weltover, Inc. - Oral Argument - April 01, 1992

Republic of Argentina v. Weltover, Inc.

Media for Republic of Argentina v. Weltover, Inc.

Audio Transcription for Opinion Announcement - June 12, 1992 in Republic of Argentina v. Weltover, Inc.

Audio Transcription for Oral Argument - April 01, 1992 in Republic of Argentina v. Weltover, Inc.

William H. Rehnquist:

We'll hear argument next in No. 91-763, Republic of Argentina and Banco Central v. Weltover, Inc., et al. Spectators are admonished to refrain from talking while you're in the courtroom.

The Court remains in session.

Mr. Davis, you may proceed.

Richard J. Davis:

Mr. Chief Justice, and may it please the Court:

The question we are addressing today involves the availability of U.S. courts to dispute between two Panamanian and one Swiss entity on the one hand, and the Government of Argentina and its Central Bank on the other hand.

For this exception to apply two requirements must be satisfied.

First it must be demonstrated that when the Central Bank financed its own obligations to provide dollars under a foreign exchange rate assurance program through the issuance of bonds instead of supplying the promised foreign exchange, that the Central Bank committed a commercial as opposed to a sovereign act.

Second, it must be demonstrated that there is a direct effect in the United States from failure to pay these non U. S. entities when no United States person suffered any financial loss and the United States' connection with the transaction is that under the bonds New York became the place of payment after being selected by these plaintiffs from four possible choices.

Antonin Scalia:

Mr. Davis, what is a Bonod?

Is that an acronym for something?

Richard J. Davis:

It is the actual name that was given to the instrument, Bonod as opposed to bond.

For our purposes it is a bond, it is just the official name of the bond.

Antonin Scalia:

They just made up a whole new word?

It doesn't stand for anything, Bonod?

Richard J. Davis:

It does not.

It was delivered by the Central Bank as one of two alternative instruments.

They had a Bonod and a promissory note in 1982 when the Central Bank's obligation had matured under a program that it had implemented in 1981 to provide foreign exchange at a fixed exchange rate.

This was part of the Central Bank's primary functions because when we talk about the Argentine Central Bank we are talking about a classic central bank in the sense that it's explicitly prohibited from participating in commercial enterprises, and one of its primary responsibilities is the issuance, regulating the foreign exchange markets, determining how foreign exchange should be allocated, establishing foreign exchange rates and policies, and providing counsel in those areas to the Republic.

In 1981 the government, the Central Bank created a program where for new and renewed loans it fixed through a... use of a specified formula the exchange rate that would be used when these various debts matured.

It did this to provide a cut off of credit to, foreign credit to Argentina because of the rapid and unpredictable devaluation of the Argentine currency.

When the Central Bank's obligation under this 1981 program matured and it was obligated to provide dollars to, as the foreign exchange in connection with its functioning as the government's responsible agent for foreign exchange, it didn't have the necessary reserves and thus what the Central Bank did is it issued two types of instruments, the promissory note and the issue, the instrument at issue in this case, the Bonod.

In considering the first issue, therefore, whether the Central Bank's issuance of the Bonod was commercial or sovereign, we have an instrument with the following characteristics.

One, it was issued by the Central Bank.

It did not finance the acquisition of any goods.

It in of itself raised no money.

It financed, as I said before, the Central Bank's own obligation under the 1981 foreign exchange rate program.

And unlike the promissory note which I referred to as the other instrument that was issued roughly contemporaneously with the Bonod, it contained no language purporting to submit to jurisdiction anyplace.

David H. Souter:

If we're going to look that far behind the surface of the Bonod, don't... that its ultimate objective was to finance foreign commercial exchange in trading relationships between Argentina and other parts of the world?

Richard J. Davis:

But it was doing it not as... you know, sometimes some of the legislative history talks to in terms of entering the commercial marketplace.

It was doing it by--