BUENOS AIRES – The U.S. Supreme Court rejected an appeal by two investment funds seeking to seize $105 million in deposits of the Central Bank of Argentina in New York. The two parties were demanding for the cessation of debt payment from Sovereign of the South American country that dates back to a decade ago.
The judges held a ruling in a federal appeals court in New York indicating that U.S. laws protect the property of foreign central banks used for traditional activities of other central banks, whether the entity is independent or not the state . The appeals court ruled that the $105 million cannot be frozen by the limits imposed by the foreign sovereign immunity law from 1976.
The ruling said the Central Bank and Argentina did not waive its immunity.
The disputed deposits, which are in the U.S. Federal Reserve in New York, had been frozen since 2006. The case was part of a long dispute by the cessation of payment of sovereign debt of Argentina that amounts to $100 million.
The two U.S. funds, EM Ltd and NML Capital Ltd, were the parties that appealed to the Supreme Court.
The funds said the ruling of the lower house threatens to create problems in financial markets and is very important for billions of dollars of financial transactions to be undertaken in future years.
The decision of the court of appeals could have implications for the future of central banks in other countries, the possibility of a debt crisis, cessation of payments, and related litigation in New York.
Italian holders of Argentine bonds supported the appeal of mutual funds to the Supreme Court.
Argentina and Central Bank asked the Supreme Court to reject the appeal and said there was no reason for judges to review the ruling.
Lawyers of the U.S. government filed a brief with the Supreme Court. The brief opposed the appeal and said the appeals court had ruled correctly that the Central Bank funds were immune from being frozen or seized.
Government lawyers said that the ruling did not interfere with the decision of the Supreme Court or any other court of appeals.
The case was the second attempt by the two creditors to freeze and seize the dollar reserves of the Central Bank of Argentina in New York after receiving $2 million in judgments in the past eight years.
The appeals court rejected a previous attempt in a ruling that assessed whether the use of reserves to repay debts to the International Monetary Fund (IMF) was valid. In 2007, the Supreme Court did not meddle in that case.
The Supreme Court rejected the final appeal without comment.