"The IMF's managing Director has withdrawn her recommendation that the IMF Executive Board file amicus curiae brief in the Argentina case, following the US authorities' decision to no longer support the filing at this stage," the spokesman said. (Agencies)
Argentina appealed to the US Supreme Court in June to overturn a New York federal judge's ruling in favor of private creditors seeking bond repayment from the country's 2001 debt default.
The IMF had planned to submit the "friend of the court" brief to the highest US court, a type of brief filed by someone who is not party to a case. Lagarde's recommendation for the filing was "premised" on the support of the United States, the IMF's largest stakeholder, the Fund spokesman said.
Without US support, the action "would not be appropriate, under the Fund's legal and policy framework, for the IMF to file this brief without that support," he said. "The lack of US support in this case could undermine the effectiveness of the Fund's filing" and put the IMF in the middle of a dispute between two members, breaching its duty of neutrality, he said.
The conclusion that it would be improper to file a brief without support from the court's host country would be the same no matter which country was involved, he added. US officials were not immediately available to comment. The New York judge last October ordered Argentina to pay USD 1.3 billion to the two US hedge funds, MNL Capital and Aurelius, which have refused to accept the country's debt restructuring.
Argentina defaulted on USD 100 billion in debt in 2001. It later was able to get acceptance from about 92 percent of its bondholders for two restructurings, in 2005 and 2010. The funds, which Buenos Aires labels "vulture funds," had bought their bonds on the market at a discount and are seeking full repayment.
According to the hedge funds, the value of the bonds is now USD 1.47 billion. Argentina has contended that its offer to the two hedge funds satisfied the requirements of the "pari passu" or equal treatment clause under which the bonds were issued.
Buenos Aires fears that full repayment would require it to repay the restructured bonds in full as well, which some analysts say could force the country back into default.
"The IMF's managing Director has withdrawn her recommendation that the IMF Executive Board file amicus curiae brief in the Argentina case, following the US authorities' decision to no longer support the filing at this stage," the spokesman said.