A US hedge fund has obtained a freeze order on Argentine embassy bank accounts in Belgium as it pursues a $1.3 billion debt default case against Buenos Aires, sources said Thursday.
The move is the latest chapter in a long, and so far unsuccessful, battle by two US hedge funds that are demanding full repayment of debt defaulted on by Argentina in 2001.
“We have been informed of a preventive closure of one or more bank accounts held by the Argentine embassy,” Belgian foreign ministry spokesman Hendrik Van De Velde said.
“We were informed of this order by a notary… acting for a foreign entity in connection with a foreign default,” Van de Velde said, without giving further details.
Sources close to the case confirmed that hedge fund NML Capital was behind the effort to have the accounts frozen in at least two banks in Belgium, using the argument that the accounts were government-controlled but not protected embassy accounts.
While not directly confirming the action, an NML spokesman blamed Buenos Aires for not negotiating with its creditors.
“The government of Argentina steadfastly refuses to sit down with creditors and negotiate a resolution of the billions of dollars in bond claims that remain outstanding since the country’s 2001 default,” the spokesman said.
“In the absence of a negotiated settlement, our recourse includes locating and attaching Argentine assets wherever we can find them.”
NML and Aurelius Capital Management have been trying to force Argentina to pay off some $1.3 billion in defaulted bonds they hold.
They are backed by a 2012 New York court ruling that says the country cannot pay holders of its restructured bonds — the majority of its creditors — unless it first pays the two funds.
Argentina refuses to pay the hedge funds, arguing that they lost their claim when they refused to join a restructuring of nearly $100 billion in debt the country defaulted on in 2001.
Last month, Argentina’s economy minister went to the United Nations to accuse so-called vulture funds of gaining “extortionate power” over countries seeking to restructure their sovereign debt.
With the country still refusing to pay, last year US courts also gave the hedge funds the right to seek out and identify Argentine assets they might be able to seize.
NML took similar action in Belgium in 2012, but a local court ruled against the company on the grounds that the 1961 Vienna Convention prohibited the seizure of diplomatic property.
In 2012 NML also persuaded a court in Ghana to hold a 103-meter (338-foot) Argentine navy training ship in port. Later the Ghana supreme court allowed the vessel to leave.
Sources in Belgium said the country will likely argue in court that the frozen accounts do belong to the embassy and are protected from such actions.
Spokesman de Velde said the Belgian foreign ministry was in contact with the Argentine embassy to discuss the issue.
NML warned though that it would continue to defend its claim.
“Argentina should not be surprised that its refusal to negotiate results in efforts by creditors to pursue their rights in court,” the spokesman said.