Case 1:08-cv-06978-TPG Document 544 Filed 06/29/14 Page 1 of 16 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK NML CAPITAL, LTD. Plaintiff, -against- 08 Civ. 6978 (TPG) 09 Civ. 1707 (TPG) 09 Civ. 1708 (TPG) AURELIUS CAPITAL MASTER, LTD. And ACP MASTER, LTD., -against- Plaintiffs, 09 Civ. 8757 (TPG) 09 Civ. 10620 (TPG) AURELIUS OPPORTUNITIES FUND II, LLC and AURELIUS CAPITAL MASTER, LTD., -against- Plaintiffs, 10 Civ. 1602 (TPG) 10 Civ. 3507 (TPG) 10 Civ. 3970 (TPG) 10 Civ. 8339 (TPG) (captions continue on following page) DECLARATION OF CHRISTOPHER J. CLARK
Case 1:08-cv-06978-TPG Document 544 Filed 06/29/14 Page 2 of 16 BLUE ANGEL CAPITAL I LLC, Plaintiff, -against- 10 Civ. 4101 (TPG) 10 Civ. 4782 (TPG) OLIFANT FUND, LTD., -against- Plaintiff, 10 Civ. 9587 (TPG) PABLO ALBERTO VARELA, et al., Plaintiff, -against- 10 Civ. 5338 (TPG)
Case 1:08-cv-06978-TPG Document 544 Filed 06/29/14 Page 3 of 16 I, Christopher J. Clark, am a partner at Latham & Watkins LLP, attorneys for interested non-parties Euro Bondholders. I am admitted to the Bar of the State of New York and of this Court. I am submitting this declaration in support of the Euro Bondholders Motion for Clarification. 1. Attached as Exhibit A is a true and correct copy of the November 16, 2012 Declaration of Kevin F. Binnie of the Bank of New York Mellon Regarding the Payment Processes for Global Bonds Issued Pursuant to That Certain Trust Indenture Dated as of June 2, 2005, and the First Supplemental Indenture Dated as of April 30, 2010. 2. Attached as Exhibit B is a true and correct copy of the January 3, 2013 brief filed by Euroclear Bank S.A. N.V. in the United States Court of Appeals for the Second Circuit. I declare under penalty of perjury that the foregoing is true and correct, pursuant to 28 U.S.C. 1746. Dated: June 29, 2014 New York, New York By /s/ Christopher J. Clark Christopher J. Clark
Case 1:08-cv-06978-TPG Document 544 Filed 06/29/14 Page 4 of 16 EXHIBIT A
Case 1:08-cv-06978-TPG Document 544 397 Filed 06/29/14 11/16/12 Page 51 of of 16 7 UNITED STA'mS DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ---------------------------------------------~--------)( NML CAPITAL, LTD. Plaintiff, 08 Civ. 6978 (TPG) 0.9 Civ. 1707 (TPG) 09'Civ. 1708 (TPG) v. THE REPUBLIC OF ARGENTINA. ----------------------------~------------~----------X AURELIUS C~ITAL MASTER, LTD. and ACP MASTER, LT_D. 09 Civ. 8757 (TPG) 09 Civ. 10620 (TPG) Plaintiffs, v. -----~------------------------------------------x AURELIUS OPPORTUNITIES FUND IT, LLC and AURELIUS CAPITAL MASTER, LTD., 10 Civ. 1602 (TPG) 10 Civ. 3507 (TPG) Plaintiffs, v. ------------------------------------------------------X (captions continue on following pages) DECLARATION OF KEVIN F. BINNIE OF THE BANK OF NEW YORK MELLON REGARDING THE PAYMENT PROCESSES FOR GLOBAL BONDS ISSUED PURSUANT TO THAT CERTAIN TRUST INDENTURE DATED AS OF JUNE 2, 2005, AND THE Fm.ST SUPPLEMENTAL INDENTURE DATED AS OF APRIL 30, 2010
Case 1:08-cv-06978-TPG Document 544 397 Filed 06/29/14 11/16/12 Page 62 of of 16 7 ---------------------------~--------------------------}( AURELIUS CAPITAL MAS1ER, LTD. and AURELTI.JS OPPORTUNITIES FUND U, LLC,. 10 Civ. 3970 (TPG) 10 Civ. 8339 (TPG) Plaintiffs, v. REPUBLIC OF ARG~NTINA, Defendant -------------------~---------------------------------}( BLUE ANGEL CAPIT~ I LLC, Plaintiff, 10 Civ. 4101 (TPG) 10 Civ. 4782' (TPG) v. --- --------------------------------------------------}( PABLO ALBERTO V AAELA, et al., 10 Civ. 5338 (TPG). v. Defendant ------------------------------------------------------}( OLIFANT FUND, LID., 10 Civ. 9587 (TPG) Plaintiff, v. ------------------------------------------------------}( -u.:
Case 1:08-cv-06978-TPG Document 544 397 Filed 06/29/14 11/16/12 Page 73 of of 16 7 1. I am a Vice President of The Bank of New York Mellon in its Corporate Trust Division. 2. The statements in this Declaration are based upo~ my personal knowledg~ and review of certain business records of The Bank of New York Mellon. A. THE INDENTURE 3. The Bank of New York Mellon is the indenture trustee (the "Trus~") under {i) a Trust: Indentme~ dated as of Jline 2, 2005, between the Republic of Argentina (the "Republic"), as issuer, and the Trustee and (ii) the First Supplemental Indenture, dated as of April30, 2010, between the Republic, as issuer, and the Trustee (together, the ''Indenture"). 4. A true and correct copy of the Indenture is attached as Exhibit A. B. THE BONDS USD-Denominafed Bonds 5. Pursuant to the Indenture, the Republic issued U.S. Dollar-denominated bonds ("USD-Denominated Bonds") as follows: 8.75% USn-Denominated Global Bonds due 2017 (ISIN 1 - XS0501195480) in the original principal amount _of $965,783,702 USD-nf?nominated GDP-Linked Security (ISJN - US040114GM64) in the original notional amount of$14,386,489,309 USD-Denominated GDP-Linked Security (ISIN- XS0501197262) in the original notional amount of $2,833,038,181 8.28% USD-Denomir!..ated Discount Bonds due 2033 (ISIN- XS0501195050) in the original principal amount of$5,656,672 8.28% USn-Denominated Discount Bonds due 2033 (!SIN- XS0501194756) in the original principal amount of$924,239,217 1 ''isin" is the acronym for International Security Identification Number. It is the international fmance equivaleqt to a "CUSIP number," which is a number provided by the Committee on Uniform Securities Identification Procedures to identify most U.S. and Canadian securities, including stocks of all registered U.S. and Canadian pompanies, and U.S. government and municipal bonds.
Case 1:08-cv-06978-TPG Document 544 397 Filed 06/29/14 11/16/12 Page 84 of of 16 7 8.28% USDwDenominated Discount Bonds due 2033 (ISIN- US040114GL81) in the origj.nal prilicipal amount of$3,048,488,277 ~ USD~Deriominated Par Bonds due 2038 (ISlN- US040114GK09) in the original principal amount of$5,296~689 1 195 '. USD-Denominated Par Bonds due 2038 (ISlN- XS0501195720) in the originalprincipai amount of$1,634,359. USD-Denominated.Par Bonds due 2038 (ISIN- XS0501195647) in the original principal amount of$95,304,820 Euro-Deno:oiinated Bonds Denominated Bonds".and, together with the USD-Denominated Bonds, ~e "Bonds,) as follows: 7.82% Burow Denominated Discount Bonds due 2033 (IS IN- XS0501195308) in the original principal amount of 3,417,881 7.82% Euro-Denomir).ated Disc.ount Bonds due 2033 (!SIN- XS0501195134) in the original prilicipal amount of 1,930,645,982 7.82% Euro... Denominated Discount Bonds due 2033 (ISIN w XS020554:5840) in the original principal amount of 2,263,500,622 Euro-Denominated GDP~Linked Security (ISIN - XS0209139244) in the origin.al notional amount of 18,947,454,209 Euro-Denominated Par Bonds due 2038 (ISIN- XS0~05537581) in the original principal amount of 5,034,912,168. Euro-Denominated Par Bonds due 2038"(IS1N- XS0501196025) in the original principal amount of 11,183,124 Euro-Denominated Par Bonds due 2038 (ISlN w XS0501195993) in the original principal amount of 1,427,127,806 6. Pursuant to the Indenture, the Republic issued Eur<rDenominated bonds (''Euro- -2-
Case 1:08-cv-06978-TPG Document 544 397 Filed 06/29/14 11/16/12 Page 95 of of 16 7 C. THE BANK OF NEW YORK MELLON AS PAYING AGENT FOR THE BONDHOLDERS 7. The Bank ~~.~ew York Mellon serves as the paying agent (the ''Paying Agenf') for the exclusiv~ benefit of the holders' of the Bonds. 2 D. 'UIE PAYMENT PROCESSES Denominated Bonds and Euro-Denominated Bonds) are cleared through Euroclear Bank S.A. N.V. ("Eurocleru-"). and Clearstream Banking S.A.. ("Clearstream"), which are foreign clearinghouses. The Bank of New York Depositary (Nominees) Limited in London, England, is the registered owner of, and serves as the foreign clearinghouses' common depesitary for, such Bonds. 9. The Bonds with an ISIN beginning with "t.js~ are cleared through th~ Depositpry Trust Company ("DTC"), which is a subsidiary of the Depository Trust & Clearing Corporation, a domestic clearinghouse. Cede & Co. the nominee of DTC, is the registered owner of such Bonds. Euro-Denominated Bonds 10. The Euro-Denominated Bonds are all cleared by Euroclear or Clearstream.. The payments are processed as follows: Step One: The Republic transfers funds to a Euro deposit account in the name of the Paying Agent at Banco Central de la Republica de Afgentina (the "Banco Central"). 2 As required by the fudenture (and the Luxembourg Stock Exchange), the Trustee appointed The Bank of New York (Luxembourg) S.A. as the nominal ''trustee paying agent" with respect to the Euro-Denominated Bonds. 8. The Bonds with an ISIN beginning with ''XS" (which include both USD- -3-
Case 1:08-cv-06978-TPG Document 544 397 Filed 06/29/14 11/16/12 Page 106 of 16 7 Step Two:. The :funds in the Paying Agent's account at Central Bank are transferred to a Deutsche Bank account in Frankfurt, Germany, in the name of The Bank ofne)v York Mellon S.A. N.V. ("BNYM. Brussels"), which is tp.e p~ European cash distribution center for the Paying Ag~t. Deutsche Bank is BNYM Brussels's correspondent bank for the receipt ofeuros. Step Three: At the direftion of the Paying Agent, BNYM Brussels transfers the funds to Euroclear or Clearstream for distnbution to its participants, who thep distribute the.funds to beneficial holders. USD-Denominated Bonds Cleared by Foreign Clearilighouses 11. With resp~ct to the USD-Denominated Bonds that ~e cleared by Euroclear or Clears"tream, payments are processed as follows: Step One: The Republic transfers funds to a US Dollar deposit ac-count in the name of the Trustee at Banco Central. Step Two: The funds in the Trustee's account at Banco Central are transfer:z-ed to an account at The Bank ofnew York Mellon (in New York, New York) in the name of BNYM Brussels. BNYM Brussels then makes a book entry on its records in Brussels to reflect the payment and credits the Paying Agent's account. Step Three: The Paying Agent instructs BNYM Brussels to pay the funds to Euroclear and Clearstream. BNYM Erussels instructs The Bank of. New York Mellon (as the correspondent bank for BNYM Brussels with respect to the receipt of US Dollars) to pay the funds to -4-
Case 1:08-cv-06978-TPG Document 544 397 Filed 06/29/14 11/16/12 Page 117 of 16 7 Euroclear and Clearstream. The Bank of New York Mellon then transfers the funds (a) to Eun~clear by internal book entry to Euroclear's account at The Bank of New York Mellon (which is a Euroclear correspondent bank for the receipt of US Dollars} and (b) to Clearstream by Fedwire or Clearing House Interbank Step Four: Payments System (CHIPS) payment. 3 ' Euroclear and Clearstream distribute the funds to their r~pective participants. who then distribute the funds to beneficial holders. USD-Denominated Bonds Cleared by DTC. ' 12. With respect to the USD-Denominated Bonds cleared by: DTC, payments are processed as follows: Step One: The Republic transfers funds to a U~ Dollar deposit account in the name of the Trustee at Banco Central. Step Two: The funds in the Trustee's account at Banco Central are transferred to an account at The Bank ofnew York Mellon in New York, New York, in the name of the Paying Agent. Step Three: The Paying Agent ~fers the funds to DTC for distribution to its participants, who distribute the funds to beneficial holders. I declare that the foregoing is true and correct under penalty of peijury. Executed on: November 16,2012 ~1~ ~innie Vice President For The Bank ofnew York Mellon 3 The Bank of New York Mellon is not a Clearstream correspondent bank for the receipt of US Dollars. - 5 -
Case 1:08-cv-06978-TPG Document 544 Filed 06/29/14 Page 12 of 16 EXHIBIT B
Case: 1:08-cv-06978-TPG 12-105 Document: Document 780 Page: 5441 Filed 01/10/2013 06/29/14 Page 813381 of 16 4 Post-trade made easy January 3, 2013 BY E-FILING Second Circuit Court of Appeals Daniel Patrick Moynihan U.S. Courthouse 500 Pearl Street New York, NY 10007 Subject: NML CaoltaL ltd, et al v Republic of Argentina, Docket Nos. 12 105(L), 12-109(Con), 12-111(Con),12-157(Con), 12-158(Con), 12 163(Con), 12-164(Con), 12-170(Con), 12-176(Con), 12-185(Con), 12-189(Con), 12-214(Con), 12-909(Con), 12-914(Con), 12 916(Con), 12-919(Con), 12-920(Con), 12-923(Con), 12-924(Con), 12-926(Con), 12-939(Con), 12-943(Con), 12-951(Con), 12 968(Con), 12-971(Con) We write to you to express our deep concern regarding the Amended February 23, 2012 order issued by the District Court on November 21, 2012 (the "Order"). We are concerned that the District Court has misunderstood the role of Euroclear Bank in the payment flows We are further concerned that giving effect to the Order will impair the smooth functioning of the international bond markets. I. Introduction Euroclear Bank SA/NV ("Euroclear Bank") Is a user-owned and user-governed commercial bank and securities settlement system incorporated in Belgium. It Is regulated by the National Bank of Belgium and has its registered office at 1 Boulevard du Rol Albert II, B-1210 Brussels, Belgium. Euroclear Bank is a member of the Euroclear Group, which Is the world's largest provider of domestic and cross-border settlement and related services. The EurocJear Group includes r inter alia l Euroclear Belgium t Euroclear Finland l Euroclear France, Euroclear Nederland, Eurodear Sweden! Euroclear UK & Ireland and Xtrakter limited. Euroctear Bank provides settlement and related securities services for crossborder transactions involving domestic and international bonds, equities, investment funds and derivatives. Its clients are major financial institutions located in more than 90 countries. Euroclear Bank holds securities and bookentry interests in securities for participating organizations and facilitates the clearance and settlement of securities transactions between Euroclear accounts and between Euroclear account holders and participants of other securities settlement systems through electronic book-entry changes in accounts of such participants or through other securities intermediaries. Eurodear Bank SA/NV 1 Boulevard du Rei Albert II 1210 Brussels, Belgium RPM Brussels 0429 875591 Tel. +32 (0)2 326 1211 www.euroclear.com Euroclear Bank has been assigned an AA+ rating by Fitch Ratings and an AA rating by Standard & Poor's. Euroclear Bank has been a highly rated firm for 10 consecutive years. Page 1 of 4
Case: 1:08-cv-06978-TPG 12-105 Document: Document 780 Page: 5442 Filed 01/10/2013 06/29/14 Page 813381 14 of 16 4 PtJst-traJe maje ea.;r The value of securities held for Eurociear Bank clients at the end of 2011 was a record of Cl0.8 trillion. The vaiue of securities transactions settled was 028.5 trillion in 2011. As a custodian of securities for its clients, Euroclear Bank receives income and redemption payments from paying agents appointed by issuers and then credits such amounts to its account holders. Euroclear Bank does not act on behalf of securities issuers. Its contractual obligations are soleiy to its clients/account hoiders. Euroc!ear Bank has no operations in the United States. It maintains a small representative office in New York for client relationship and support purposes, II. Our concerns A. The Order is overly broad The Order purports to cover "Participants" defined by the Court as "those persons and entities who aet in active concert or participation with the Republic, to assist the Republic in fulfilling its payment obligations under the Exchange Bonds." The Order then goes on to list the Participants to include Euroclear Bank under "the clearing corporations and systems, depositaries, operators of clearing systems! and settlement agents for the Exchange Bonds." This is a misunderstanding of the roie of Euroclear Bank. Euroclear Bank does not act in "active concert or participation" with Argentina. It has no contractual relationship with Argentina as the issuer of the Exchange Bonds and does not act as its agent. It merely receives payments on the Exchange Bonds on behalf of its clients. Euroclear Bank should not be considered a Participant under the definition used in the Court Order and Federal Rule of Civil Procedure 65(d)(2). B. Euroc!ear Bank is an "intermediary bank" under Article 48 of the vee The District Court in issuing the Order recognized that it couid not enjoin the activity of any "intermediary bank" as defined in Article 4A of the Uniform Commercial Code (UCC).l The UCC defines "intermediary bank" as "a receiving bank other than the originator's bank or the beneficiary's bank." Euroclear Bank's roie is that of an intermediary bank in respect of payments on Exchange Bonds. It receives the funds from the bank of the issuer Argentina and then credits the accounts of its clients which either are the direct beneficiaries or act on behalf of the beneficiaries. Accordingiy, per the terms of the Order itseif. Eurociear Bank should be exempt from its effect. However, the Order specifically identifies Euroclear Bank as a Participant covered under the Order. Thus, there is an inherent contradiction within the terms of the Order. Clearly, the District Court has not understood the role of Euroclear Bank in the payment flows between Argentina and the owners of the Exchange Bonds. Euroclear Bank SA/NV 1 Boulevard du Rai Albert II 1210 Brussels, Belgium RPM Brussels 0429 875 591 Tel. +32 (0)2 3261211 www.euroclear.com 1 N.Y.C.L.S. U.C.C. 4-A-104 Page 2 of 4
Case: 1:08-cv-06978-TPG 12-105 Document: Document 780 Page: 5443 Filed 01/10/2013 06/29/14 Page 813381 15 of 16 4 Post-trade made easy C. The Order would have an extra-territorial effect By the express inclusion of the European securities settlement systems as Participants in the Order, the District Court has extended its reach weli beyond Its jurisdiction.' It asserts authority over Institutions and activities with little or no connection to the United States. The Exchange Bonds for which the Order attempts to constrain the payments include a number of Eure-denominated instruments. These bonds are held entirely outside the United States and are governed by English law. The payments made on such bonds occur outside the United States. The injunction Issued by the District Court purports to enjoin payments made within the European System of Central Banks TARGET2 real-time gross cash settlement system. Giving effect of the Order wili expand the authority of the US courts beyond the borders of the United States to activities carried out by governmental institutions in Europe. In the interest of comity we would expect that the Court would strive to avoid such a result. D, The Order is in direct conflict with Belgian law In Juiy 2003, an interest payment on bonds issued by Nicaragua was stopped by a Belgian lower court order served on Euroclear Bank at the request of LNC Investments which claimed that such interest payment was a breach of the pari passu provision in the governing documentation for such bonds. That court order prevented Euroclear to accept or make any payments in respect of Nicaragua bonds. On appeal, the Brussels Court of Appeal reversed the court order in March 2004 and reieased Euroclear Bank from the biocking measures. The Court of Appeal found that Euroclear Bank was a third party to the ioan agreement between Nicaragua RepUblic and Its ienders (including the pari passu provision) and that in such capacity, Euroclear Bank could not be forced to compiy with any contractuai obligation to treat debtors equally. Following the Nicaragua case, Beigian law was amended to prevent any future Court orders similar to the Juiy 2003 order. Article 9 of the Belgian Act of April 28, 1999 impiementing the EU Settlement Finality Directive as amended by article 15 of the Law of November 19, 2004 and by subsequent legisiation provides: Any cash settlement account maintained with the operator of a system or with a cash settlement agent, as well as any cash transfer, through a Belgian or foreign credit institution, to be credited to such cash settlement account, can not be attached, put under sequestration or otherwise blocked by any means by a participant (other than the operator or the settiement agent), a counterpart or a third party. [Euroclear Transiation] Euroclear Bank SA/NV 1 Boulevard du Roi Albert II 1210 Brussels, Belgium RPM Brussels 0429 875 591 Tel. +32 (0)2 3261211 www.euroclear.com, See Restatement (Third) of Foreign Relations Law of the United States, Section 403 (the jurisdiction of a state with respect to prescribing iaw with respect to matters taking place outside of Its own territory is limited to: conduct that has or is intended to have substantial effect within its territory; the activities, etc., of its own nationals; and conduct that is directed against the security of the state or against a limited class of other state interests). Page 3 of 4
Case: 1:08-cv-06978-TPG 12-105 Document: Document 780 Page: 5444 Filed 01/10/2013 06/29/14 Page 813381 16 of 16 4 Post-trade made easy According to the legislative history of Article 9 and its subsequent amendment, the purpose of this prohibition to attach or otherwise biock a cash settlement account or any cash transfer to be credited to such account is to avoid any impediment to the proper functioning of payment or settlement systems and hence to safeguard the credibility and the liquidity of national and international financial markets. Considering this objective, the prohibition contained in Article 9 of the Belgian Act of April 28, 1999 implementing the EU Settlement Finality Directive should be regarded as a rule of Belgian international public policy. The implementation of the Order on the terms set by the District Court would likely lead to a direct violation of this ruie of Belgian law to the extent it wouid be interpreted in such a way that Euroclear Bank would be prohibited from receiving cash payments In relation to the Exchange Bonds from its correspondents and from crediting the cash so received to its clients' cash settlement accounts. A conflict of laws of this nature will impact the legal certainty underpinning the internationai bond markets and could cause a loss of confidence in the role of key market infrastructure providers. In the interest of comity, we trust that the Court wouid not wish to permit any action which wouid interrupt or Impair the smooth functioning of the bond markets upon which so many governments and investors over the world reiy so heavily.' * * * * * For the above reasons, we submit to the Court that the Order should not be given effect under the terms written by the District Court. We are available to respond to any questions of the Court or to provide a formal submission If requested by the Court. Respectfully submitted on behalf of Euroclear Bank, icer cc: counsei of re ord for the above-captioned action (by email) Eurodear Bank SA/NV 1 Boulevard du Rei Albert II 1210 Brussels, Belgium RPM Brussels 0429 875 591 Tel. +32 (0)2 3261211 www.euroc1ear.com 3 See, e.g., Federal Trade Commission v. Compagnie de Saint-Gobain-Pont-a Mousson, 636 F.2d 1300, 1327 n. 150 (D.C. Cir. 1980) (principles of international comity require that domestic courts not take action that may cause the violation of another nation's laws). Page 4 of 4