IN THE UNITED STATES COURT OF APPEALSFOR THE SECOND CIRCUIT

NML CAPITAL, LTD., et al.,

Plaintiffs-Appellees,v.

THE REPUBLIC OF ARGENTINA,

Defendant-Appellant,

BANK OF NEW YORK MELLON, asIndenture Trustee, EXCHANGEBONDHOLDER GROUP,

Non-Party Appellants,

FINTECH ADVISORY, INC., EUROBONDHOLDERS,

Intervenors.

Nos. 12-105-cv (L), 12-109-cv (CON),12-111-cv (CON), 12-157-cv (CON),12-158-cv (CON), 12-163-cv (CON),12-164-cv (CON), 12-170-cv (CON),12-176-cv (CON), 12-185-cv (CON),12-189-cv (CON), 12-214-cv (CON),12-909-cv (CON), 12-914-cv (CON),12-916-cv (CON), 12-919-cv (CON),12-920-cv (CON), 12-923-cv (CON),12-924-cv (CON), 12-926-cv (CON),12-939-cv (CON), 12-943-cv (CON),12-951-cv (CON), 12-968-cv (CON),12-971-cv (CON), 12-4694-cv (CON),12-4829-cv (CON), 12-4865-cv (CON)

MOTION OF NON-PARTY APPELLANTS EXCHANGE BONDHOLDERGROUP FOR CERTIFICATION TO NEW YORK COURT OF APPEALS

O'SHEA PARTNERSLLPSean F. O'SheaMichael E. Petrella521 Fifth Avenue, zs" FloorNew York, New York 10175Tel.: (212) 682-4426

BOIES, SCHILLER& FLEXNERLLPDavid BoiesDavid A. BarrettNicholas A. Gravante, Jr.Steven 1.Froot575 Lexington AvenueNew York, New York 10022Tel.: (212) 446-2300

Attorneys for Interested Non-Party Appellants Exchange Bondholder Group

TABLE OF CONTENTS

PRELIMINARY STATEMENT 1

BACKGROUND AND PROCEDURAL HISTORy 2

A. Factual Background 2

B. The District Court's February 23, 2012 Order and March 5, 2012Stay 3

C. This Court's October 26,2012 Decision 4

D. The District Court's Actions on Remand 5

E. The Present Appeal Before this Court 6

ARGUMENT 7

A. New York Law Is Silent on the Meaning of the Pari Passu Clause 8

B. Interpretation of the Pari Passu Clause Directly Affects NewYork's Compelling Interest as the World's PreeminentCommercial and Financial Center 10

C. Interpretation of the Pari Passu Clause Is Necessary to Determinethe Propriety of the District Court's Order. 14

CONCLUSION 20

1

TABLE OF AUTHORITIES

Cases

10 Ellicott Square Court Corp. v. Mountain Valley Indem. Co.,634 F.3d 112 (2d Cir. 2010) 10

Barenboim v. Starbucks Corp.,698 F.3d 104 (2d Cir. 2012) 7, 10, 14,20

Ehrlich-Bober & Co. v. Univ. of Houston,49 N.Y.2d 574 (1980) 1, 11

Friends of Van Cortlandt Park v. City of New York,232 F.3d 324 (2d Cir. 2000) 1

Hoffman v. Finger Lakes Instrumentation, LLC,7 Misc. 3d 179 (Sup. Ct., Monroe Cty. 2005) 16

In re Koreag, Controle et Revision S.A.,961 F.2d 341 (2d. Cir. 1992) 11

In re Se. Banking Corp.,93 N.Y.2d 178 (1999) 16

ITC Ltd. v. Punchgini, Inc.,482 F.3d 135 (2d Cir. 2007) 11

J Zeevi and Sons, Ltd. v. Grindlays Bank (Uganda) Ltd.,37 N.Y.2d 220 (1975) 11, 15

Johnson v. Bloodgood,1 Johns. Cas. 51 (N.Y. Sup. Ct. 1799) 8

Joseph v. Athanasopoulos,648 F.3d 58 (2d Cir. 2011) 8

Lockheed Martin Corp. v. Retail Holdings, N v.,639 F.3d 63 (2d Cir. 2011) 15

11

Manela v. Garantia Banking Ltd.,940 F. Supp. 584 (S.D.N.Y. 1996) 11

Mount Vernon Fire Ins. Co. v. Creative Hous. Ltd,70 F.3d 720 (2d Cir. 1995) 8

NML Capital Ltd. v. Republic of Argentina,699 F.3d 246(2d Cir. 2012) passim

NML Capital v. Republic of Argentina,621 F.3d 230 (2d Cir. 2010) 1, 10

Penguin Grp. (USA) Inc. v. Am. Buddha,609 F.3d 30 (2d Cir. 2010) 15

Policano v. Herbert,453 F.3d 75 (2d Cir. 2006) 17

Rooney v. Tyson,127 F.3d 295 (2d Cir. 1997) 7

Sharon Steel Corp. v. Chase Manhattan Bank, N.A.,691 F.2d 1039 (2d Cir. 1982) 16

Trust for the Certificate Holders v. Love Funding Corp.,556 F.3d 100 (2d Cir. 2009) 11

us. v. Son al, Inc.,573 F. Supp. 1126 (S.D.N.Y. 1983) 11

Other Authorities

Black's Law Dictionary (9th ed. 2009) 20

Christopher C. Wheeler & Amir Attaran,Declawing the Vulture Funds: Rehabilitation of a Comity Defense inSovereign Debt Litigation,39 Stan. J. Int'l L. 253 (2003) 12

III

Felix Salmon,Argentina's Stunning Pari Passu Loss,Reuters, Oct. 27, 2012 14

Judith S. Kaye & Kenneth 1. Weissman,Interactive Judicial Federalism: Certified Questions in New York,69 Fordham L. Rev. 373 (2000) 7

Philip R. Wood,Pari Passu Clauses - What Do They Mean?,Butterworths J. Int'l Banking & Fin. L. 371, 374 (2003) 9

Steven M. Davidoff,In Court Battle, A Game of International Brinkmanship With Argentina,N.Y. Times, Nov. 28, 2012 14

Tracy Alloway et al.,BNY Mellon Joins Argentina Spat,Financial Times, Dec. 4, 2012 12

Rules

Federal Rule of Civil Procedure 60(b) 5

Local Rule 27.2 1, 7

N.Y. Compo Codes R. & Regs. tit. 22 § 500.27 7, 14

IV

PRELIMINARY STATEMENT

The Interested Non-Party Appellants listed in Appendix A (collectively, the

"Exchange Bondholder Group" or "EBG") submit this motion for certification to

the New York Court of Appeals.' The pending appeals by the EBG and others

involve novel questions of New York State law that substantially affect New

York's "pivotal role in international commerce," NML Capital v. Republic of

Argentina, 621 F.3d 230,243 (2d Cir. 2010), as well as New York's "undisputed

status as the preeminent commercial and financial nerve center of the Nation and

the world." Ehrlich-Bober & Co. v. Univ. of Hous ton , 49 N.Y.2d 574,581 (1980).

This expedited appeal will be fully briefed by February 1,2013 and is set for oral

argument on February 27,2013, although the Court may grant this motion prior to

argument. See Friends of Van Cortlandt Park v. City of New York, 232 F.3d 324,

324 (2d Cir. 2000)?

Pursuant to Local Rule 27.2, movants respectfully request that the Court

certify the following question of state law to the New York Court of Appeals:

I The EBG represents total holdings of Exchange Bonds in excess of $1 billion.

2 If there is concern regarding delay of the appeal, the Court may wish to requestthat the New York Court of Appeals respond to the certification within a limitedtimeframe. See, e.g., Friends of Van Cortlandt Park, 232 F.3d at 327 (certifyingquestion conditioned upon Court of Appeals agreeing to resolve it within 90 days).

Whether under New York law, in an action seeking specificperformance of apari passu clause in a bond contract,' a referenceto "payment obligations" that "at all times shall rank at leastequally" to other bonds should be interpreted to require the issuerto make payments to the bondholders concurrently andproportionally to any payments it makes to third-party holders ofseparate and distinct bonds issued subsequently as part of aninternationally sponsored post-default restructuring of thesovereign issuer's debt, and if so, how that proportion should becalculated.

BACKGROUND AND PROCEDURAL HISTORY

A. Factual Background

These appeals arise from proceedings in the United States District Court for

the Southern District of New York (Hon. Thomas P. Griesa) concerning the

Republic of Argentina's (the "Republic's") 2001 sovereign debt default. Between

1992 and 2001, the Republic issued debt securities (the "FAA Bonds") in the

aggregate amount of approximately $82 billion. NML Capital Ltd. v. Republic of

Argentina, 699 F.3d 246,251 (2d Cir. 2012). In 2001, the Republic defaulted on

the FAA Bonds and has not since made any payments on them. Id.

3 The pari passu clause in this case provides:

The Securities will constitute ... direct, unconditional, unsecuredand unsubordinated obligations of the [issuer] and shall at all timesrank pari passu without any preference among themselves. Thepayment obligations of the [issuer] under the Securities shall at alltimes rank at least equally with all its other present and futureunsecured and unsubordinated External Indebtedness ....

NML Capital Ltd. v. Republic of Argentina, 699 F.3d 246,251 (2d Cir. 2012).

2

After the default, the Republic initiated exchange offers in 2005 and 2010

(the "Exchange Offers") that allowed holders of FAA Bonds to replace those

instruments with new unsecured and unsubordinated external debt at 25 to 29 cents

on the dollar (the "Exchange Bonds"). Id. at 252. Over 91% of the holders of

FAA Bonds (including the EBG members) participated in the Exchange Offers,

allowing the Republic to restructure approximately $74.5 billion of debt and take

control of its dire economic situation. Id. To date, the Republic has fully honored

its obligations to holders of Exchange Bonds (the "Exchange Bondholders"). Id. at

253.

B. The District Court's February 23, 2012 Order andMarch 5,2012 Stay

Over the past decade, FAA bondholders have obtained judgments totaling

approximately $6 billion against the Republic, see Ex. A (Hr'g Tr. 46:14-15 (Feb.

23,2012)),4 but collection has been virtually impossible due to the Republic's

sovereign immunity. In the instant action, Plaintiffs have tried a new strategy -

they eschewed any money judgment and instead sued for specific performance of

the pari passu clause contained in the FAA bonds, claiming that absent an

injunction, "NML will have no means of enforcing its rights." See Ex. B (PIs.

Mem. of Law in Support of the Renewed Motion ofNML Capital, Ltd. for Specific

4 References to Exhibits in this Brief ("Ex. _") refer to Exhibits to theDeclaration of David A. Barrett filed in support of this Motion.

3

Enforcement of the Equal Treatment Provision 3 (Jan. 6,2012)); Ex. C (Am.

Compl. ~~ 102-116 (Oct. 17,2011)).

On February 23, 2012, the district court entered an order directing specific

performance of the pari passu clause (the "Injunction"). The Injunction required

the Republic to "make a 'Ratable Payment'" to Plaintiffs "concurrently or in

advance" of any payment to the Exchange Bondholders, including the EBG. Ex. D

~ 2(a) (Dist. Ct. Order of Feb. 23, 2012). The court further enjoined "all parties

involved, directly or indirectly" from "aiding and abetting ... any effort to make

payments under the ... Exchange Bonds without also concurrently or in advance

making a Ratable Payment" to Plaintiffs. Id. at ~ 2(e). The court later interpreted

this "aiding and abetting" provision to apply to The Bank of New York Mellon

("BNYM"), which is trustee under the bond indenture, as well as to all banks and

clearinghouses that would process funds transferred from Argentina to Exchange

Bondholders. Many of these institutions are located in New York and hence are,

without question, subject to the Court's jurisdiction and bound by the Injunction.

On March 5, 2012, the district court stayed the Injunction pending Argentina's

appeal. Ex. E (Dist. Ct. Order of Mar. 5,2012).

C. This Court's October 26, 2012 Decision

On October 26, 2012, this Court affirmed the award of specific performance,

while expressing concern over the potential consequences of the Injunction's

4

application to third parties. The Court also identified ambiguity in the February 23

payment formula, and remanded "for such proceedings as are necessary to address

the operation of the payment formula and the orders' application to third parties

and intermediary banks" while maintaining jurisdiction to hear appeals from the

district court's anticipated clarification orders. 699 F.3d at 264.

D. The District Court's Actions on Remand

Following remand, the EBG - which had not been joined as a necessary

party in February, even though the Injunction directly imposed a burdensome

condition on the Exchange Bondholders' rights to receive payment - moved to

appear as an interested non-party, and for relief from the Injunction pursuant to

Federal Rule of Civil Procedure 60(b). The EBG contended that the Injunction

impermissibly burdened third parties and violated the Fifth Amendment's Due

Process and Takings clauses. It further articulated the irreparable harm that the

Injunction threatened by potentially blocking payment on the Exchange Bonds and

calling into question New York's preeminence as a world financial center.

On November 21,2012, the district court entered two opinions and an order,

which lifted the stay pending appeal, clarified the third-party banks and financial

institutions to which the Injunction would apply, and ordered that if the Republic

made any payment to the Exchange Bondholders after mid-December 2012, it

must pay into escrow the full amount of $1.3 billion that Plaintiffs claim is due to

5

them. See Ex. F (Dist. Ct. Op. of Nov. 21, 2012); Ex. G (Second Dist. Ct. Op. of

Nov. 21, 2012); Ex. H (Dist. Ct. Am. Order of Nov. 21, 2012).5 If the Republic

failed to fund the escrow, BNYM and other financial institutions were enjoined

from processing any payments from Argentina to the Exchange Bondholders. As

to the payment formula, the district court stated:

The obligation to plaintiffs under the February 23, 2012Injunctions accrues whenever Argentina "pays any amount due"under the terms of the Exchange Bonds. . .. Assuming thatArgentina pays 100% of what is then due on the Exchange Bonds... Argentina would be required to pay 100% "multiplied by thetotal amount currently due" to plaintiffs .... The amount that iscurrently due is the amount of the unpaid principal, the due date ofwhich has been accelerated, and accrued interest. The total ofthese amounts due to plaintiffs is approximately $1.33 billion.

See Ex. G at 3-4 (emphasis in original).

On November 26, 2012, the district court entered two further orders, which

denied without explanation the EBG's motions to appear as an interested non-party

and to vacate the Injunction under Rule 60(b). Ex. K (denying motion to vacate);

Ex. J (denying leave to appear).

E. The Present Appeal Before this Court

On November 28,2012, acting on motions filed by the Republic, the EBG

and another Exchange Bondholder, this Court stayed the district court's November

5Another order, also dated November 21,2012, was issued by the district court onNovember 26,2012. That order modified the provisions of the March 5,2012 Stayconsistent with the rulings in the November 21 Orders. See Ex. 1.

6

21 Orders and set an expedited schedule for hearing the appeal. Under that

schedule, briefing will be completed by February 1,2013 and oral argument will

be held on February 27, 2013. See Ex. L. Further orders granted the EBG's

motion to appear as an interested non-party, see Ex. M, and consolidated the

EBG's appeal with the lead case, designating the EBG as an Interested Non-Party

Appellant. See Ex. N.

ARGUMENT

Under Local Rule 27.2 and New York law, this Court may certify a question

of state law to a state's highest court on motion by a party. See N.Y. Compo Codes

R. & Regs. tit. 22 § 500.27. The Court's decision to grant certification is guided

by three factors:

(1) whether the New York Court of Appeals has addressed theissue and if not, whether the decisions of other New York courtspermit us to predict how the Court of Appeals would resolve it; (2)whether the question is of importance to the state and may requirevalue judgments and public policy choices; and (3) whether thecertified question is determinative of a claim before [this Court].

Barenboim v. Starbucks Corp., 698 F.3d 104, 109 (2d Cir. 2012). Some of the

most commonly certified questions in New York involve the interpretation of

contractual provisions. See Judith S. Kaye & Kenneth 1.Weissman, Interactive

Judicial Federalism: Certified Questions in New York, 69 Fordham L. Rev. 373,

401 (2000) (Ex. 0) ("Contract law has been [a] fertile area for certification in New

York."); see also Rooney v. Tyson, 127 F.3d 295,298 (2d Cir. 1997) (certifying

7

question of whether an oral contract for plaintiff to train defendant "for as long as

the boxer fights professionally" established a fixed period of employment); Mount

Vernon Fire Ins. Co. v. Creative Hous. Ltd, 70 F.3d 720 (2d Cir. 1995) (certifying

question of whether assault and battery exclusion in an insurance policy excluded

coverage under the circumstances presented). The question presented in this

motion clearly satisfies these three factors.

A. New York Law Is Silent on the Meaning of the Pari PassuClause

Certification is warranted "if the New York Court of Appeals has not

squarely addressed an issue and other decisions by New York courts are

insufficient to predict how the Court of Appeals would resolve it." Joseph v.

Athanasopoulos, 648 F.3d 58, 67 (2d Cir. 2011). Here, that standard plainly is

met.

At the heart of the instant appeal is the issue of how to interpret under New

York contract law a pari passu clause in an unsecured debt instrument - in this

case, an international bond indenture issued by a sovereign debtor. While the

phrase ''pari passu" had found its way into the vernacular of New York decisional

law as early as 1799, see Johnson v. Bloodgood, 1 Johns. Cas. 51, 59 (N.Y. Sup.

Ct. 1799), New York courts have provided no guidance on how to construe apari

passu clause in a debt contract. See, e.g., U.S. Brief as Amicus Curiae 14, Docket

8

No. 12-105(L) (Apr. 4, 2012), ECF No. 238 (Belgian court, asked to interpret and

apply New York law to apari passu clause in case brought by affiliate ofNML

Capital seeking a similar specific performance remedy with respect to Peruvian

bonds, did so "without citation to any authority");" Philip R. Wood, Pari Passu

Clauses - What Do They Mean?, Butterworths J. Int'l Banking & Fin. L. 371,374

(2003) (Ex. P) ("[A]s regards the two legal systems which dominate the governing

law of international syndicated credits and bond issues (English and New York

law)[,] there appears to be no New York case [interpreting apari passu clause in

an unsecured debt agreement involving a sovereign debtor]. ... ").

Indeed, there is no decision from any New York court, let alone the Court of

Appeals, that sheds any light - beyond the most general precepts of contract

construction - on how this Court should interpret apari passu clause, particularly

in sovereign debt agreements. Neither this Court's October 26 decision nor

NML's briefs cited any such state court authority. Accordingly, this Court's

expressed "preference that states determine the meaning of their own laws in the

first instance," Joseph, 648 F.3d at 68, weighs strongly in favor of certification.

This is particularly so with respect to the FAA Bonds, since the interpretation of

the pari passu clause presents a novel issue never addressed by the State courts,

6 Notably, that Belgian court decision was subsequently overruled by Belgium'sParliament. See U.S. Br. as Amicus Curiae 15, Docket No. 12-105(L) (Apr. 4,2012), ECF No. 238.

9

making it essentially impossible to predict how the Court of Appeals will resolve

it. Accordingly, this Court should certify the issue to the New York Court of

Appeals.

B. Interpretation of the Pari Passu Clause Directly AffectsNew York's Compelling Interest as the World's PreeminentCommercial and Financial Center

Certification is appropriate where the question is "of importance to the state"

and its resolution requires "value judgments and important public policy choices

that the New York Court of Appeals" is best suited to make. 10 Ellicott Square

Court Corp. v. Mountain Valley Indem. Co., 634 F.3d 112, 126 (2d Cir. 2010)

(internal citations and quotations omitted); see also Barenboim, 698 F.3d at 117

(certifying question of mandatory tip pooling because its resolution "will shape the

basic rules of how the hospitality industry, which is plainly vital to New York's

economy, must pay its employees") (emphasis added).

When considering whether to certify a question to the Court of Appeals, this

Court has repeatedly acknowledged New York's interest in maintaining its position

as a capital of international finance and the importance of interpreting and applying

state law in furtherance of that interest. For example, in litigation arising from

Argentina's 2001 default, this Court recognized the importance of obtaining a clear

resolution of "an important policy issue for a state that plays a pivotal role in

international commerce." NML Capital, 621 F.3d at 243 (Raggi, J.) (involving

10

accrual of statutory interest on floating rate notes) (quoting ITC Ltd. v. Punchgini,

Inc., 482 F.3d 135, 166 (2d Cir. 2007)). Similarly, "New York's recognized

interest in maintaining and fostering its undisputed status as the preeminent

commercial and financial nerve center of the Nation and the world" regularly

informs the Court of Appeals' application of New York law. See Ehrlich-Bober &

Co., 49 N.Y.2d at 581.7

This long-established State interest is critical in this appeal, where the

decisions about New York contract law have already influenced the perceptions of

governments, markets, issuers and financial institutions. Simply put, if the existing

7 See also, e.g., Trust for the Certificate Holders v. Love Funding Corp., 556 F.3d100, 109 (2d Cir. 2009) (certifying question given "the importance of New Yorklaw to the State's preeminent role in world financial affairs"); In re Koreag,Controle et Revision SA., 961 F.2d 341,351 (2d Cir. 1992) (recognizing "NewYork as a world financial center"); Manela v. Garantia Banking Ltd., 940 F. Supp.584, 596 (S.D.N.Y. 1996) ("[I]n light of New York's role as an internationalfinancial capital, New York courts often apply New York law to disputes arisingout of the parties' agreements, even in the absence of a choice of law clause.");US v. Sonal, Inc., 573 F. Supp. 1126,1128 (S.D.N.Y. 1983) (applying New Yorklaw due to "New York's interest in the matter as an international financialcapital"); J Zeevi and Sons, Ltd. v. Grindlays Bank (Uganda) Ltd., 37 N.Y.2d 220,227 (1975) (applying New York law because New York's status as "a financialcapital of the world" created an "overriding and paramount interest in theoutcome" of litigation); Banco Nacional De Mexico, SA. v. Societe Generale, 34A.D.3d 124, 130 (1st Dep't 2006) ("As a primary financial center and aclearinghouse of international transactions, the State of New York has a stronginterest in maintaining its preeminent financial position and in protecting thejustifiable expectation of the parties who choose New York law .... "); CreditFrancais Int'l, SA. v. Sociedad Financiera De Comercio, CA., 128 Misc.2d 564,572 (Sup. Ct., N.Y. Cty. 1985) (New York is "[t]he center of world banking, trade,finance and other activities").

1 1

interpretation of the pari passu clause in this appeal stands, sovereigns and other

issuers will at least think twice before using the law, legal system and financial

services of New York, and may well choose to do business in other financial

centers such as London or Singapore. The ultimate adverse effect on the economic

well-being of the State, its financial services businesses and its residents is

apparent. See, e.g., Christopher C. Wheeler & Amir Attaran, Declawing the

Vulture Funds: Rehabilitation of a Comity Defense in Sovereign Debt Litigation,

39 Stan. J. Int'l L. 253, 283 (2003) (Ex. Q) ("[A] primary lender would prefer a

jurisdiction that will prevent a single creditor from disrupting a restructuring. For

this reason, protecting New York as a center of international finance requires the

frustration of ... litigation [by holdout creditors], not allowing it to go forward

unimpeded."); Tracy Alloway, et al., BNY Mellon Joins Argentina Spat, Financial

Times, Dec. 4, 2012 (Ex. R) ("[This] case has also led to soul-searching in another

critical area of New York's financial prominence: whether sovereigns will reject its

governing law for issuing debt, versus London's.").

For example, the district court's orders have upset long-settled market

understandings and expectations. As the U.S. Departments of State and the

Treasury recently advised this Court:

The interpretation of [the pari passu] clause, first by ... theDistrict Court ... and then by the panel of this Court, is contrary toUnited States economic policy and inconsistent with the settledmarket understanding of this provision .... [T]he district court's

12

interpretation ... may adversely affect future voluntary sovereigndebt restructurings, the stability of international financial markets,and the repayment of loans extended by international financialinstitutions.

u.s. Brief in Support of Mot. for Leave to File Brief as Amicus Curiae,-r 6, Docket

No. 12-105(L) (Dec. 1,2012), ECF No. 583-2; see also Ex. P at 373 ("nobody

would ever agree" to requiring pro rata payment among creditors, because it would

be "unworkable"); id. at 372-73 (describing implications of a pro rata payment

interpretation ofpari passu clauses)."

The district court's orders and NML's related legal maneuvering have

shaken investor confidence, causing the prices of Argentina's sovereign bonds to

fluctuate wildly due to investor uncertainty and rampant speculation. The price for

some Argentine bonds dropped 23.6% in the two weeks following this Court's

October 26 decision. See Decl. of Stephen J. Choi ,-r 15, Docket No. 08-6978 (Nov.

8 Other consequences also may flow from the district court's specific performanceorders. Adopting the district court's interpretation will render "voluntarysovereign debt restructuring ... substantially more difficult." U.S. Br. as AmicusCuriae 17, Docket No. 12-105(L) (Apr. 4, 2012), ECF No. 238; see id. at 5 (thedistrict court's interpretation "could enable a single creditor to thwart theimplementation of an internationally supported restructuring plan."). Indeed, evenwith the presence of a Collective Action Clause that is typically included in morerecent sovereign debt indentures, it is unlikely that individual bondholders willaccept future restructuring deals if they know that they can compel payment in full,and that holdouts can block payments from the debtor to the restructured creditors.See Decl. of Stephen J. Choi,-r,-r 11-13, Docket No. 08-cv-6978 (Dec. 10,2010),ECF No. 272 (Ex. S); Supp. Decl. of Stephen J. Choi ,-r,-r31-32, Docket No. 12-105(L) (Nov. 27,2012), ECF No. 469 (Ex. U).

13

16,2012), ECF No. 403 (Ex. T). Indeed, the mere filing of briefs - not even court

decisions - has had dramatic effects on bond prices, such as a 5.4% increase in

Argentine bond prices in three days following the submission of briefs to the

district court on remand. Ex. U ~ 16.9 This sort of volatility and uncertainty is

anathema to capital markets, see, e.g., Ex. Qat 282-83 ("what ultimately decreases

the value of debt on the secondary market is a disorderly workout disrupted by

legal challenges"), while a definitive resolution by the New York Court of Appeals

will go far to restoring stability.

C. Interpretation of the Pari Passu Clause Is Necessary toDetermine the Propriety of the District Court's Order

This Court may certify a question of state law where it is "determinative of a

claim" before the Court. Barenboim, 698 F.3d at 109; see also N.Y. Compo Codes

R. & Regs. tit. 22 § 500.27 (the Court of Appeals may accept certification of

"determinative questions of New York law" and "dispositive questions of law"). It

is not necessary that the question resolve a case in its entirety; rather, resolution of

the issue need only "ensure that any federal trial of such questions is conducted

9 See Steven M.Davidoff, In Court Battle, A Game of International BrinkmanshipWith Argentina, N.Y. Times, Nov. 28,2012, at B11 (Ex. V) (describing market"chaos" following Judge Griesa's remand opinion and the "uncertainty"surrounding the litigation); Felix Salmon, Argentina's Stunning Pari Passu Loss,Reuters, Oct. 27, 2012 (Ex. W) (market reactions to this litigation, as seen inArgentina's credit default swaps, "create a clear sign that the markets areextremely worried the unexpected ruling will cause the very thing it's ostensiblytrying to cure: an Argentine default").

14

with a correct understanding of the controlling principles of New York law."

Barenboim, 698 F.3d at 118 (certifying question notwithstanding that Court of

Appeals' determination may "not resolve all questions of fact"); see Penguin Grp.

(USA) Inc. v. Am. Buddha, 609 F.3d 30,42 (2d Cir. 2010) (certifying question

whether there was personal jurisdiction over defendant under New York law, while

noting that remand to district court for further proceedings would be necessary if

jurisdiction was found to exist). This requirement minimizes concern that the state

court may be asked to render advisory opinions, since certification occurs where

the question is important to resolving a concrete issue arising from actual litigation.

See Ex. 0 at 393 n.125.

Interpretation of the pari passu clause is necessary to resolve the primary

issue in this appeal - whether the relief ordered by the district court was

appropriate under the FAA indentures. Consideration of the parties' settled

expectations is essential, because it is "axiomatic under New York law ... that the

fundamental objective of contract interpretation is to give effect to the expressed

intentions of the parties." Lockheed Martin Corp. v. Retail Holdings, N. V, 639

F.3d 63,69 (2d Cir. 2011) (internal quotations and citations omitted); see also

Zeevi, 37 N.Y.2d at 227 (interpretation of a contract must protect the "justified

expectations of the parties to the contract").

15

Moreover, New York law recognizes that "uniformity in interpretation is

important to the efficiency of capital markets." See Sharon Steel Corp. v. Chase

Manhattan Bank, N.A., 691 F.2d 1039,1048 (2d Cir. 1982). New York courts

recognize that a policy of consistent interpretation is especially important when

considering "commercial matters where reliance, definiteness and predictability are

such important goals of the law itself." Hoffman v. Finger Lakes Instrumentation,

LLC, 7 Misc. 3d 179, 187 (Sup. Ct., Monroe Cty. 2005) (quoting In re Se. Banking

Corp., 93 N.Y.2d 178, 184 (1999)). As demonstrated above, the market's volatile

and unpredictable reaction to the twists and turns of this litigation demonstrate that

there is serious doubt here as to "predictability" and "uniformity of interpretation."

A definitive interpretation of the pari passu clause is necessary to determine

whether Plaintiffs are entitled to specific performance at all and, if so, what ratable

payment structure would be appropriate. A substantial question of state law -

which can be finally decided only by the New York Court of Appeals - exists as to

whether the two sentences comprising the pari passu clause, read in conjunction,

can justify an injunction requiring Argentina to make ratable payments to the FAA

bondholders in some proportion to payments made to the Exchange Bondholders.1o

10 Although this Court interpreted this aspect of the pari passu clause in its October26 decision (699 F.3d at 259-60), the EBG respectfully submits that this issue isappropriately certified to the Court of Appeals because the October 26 decision isnot final. First, Argentina's petition for panel and en bane rehearing is pending.Second, the EBG's appeal of the district court's denial of its Rule 60(b) motion,

16

The first sentence of the clause - stating that the FAA Bonds "shall at all

times rank pari passu without any preference among themselves" - ensures that all

of the FAA Bonds enjoy the same legal status. The key word in this sentence is

the term "rank," which refers to the legal priority of the FAA Bonds. See Ex. P, at

372 (the word "rank" refers to "where the debt stands on the ladder of legal

priorities"). The second sentence of the clause states that the "payment obligations

of the [issuer] under the [FAA Bonds] shall at all times rank at least equally with

all its other present and future unsecured and subordinated External Indebtedness."

Once again, the critical term "rank" is used. Employing the term's ordinary

meaning, the second sentence adds the guarantee that the FAA Bonds stand on

equal footing not just among themselves (as required by the first sentence of the

clause), but also that no other unsecured, subordinated debt can ever be issued that

is senior to (i.e., out-"ranks") the FAA Bonds. 11

which would void the Injunction ab initio, also is pending. Third, this Courtpreviously has certified questions seeking clarification of New York law after aninitial appellate decision, but before the mandate issued, and recognized that itwould "be required to apply any answers the Court of Appeals provides" to thepending appeal. See Policano v. Herbert, 453 F.3d 75, 76 (2d Cir. 2006).

11 Use of the phrase "payment obligations," on which this Court's interpretation ofthe pari passu clause turned, 699 F.3d at 259-60, is not determinative. Thosewords are reasonably understood as identifying that the FAA Bonds cannot be out-"ranked" by (or subordinated to) any future bond issue. And the interpretationdiscussed in the text gives full effect to both sentences in the clause, as this Courtsought to accomplish in its contract interpretation. ld. at 258.

17

Even if, under this Court's previous ruling, the pari passu clause entitles

Plaintiffs to relief, the New York Court of Appeals still should determine as a

matter of state law the parameters of specific performance under the contract. As

this Court recognized, the district court's first attempt to implement "ratable

payments" was ambiguous.V The Court remanded to the district court "to address

the operation of the payment formula." 699 F.3d at 265. But it is a controlling

issue of state law what kind and measure of "ratable payments" are required by the

pari passu clause.

The district court, too, recognized the problems of requiring "ratable

payments" under a pari passu clause in these circumstances. Ex. G at 6-7. For

12 This Court found:

The Injunctions provide that "whenever the Republic pays anyamount due under the terms of the [exchange] bonds," it must"concurrently or in advance" pay plaintiffs the same fraction of theamount due to them (the "Ratable Payment"). We are unable todiscern from the record precisely how this formula is intended tooperate. It could be read to mean that if, for example, Argentinaowed the holders of restructured debt $100,000 in interest and paid100% of that amount then it would be required to pay the plaintiffs100% of the accelerated principal and all accrued interest. Or itcould be read to mean that, if such a $100,000 payment to theexchange bondholders represented 1% of the principal and interestoutstanding on the restructured debt, then Argentina must payplaintiffs 1% of the amount owed to them. We cannot tellprecisely what result the district court intended. On remand thedistrict court will have the opportunity to clarify precisely how itintends this injunction to operate.

699 F.3d at 254-55 (footnote omitted, alteration in original).

18

example, the court noted that "the debt now owed to the exchange bondholders is

of a different amount and of a different nature from what is owed to plaintiffs," id.,

but (without citation to any New York law) interpreted the pari passu clause as not

requiring "that the debts in question be in the same amount or of the same nature"

so long as "the obligations under the various debts are complied with to the same

extent, rather than having the obligations on one debt honored and the obligations

on the other debt repudiated, as has occurred in the present case." Id. at 6. The

district court further elaborated on the necessity of interpreting the meaning of the

pari passu clause:

Of course, what is being done here is not literally to carry outthe Pari Passu Clause, as would be done in a normalcommercial situation, but to provide a remedy for Argentina'sviolation of the Clause. Yet, the remedy must bear somereasonable relation to the Pari Passu Clause in order to be asensible remedy.

Id. (internal citation omitted). The district court, acting without the benefit of any

New York precedent whatever, concluded that apari passu payment means that "if

100% of what is currently due to the exchange bondholders is paid, then 100% of

what is currently due to plaintiffs must also be paid." Id. at 7.

The resolution of how payments should be made pursuant to apari passu

clause is a question of state law contract interpretation. There are a number of

rational methods by which apari passu obligation could be measured, as this

19

Court recognized. See 699 F.3d at 254-55.13 For example, paying the Plaintiffs

their claimed $1.3 billion under the Injunction would give them an immediate

windfall of over 300% of the original $433 million face amount of their FAA

bonds, while the Exchange Bondholders have received to date only a far smaller

fraction of the original face amount of their FAA Bonds.

As the history of this litigation has brought into focus, the meaning of the

pari passu clause is a central issue that will determine the nature of any appropriate

contract remedy. Now that the district court has decided how payments should be

made pursuant to the pari passu clause - an interpretation that has enormous

consequences for New York's preeminent financial services industry - the State's

highest court should be given an opportunity to ensure that this Court's review of

of the Injunction is undertaken "with a correct understanding of the controlling

principles of New York law." Barenboim, 698 F.3d at 118.

CONCLUSION

For the foregoing reasons, the EBG respectfully requests that this Court

certify the question presented herein to the New York Court of Appeals.

13 The district court's only citation in support of the methodology it selected toapply the pari passu clause was to one definition of the term in Black's LawDictionary. Ex. G at 7. The Court did not explain why the definition of pari passuthat it chose ("proportionality") is more reasonably applicable to the situation atbar than the other two definitions - "without preference" and "at an equal pace."See Black's Law Dictionary (9th ed. 2009).

20

December 27,2012

By: /s/ David A. BarrettDavid BoiesDavid A. BarrettNicholas A. Gravante, Jr.Steven I. FrootBOIES, SCHILLER & FLEXNER LLP575 Lexington AvenueNew York, NY 10022Tel.: (212) 446-2300

Sean F. O'SheaMichael E. PetrellaDaniel M. HibshooshO'SHEA PARTNERS LLP521 Fifth Avenue, 25th FloorNew York, New York 10175Tel.: (212) 682-4426

Attorneys for Interested Non-PartyAppellants Exchange Bondholder Group

21

APPENDIX A

The following interested non-parties are members of the ExchangeBondholder Group: Gramercy Funds Management LLC; Gramercy ArgentinaOpportunity Fund, Ltd.; Gramercy Distressed Debt Master Fund; GramercyDistressed Opportunity Fund, Ltd.; Gramercy Distressed Opportunity Fund II,L.P.; Gramercy Emerging Markets Fund; Gramercy Local Currency EmergingMarket Debt Master Fund; Gramercy Master Fund; Gramercy Opportunity Fund -Special Opportunities II Offshore SP; Gramercy Opportunity Fund - SpecialOpportunities II SP; Gramercy Opportunity Fund - Special Opportunities SP;Gramercy U.S. Dollar Emerging Market Debt Master Fund; and Gramercy SelectMaster Fund (collectively, "Gramercy"); MFS Diversified Income Fund; MFSEmerging Markets Debt Fund; MFS High Yield Opportunities Fund; MFSEmerging Markets Debt Local Currency Fund; MFS Global Bond Fund; MFSMultimarket Income Trust; MFS Charter Income Trust; MFS Meridian Funds -Emerging Markets Debt Fund; MFS Meridian Funds - High Yield Fund; MFSMeridian Funds - Global Bond Fund; MFS Meridian Funds - Emerging MarketsDebt Local Currency Fund; MFS Investment Management Co. (Lux), S.a.r.l., onbehalf of (i) MFS Investment Funds - Emerging Markets Debt Fund, and (ii) MFSInvestment Funds - Emerging Markets Debt Local Currency Fund II; MFSHeritage Trust Company Collective Investment Trust - Emerging Markets DebtFund; and MFS Emerging Markets Debt LLC (collectively, "MFS"); BrevanHoward Asset Management LLP and Brevan Howard Master Fund Limited(collectively, "Brevan Howard"); SW Asset Management, LLC and SWGCOMaster Fund, Ltd. (collectively, "SW"); and AllianceBemstein L.P. on behalf ofcertain accounts managed by AllianceBemstein L.P. and its affiliates (collectively,"AB").