Clifford Chance

U.S. Supreme Court Rules that Sovereign States Are Not Immune from U.S. Court Discovery into their Worldwide Assets

18 June 2014

On June 16, 2014, the U.S. Supreme Court issued two decisions with significant implications not only for a long-running dispute between the Republic of Argentina and holders of defaulted Argentine sovereign debt, but also for any sovereign that finds itself subject to a civil judgment in a U.S. court. With respect to the substance of the dispute, the Court declined to hear an appeal of a lower court decision obligating Argentina to pay the bondholders, which means that the bondholders will very soon have an enforceable judgment for approximately 2.5 billion dollars in defaulted bonds. At the same time, the Court issued a ruling that provides a powerful tool to allow the bondholders to enforce that judgment: access to the sweeping discovery process under the U.S. Federal Rules of Civil Procedure. Specifically, in Republic of Argentina v. NML Capital, Ltd.,  the Court held that the Foreign Sovereign Immunities Act does not limit U.S. courts’ ability to authorize discovery into the worldwide assets held by a foreign sovereign in aid of enforcement of a judgment against that sovereign. In the words of the lower court, U.S. courts may now act as “clearinghouse[s] for information” regarding a sovereign’s worldwide assets, with the sole limit to their inquiry being the discretion and reasonableness of the trial court.

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