Billionaire Paul Singer made headlines in recent days with his company’s move to seize an Argentine navy ship off the coast of Ghana.
Singer is is founder and CEO of Elliott Capital Management, which owns the hedge fund NML Capital Limited. NML bought some of Argentina’s bonds (before and after the country’s default in its 2001-02 financial crisis), and has been attempting to collect as much payback as possible for them.
Over the next decade, NML convinced US courts and UK courts to side with its efforts, even as other bondholders settled with the government as part of a debt restructuring. The Ghanaian courts are pointing to these judgements as the reason for their authorization of the forced docking of the ship. According to The Finder newspaper,
Lawyer for the Argentine government, Larry Otu have argued that as a military vessel, the Libertad enjoyed immunity.
He argued that Article 3 of the 1996 Convention concerning the immunity of state-owned ships stipulates that state-owned ships which were not used for commercial purposes would not be subjected to arrest, and that Argentina was enjoying a sovereignty in Ghana; and even if the government has waived any immunity from pre-judgement and execution attachment of any of its asserts and properties, waiving it in Ghana will be invalid with the law.
The court, however, ruled that Argentina waived immunity as part of the agreement it entered with NML Capital in the Fiscal Agreement Agency on October 19, 1994.
Justice Adjei said even though the 2004 United Nations Convention on the law of the sea recognises the immunity of warships, that recognition was based on the rules and principles of customary international law which permits the immunity to be waived, including by contract.
This case does not directly relate to investor-state dispute settlement. Indeed, Argentina’s bond issuance terms were pretty unilaterally sovereignty sacrificing. (There are a number of closely related cases making their way through the international law realm.)
What Singer’s latest move shows however is how hedge funds are becoming increasingly sophisticated in using both developed and developing country courts, both standard judicial processes and arbitration, in order to get what they want.
The question does become, if Ghanaian courts are so reliable for international capital, why the push to allow multinationals to evade Ghana’s courts when it comes to Ghana’s regulations? Stay tuned to see if a Ghana-US bilateral investment treaty actually moves forward.