WASHINGTON — The U.S. Supreme Court appeared to be searching for a middle ground Monday in the decade-long battle between Argentina and holders of its defaulted bonds.
The justices heard arguments on a relatively narrow aspect of the issue, the question of whether a sovereign nation can be forced to reveal assets around the world so plaintiffs can collect on U.S. court judgments.
The court seemed inclined to narrow lower court orders in favor of the bondholders to exclude diplomatic, military and national security property owned by Argentina. At the same time, the justices indicated they might uphold the orders as they apply to commercial property outside the United States.
The court offered few clues about the larger case involving the same players: Argentina's appeal of a $1.4 billion judgment that it says could destroy the country's economy and also damage the U.S. financial system. So far, lower courts have backed hedge fund NML Capital Ltd., which won an unprecedented judgment that would block Argentina's payments to many other bondholders unless it pays cash first to the plaintiffs.
The high court probably won't even decide whether to hear that case before June. It is expected to decide the current case by then as well.
On Monday, the justices expressed discomfort with the positions of both the bondholders, who want information about everything Argentina owns around the world, and Argentina, which claims protection from having to reveal the information under a U.S. Foreign Sovereign Immunity Act. The Obama administration is backing Argentina and Justice Department lawyer Edwin Kneedler told the justices that a ruling for the bondholders could complicate U.S. foreign policy and endanger U.S. interests overseas.
"In a reciprocal situation, the United States would be very concerned" about a foreign court ordering the government to turn over information on everything it owns around the world, Kneedler said.
The legal fight stems from debt that has been unpaid since the country's 2001 economic crisis. Investors holding more than 92 percent of Argentina's defaulted debt agreed in 2005 and 2010 to write off two-thirds of their pre-crisis value, providing debt relief that enabled the economy to rebound.
But some of the holdouts sued. Theodore Olson, the Washington-based lawyer representing the hedge fund, said Argentina agreed to be bound by U.S. law and U.S. courts when it issued the bonds.
Otherwise, Olson said, the country "would never have been able to borrow money in the United States."
Chief Justice John Roberts pointed out that the case is about enforcing court-ordered subpoenas, not the broader issue of Argentina's debt default. "What does that have to do with this case?" he asked.
The case is Argentina v. NML Capital, 12-842.
Associated Press writer Michael Warren in Buenos Aires contributed to this report