Rogue Trends in Sovereign Debt: Argentina, Vulture Funds, and Pari Passu Under New York Law

Coined the “trial of the century” in sovereign debt litigation, NML v. Argentina (NML) involves a radical departure from the traditional unenforceability of sovereign debt contracts in favor of the opposite extreme: enforcement through potent injunctive remedies applicable to third parties. Problems with the NML precedent could extend far beyond Argentina’s immediate situation. NML is the latest landmark in a trend that creates serious uncertainties for sovereign debt markets—a major concern for sovereigns, their creditors, and financial institutions around the world. This Article argues that NML creates “bad law” by overcompensating for unenforceability problems with an ambitious reading of the pari passu clause and supercharged injunctive remedies. As a practical matter, the milk is spilled; “rogue” precedent now exists. But until broader solutions for problems in sovereign debt are available, there are compelling grounds for other courts to apply the NML precedent as narrowly as possible. In addition to the extraordinary factual circumstances of NML, the Second Circuit provided a starting point for distinguishing NML from future cases