On 5 April 2023 Mr Justice Picken handed down judgment in Palladian Partners LP and others v Republic of Argentina [2023] EHWC 711 (Comm), following a 4-week trial in the Commercial Court last year. The judgment is available here.

The claim by various institutional and corporate investors related to Euro-denominated GDP-linked Securities issued by the Republic as part of a major sovereign debt restructuring launched in 2005. Picken J noted that this restructuring took place in the wake of a national financial crisis of unprecedented scale. Payment under the Securities would only be triggered if certain Payment Conditions relating to the level and growth of GDP, compared to a Base Case, were met.

In 2014, the Republic rebased its measurement of GDP, changing the Year of Base Prices from 1993 to 2004. It concluded that, following the rebasing, the Payment Conditions had not been met for Reference Year 2013 and that no payment was due. The Claimants contended that the effect of the “Adjustment Provision” contained in the Securities was that the Payment Conditions were met.

The issue decided by Picken J related to the impact of the rebasing on the Payment Conditions. He concluded that the Claimants were correct in their construction of the Adjustment Provision, namely that it required an annual adjustment to Base Case GDP based on the ratio between Real GDP in the old and new Years of Base Prices, rather than a one-off adjustment using a fixed factor. He therefore ordered payment of EUR 1.33bn plus interest, and ordered specific performance of the Republic’s obligations for subsequent years.

Picken J concluded that he did not need to rule on the Claimants’ alternative case, namely that the Republic had not carried out the rebasing in good faith and for a proper purpose, stating that it would be undesirable to do so given that it only arose in the alternative and the seriousness of the allegations levelled against a sovereign state.

The Trustee made submissions for the protection of the trust and all holders in the interests of ensuring that the entire class would benefit from any judgment. During the course of trial, it became common ground that relief, if any, would be for all holders. A further issue concerned whether the Claimant beneficial holders were also entitled under the Securities and the Trust Indenture to obtain judgment for their own beneficial share of the Payment Amount in addition to the judgment for the Trustee. The Judge concluded that beneficial holders could bring such a claim and this was not pre-empted by the rights of the Trustee to receive payment on behalf of all noteholders.

The Republic has indicated its intention to seek to appeal the judgment and a further hearing to address consequential matters is to take place in the Commercial Court later this year. 

Alex Barden (with Sue Prevezer KC and James Shaerf) acted for the Claimants (instructed by Quinn Emanuel). Ben Valentin KC, Tamara Oppenheimer KC, Sam Ritchie and Francesca Ruddy acted for the Republic (instructed by Sullivan & Cromwell). Adam Zellick KC and Ian Bergson acted for the Note Trustee, Bank of New York Mellon (instructed by Reed Smith).