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We’ll admit it. FT Alphaville got a little excited when the US government signalled that it wanted to wade into the weird lawsuit surrounding Sri Lanka’s 2022 default.
If this was just about supporting an orderly debt restructuring it could have said so in an amicus brief that it supported Sri Lanka’s request for a six-month stay, as the UK and France did on behalf of the Paris Club.
We therefore wondered if the incoming US “statement of interest” would somehow be related to the identity of the mysterious person or people behind the lawsuit launched by Hamilton Reserve Bank, a tiny St Kitts based lender that says it has $250mn worth of Sri Lanka’s 2022 bond.
FTAV was therefore anxiously awaiting the statement that Damian Williams, the US Attorney for SDNY had promised last month. That it landed moments before an Oct 2 deadline added to the drama.
But the reality (HT Mitu Gulati) was a bit of a let-down:
The United States of America respectfully submits this Statement of Interest in accordance with federal statutes that authorize the United States Department of Justice “to attend to the interests of the United States” by “argu[ing] any case in a court of the United States in which the United States is interested.” 28 U.S.C. §§ 517, 518.
This Statement of Interest is submitted in litigation filed on June 21, 2022, by Hamilton Reserve Bank Ltd. (“Plaintiff” or “Hamilton Bank”) against the Democratic Socialist Republic of Sri Lanka (“Defendant” or “Sri Lanka”) seeking payment on $250,190,000 of defaulted sovereign bonds. Dkt. No. 23. Hamilton Bank has filed a motion for summary judgment, Dkt. Nos. 44-48, 52, while Sri Lanka has filed a motion to stay the litigation for a period of six months while it conducts sovereign debt restructuring negotiations with sovereign and commercial creditors, Dkt. Nos. 53-55.
The United States submits this Statement of Interest in support of Sri Lanka’s motion for a six-month stay. Sri Lanka’s sovereign debt restructuring process, described in Section A infra, is well advanced and is progressing toward a favorable resolution for Sri Lanka and its creditors in the coming months. As described in Section B infra, U.S. policy interests favor an orderly and consensual sovereign debt restructuring process consistent with the principles of comparability of treatment and enforceability of contractual rights. Under the circumstances of this case, the United States assesses that the stay would facilitate an orderly and consensual sovereign debt restructuring process. The expectation is that the official creditor committee will reach consensus on debt treatment terms — including a term committing Sri Lanka to seek comparable treatment from its commercial creditors and other official bilateral creditors — by the end of the year.
A stay would also facilitate negotiations with private creditors, an estimated majority of which have conditioned their participation on the application of comparable treatment. Hamilton Bank’s request that this Court order its immediate repayment undermines these ongoing negotiations. Accordingly, as described in Section C infra, the public interest and the interests of others not parties to the litigation support the grant of the motion for a stay.
You can read the full statement of interest here but honestly, probably don’t bother. It is indeed mostly just a (lengthy) reiteration of the arguments for a stay made several weeks ago by France and the UK.
It appears that the main reason why SDNY got involved is simply that someone, somewhere in the US government took particular exception to how Hamilton Reserve Bank’s lawyers presented the US position on sovereign debt restructurings.
What follows is a lengthy WELL AKSHUALLY. The SDNY (presumably on behalf of main Justice/Treasury etc) goes through various case law that it feels the HRB wilfully or dumbly misrepresents or misunderstands.
All this might be an entertaining blast from the past, if Pravin Bankers Assocs., Ltd. v. Banco Popular Del Peru or Allied Bank Int’l v. Banco Credito Agricola de Cartago is your idea of fun. But we have to admit that it feels like a bit of an anticlimax, even if it looks like Sri Lanka will get its stay.