Case 1:08-cv-06978-TPG Document 742 Filed 02/17/15 Page 1 of 19

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK
---------------------------------NML CAPITAL, LTD.,
Plaintiff,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------AURELIUS CAPITAL MASTER, LTD. and
ACP MASTER, LTD.,
Plaintiffs,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------AURELIUS OPPORTUNITIES FUND II, LLC
and AURELIUS CAPITAL MASTER, LTD.,
Plaintiffs,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------BLUE ANGEL CAPITAL I LLC,
Plaintiff,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
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No. 08 Civ. 6978 (TPG)

No. 09 Civ. 1707 (TPG)
No. 09 Civ. 1708 (TPG)

No. 09 Civ. 8757 (TPG)

No. 09 Civ. 10620 (TPG)

No. 10 Civ. 1602 (TPG)

No. 10 Civ. 3507 (TPG)
No. 10 Civ. 3970 (TPG)
No. 10 Civ. 8339 (TPG)

No. 10 Civ. 4101 (TPG)

No. 10 Civ. 4782 (TPG)

(captions continue on following page)

DECLARATION OF JUAN DUGGAN

Case 1:08-cv-06978-TPG Document 742 Filed 02/17/15 Page 2 of 19

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No. 10 Civ. 9587 (TPG)
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PABLO ALBERTO VARELA, et al.,
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Plaintiffs,
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- against :
No. 10 Civ. 5338 (TPG)
THE REPUBLIC OF ARGENTINA,
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Defendant.
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---------------------------------OLIFANT FUND, LTD.,
Plaintiff,
- against THE REPUBLIC OF ARGENTINA,
Defendant.

Pursuant to 28 U.S.C. 1746, I, Juan Duggan, declare under penalty of perjury under
the laws of the United States of America that the following is true and correct:
1.

I am a partner in the law firm Hope, Duggan & Silva, and am duly admitted to

practice law in the City of Buenos Aires, Republic of Argentina. My main areas of expertise are
securities law, banking law and financial regulation in general. Since 1982 as partner in
Crdenas, Hope & Otero Monsegur and then since 1990 as name partner in Hope, Duggan &
Silva I have been actively involved as advisor to issuers, arrangers, agents and managers in
connection with public and private issuances of securities (including issuances from public
entities such as the City of Buenos Aires and the Province of Buenos Aires). I have also acted as
legal advisor to members of the Banking Working Committee that negotiated the 1984-1985
Financing Program with the Government of Argentina and as counsel to several of the syndicate
agents under most of the Guaranteed Refinancing Agreements entered into with public entities
with the guarantee of the Republic of Argentina in connection with such 1984-1985 Financing

Case 1:08-cv-06978-TPG Document 742 Filed 02/17/15 Page 3 of 19

Program. I have acted as legal advisor to institutional investors in connection with the exchange
of existing Argentine sovereign debt under Decree No. 1387/01 and in connection with the 2005
Exchange referred to below.
I.

Question Addressed and Brief Conclusion

2.

I understand that the characteristics of the Argentine Law Bonds1 and the means

by which they were made available to their holders may be useful information for the Court to
consider in connection with the issues now pending before the Court. Specifically, I understand
that there is a dispute between the Plaintiffs on the one hand and Citibank, N.A. (Citibank) on
the other regarding whether the Argentine Law Bonds meet the definition of Domestic Foreign
Currency Indebtedness or External Indebtedness under the Republics 1994 Fiscal Agency
Agreement (FAA). I further understand that the FAA is governed by New York law. I have
not been asked to give any opinions regarding New York law. I have been asked, however,
based on my knowledge of Argentine law and the Argentine Law Bonds, which are governed by
Argentine law and payable in Argentina, to provide information regarding the Argentine Law
Bonds, their characteristics and the manner in which they were made available to holders under
Argentine law. In providing this information, I am aware that the FAA defines the following
categories of indebtedness as Domestic Foreign Currency Indebtedness: indebtedness
(a) exchanged for certain bonds specifically enumerated; (b) exchanged for debt payable in
Argentine pesos, the lawful currency of Argentina (Pesos); or (c) offered exclusively within
Argentina.
3.

Based on my knowledge of Argentine law and my study of the Argentine Law

Bonds and the circumstances of their issuance, I have reached the following conclusions:

The term Argentine Law Bonds is defined below in note 10, and refers to certain bonds issued
by the Republic of Argentina, denominated in U.S. dollars, governed by Argentine law, and payable in Argentina.

Case 1:08-cv-06978-TPG Document 742 Filed 02/17/15 Page 4 of 19

(a)

As I understand Plaintiffs themselves have admitted, certain Argentine

Law Bonds were issued in exchange for bonds bearing certain specified International
Securities Identification Numbers (ISINs), which are specifically enumerated in the
FAA by their name and authorizing legislation, as described in paragraphs 1617;
(b)

All Argentine Law Bonds issued in the 2005 and 2010 exchanges were

issued in payment, exchange, substitution, discharge or replacement of Argentine law

securities that, although originally denominated in U.S. dollars, had been converted by a
2002 Government decree into Peso-denominated securities, as described in greater detail
in paragraphs 1824;
(c)

Other Argentine Law Bonds issued outside the 2005 and 2010 exchanges

were issued in separate offerings or transactions subsequent to 2005. Under the terms of
their issuance, these Argentine Law Bonds were required to be offered exclusively in
local Argentine markets pursuant to either Spanish-language Local Placement
Procedures, operating procedures for a tax credit exchange, or a settlement agreement
between the Republic of Argentina and Repsol, S.A., as described in greater detail below
in paragraphs 2538;
(d)

None of the Argentine Law Bonds are enforceable outside Argentina, and

all are governed by Argentine law and payable in Argentina, where in circumstances of
extreme public emergency they remain subject to conversion into Peso-denominated
securities (Pesificacin), as was done in 2002. Their characteristics are therefore
fundamentally inconsistent with the characteristics that cause bonds to be classified as
external indebtedness under Argentine law, as described in paragraphs 4546.

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II.

The Pesificacin of Argentine Law Debt in 2002

4.

During the period between 1991 through 2001, Argentina applied a monetary

regime (the Convertibility Regime) pursuant to which the Peso was fully convertible into the
U.S. dollar at a one-to-one exchange rate and the Central Bank of Argentina (the Central
Bank) was required to maintain reserves at least equal to the monetary base. By the end of
2001, most of Argentinas public debt was denominated and payable in foreign currencies
(primarily U.S. dollars).2
5.

Argentina publicly acknowledged that, by the end of 2001, the Convertibility

Regime had become economically unsustainable.3 On January 6, 2002, the Argentine Congress
passed the Public Emergency and Reform of Exchange Regime Law No. 25,5614 (the Public
Emergency Act) (Ex. A), which declared the existence of a state of public emergency in
social, economic, administrative, financial and exchange matters and, as provided in the
Argentine Constitution, delegated powers to the President to restructure the countrys
indebtedness.
6.

In the first months of 2002, the President adopted a series of measures that had the

purpose of converting substantially all current Argentine private and public indebtedness
(including Argentine law-governed securities) that were denominated in non-Argentine currency
into Pesos.5 This process is known in Argentina as the Pesificacin, and is described further, as
relevant, in paragraphs 1824 below.

See, e.g., Registration Statement, filed with the U.S. Securities and Exchange Commission
(SEC) on July 2, 2004, at 160, available at https://www.sec.gov/Archives/edgar/data/914021/
000095012304008163/y98698svb.htm.
3
See Registration Statement, filed with the SEC on July 2, 2004, at 87, available at
https://www.sec.gov/Archives/edgar/data/914021/000095012304008163/y98698svb.htm.
4
Published in the Official Gazette on January 7, 2002.
5
This was primarily accomplished pursuant to the terms of Decree No. 214/2002 dated February 3,
2002 (published in the Official Gazette on February 4, 2002), under which all monetary obligations, deposits in the

Case 1:08-cv-06978-TPG Document 742 Filed 02/17/15 Page 6 of 19

7.

Article 1(e) of Decree No. 410/20026 established that the Pesificacin would not

apply to public and private sector payment obligations denominated in non-Argentine currency if
such obligations were not subject to Argentine law.
III.

The Post-Pesificacin Exchanges and Offerings

A.

The 2005 Exchange

8.

On December 9, 2004, the President issued Decree No. 1735/20047 (the 2005

Restructuring Issuance Decree) (Ex. B) pursuant to which he approved the restructuring of

the public indebtedness whose payment had been deferred pursuant to Article 59 of Law
No. 25,827 (the 2005 Exchange).
9.

The 2005 Exchange was governed by a prospectus supplement applicable to the

international offer (the 2005 Prospectus Supplement) that was filed with the SEC,8 and
Operating Procedures applicable in the Republic of Argentina, which were included as Annex
II to the 2005 Restructuring Issuance Decree (the 2005 Procedimientos) (Ex. C). The 2005
Procedimientos provide that the 2005 Prospectus Supplement governs tenders submitted in
Argentina in all such matters that are not expressly modified by the 2005 Procedimientos, and
therefore these documents must be reviewed jointly. The 2005 Procedimientos were not filed
with the SEC and were officially published only in Spanish.9

financial system, and indebtedness owed to the financial system that were denominated in foreign currencies were
converted into Pesos at various exchange rates.
6
Published in the Official Gazette on March 8, 2002.
7
Published in the Official Gazette on December 10, 2004.
8
See https://www.sec.gov/Archives/edgar/data/914021/000095012305000302/y04567e424b5.htm.
9
In addition, Section 1 of Decree No. 319/2004 (published in the Official Gazette on March 17,
2004) (Ex. D), appointed a group of International Dealer Banks for the North American and Caribbean and Europe
regions, and a second group of Dealer Banks for the Republic of Argentina.

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10.

Under the 2005 Exchange, Argentina issued new securities (including Argentine

Law Bonds10) in exchange for eligible securities tendered by their direct or indirect holders (the
2005 Eligible Securities).11 Pursuant to the terms of the 2005 Exchange, Argentine Law
Bonds could be issued only in exchange for securities originally denominated in U.S. dollars and
governed by Argentine law (the Argentine Law Eligible Securities).12
11.

Pursuant to the 2005 Restructuring Issuance Decree, Argentina first issued an

Argentine Law Bond that was assigned the ISIN ARARGE03E113 (the AR 113 Bond).
B.

Additional Issuances of AR 113 Bonds

12.

Beginning in 2007, Argentina authorized the issuance of additional AR 113 Bonds

through the reopening of the original issue provided for in the 2005 Restructuring Issuance
Decree. Thus, the terms and conditions of such additional AR 113 Bonds issued under such
reopenings are identical to the terms and conditions of the AR 113 Bonds that were originally
issued pursuant to the 2005 Restructuring Issuance Decree.
13.

As explained in greater detail in paragraphs 2538, Argentina authorized the

issuance of additional AR 113 Bonds from 2007 through 2014 in separate transactions that were
unrelated to the 2005 and 2010 exchanges.

10

The following bonds were issued under the 2005 Restructuring Issuance Decree: (i) Bonos de la
Repblica Argentina con Descuento en Dlares Estadounidenses 8,28% 2033 (the AR 113 Bonds defined in
paragraph 11); (ii)Bonos de la Repblica Argentina a la Par en Dlares Estadounidenses Step Up 2038; and
(iii) Valores Negociables Vinculados al PBI con vencimiento el 15 de Diciembre de 2035 (collectively, the 2005
Argentine Law Bonds and, together with the 2010 Argentine Law Bonds defined in note 15 below, the
Argentine Law Bonds).
11
A list of all 2005 Eligible Securities (including the Argentine Law Eligible Securities) is included
in Annex A to the 2005 Prospectus Supplement and in Annex A and B to the 2005 Procedimientos, where the ISINs,
if any, corresponding to such 2005 Eligible Securities are also stated.
12
See Chart 3 of the 2005 Procedimientos; Chart at S-16 of the 2005 Prospectus Supplement.

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C.

The 2010 Exchange

14.

On April 26, 2010, the President issued Decree No. 563/201013 (the 2010

Restructuring Issuance Decree) (Ex. E) pursuant to which she approved the restructuring of
the public indebtedness that, having been eligible to participate in the 2005 Exchange, had not
been tendered at that time (the 2010 Exchange).14
15.

Under the 2010 Exchange, Argentina issued new securities (including Argentine

Law Bonds15) in exchange for eligible securities tendered by their direct or indirect holders (the
2010 Eligible Securities). Pursuant to the terms of the 2010 Exchange, Argentine Law Bonds
issued thereunder would again be issued in exchange for the Argentine Law Eligible Securities.16
IV. Summary of the Different Types of Argentine Law Bonds
A.

Category 1: Argentine Law Bonds Exchanged for Securities Specifically

Enumerated in the FAA

16.

I have reviewed a memorandum of law in which Plaintiffs agree that certain

Argentine Law Bonds were issued in the 2005 Exchange and/or the 2010 Exchange in exchange
for securities listed in subparagraph (i) of the FAAs definition of Domestic Foreign Currency
Indebtedness.17 Plaintiffs identified Argentine securities with the following ISINs as securities
listed in subparagraph (i) of the definition of Domestic Foreign Currency Indebtedness:

13

Published in the Official Gazette on April 29, 2010.

The 2010 Exchange was also governed by a prospectus supplement applicable to the international
offer (the 2010 Prospectus Supplement), filed with the SEC, see https://www.sec.gov/Archives/edgar/
data/914021/000090342310000252/roa-424b5_0428.htm, and Procedures applicable in the Republic of Argentina
(the 2010 Procedimientos) (Ex. F), which were included as Annex I to the 2010 Restructuring Issuance Decree.
The 2010 Procedimientos were not filed with the SEC and were officially published only in Spanish.
15
The following bonds were issued under the 2010 Restructuring Issuance Decree: (i) Bonos de la
Repblica Argentina con Descuento en Dlares Estadounidenses 8,28% 2033 and (ii) Bonos de la Repblica
Argentina a la Par en Dlares Estadounidenses Step Up 2038 (collectively, the 2010 Argentine Law Bonds).
16
The same Argentine Law Eligible Securities that qualified to participate in the 2005 Exchange also
qualified to participate in the 2010 Exchange. Lists of all 2010 Eligible Securities are included in Annexes A-1 and
A-2 to the 2010 Prospectus Supplement and in Annexes A and B to the 2010 Procedimientos.
17
See Plaintiffs Memorandum of Law in Opposition to Non-Party Citibank, N.A.s Motion by
Order to Show Cause, filed Sept. 26, 2014 (Dkt. No. 680) at 16 & n.17.
14

Case 1:08-cv-06978-TPG Document 742 Filed 02/17/15 Page 9 of 19

ARP04981DG19, ARP04981BA66, ARARGE043901, ARARGE044032, ARARGE044198,

ARARGE043927, ARARGE044008, ARARGE044164, ARARGE030114, ARARGE044081,
ARARGE043992, ARARGE044156, ARARGE030056 (the Designated Eligible Securities).
17.

I have confirmed that (a) all the Designated Eligible Securities correspond with

securities identified by name and authorizing legislation in subparagraph (i) of the definition of
Domestic Foreign Currency Indebtedness in the FAA;18 (b) all of the Designated Eligible
Securities were eligible to be tendered in exchange for Argentine Law Bonds in the 2005
Exchange and the 2010 Exchange; and (c) all Argentine Law Bonds issued in exchange for any
Designated Eligible Securities in the 2005 Exchange and/or the 2010 Exchange are securities
that were issued in exchange for bonds specifically enumerated in the FAA.
B.

Category 2: Argentine Law Bonds Exchanged for Securities Payable Only in

Pesos Because of the 2002 Pesificacin

18.

As part of the Pesificacin, and pursuant to the terms of Decree No. 471/200219

dated March 8, 2002 (Ex. G), all U.S. dollar-denominated indebtedness due by the National
Government, the Provinces20 and the Municipalities that was outstanding as of February 3, 2002
and was governed exclusively by Argentine law was converted into Pesos at the rate of U.S.
dollars 1:00 to Pesos 1:40.
19.

Effective as from then, all of Argentinas National public debt governed by

Argentine law that was outstanding as of February 3, 2002 became payable exclusively in Pesos.

18

Specifically, these securities are: (b) Bonos de Consolidacin issued under Law No. 23,982 and
Decree No. 2140/91, (c) Bonos de Consolidacin de Deudas Previsionales issued under Law No. 23,982 and Decree
No. 2140/91, (f) Ferrobonos issued under Decree No. 52/92 and Decree No. 526/92 and (g) Bonos de Consolidacin
de Regalas Hidrocarburferas a 16 Aos de Plazo issued under Decree No. 2284/92 and Decree No. 54/93.
19
Published in the Official Gazette on March 13, 2002.
20
Decree No. 1,443/2002, dated August 9, 2002, established separate rules for the conversion into
Argentine Pesos of certain debts of Provincial governments to the public banks controlled by them.

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20.

Decree No. 471/2002 was ratified by Article 62 of Law No. 25,725. The specific

securities that had been converted into Pesos in conformity with the provisions of Decree
No. 471/2002 were listed in Annex I to the Ministry of Economys Resolution No. 55/2002 dated
April 15, 200221 (Ex. H). This Annex was later substituted by Annex I attached to the Ministry
of Economys Resolution No. 50/2002 dated May 30, 200222 (Ex. I).
21.

All of the Argentine Law Eligible Securities are included in Annex I to Resolution

No. 50/2002, and therefore are payable exclusively in Pesos in accordance with Decree
No. 471/2002.
22.

The constitutionality of the Pesificacin was upheld when it was judicially

challenged before Argentine courts by holders of securities evidencing Argentine public debt that
had been subject to conversion into Pesos. In the Galli case23 the Federal Supreme Court
rejected such challenge and concluded that the provisions of Decree No. 471/2002 are
constitutional.24 The Federal Supreme Court has reiterated the constitutionality of the provisions
of Decree No. 471/2002 in other cases.25

21

Published in the Official Gazette on April 22, 2002.

Published in the Official Gazette on May 31, 2002.
23
Galli, Hugo Gabriel y otro c/ PEN-Ley 25.561-Dtos. 1570/01, 214/02 s/ amparo ley 25.561,
Federal Supreme Court docket No. G. 2181, XXXIX., April 5, 2005.
24
The Federal Supreme Court is the most senior court in the Argentine Federal court system and its
decisions carry the highest weight with all other courts. While the effect of these decisions in the Galli and other
cases is limited to the parties involved in the specific controversy and these decisions have no binding authority on
other litigants, the opinion expressed by the Federal Supreme Court in the Galli case has been consistently
followed by Argentine courts in other cases. See, e.g., Castorina, Jorge Rene y otro c. Estado Nacional - Poder
Ejecutivo, Ist. Chamber of the Appellate Court in Federal Civil and Commercial Matters, September 18, 2007;
Mamani, Marta Norma c. PEN - Ley 25.561- Dtos. 1570/01 214/02 s/amparo sobre Ley 25.561, IInd. Chamber of
the Federal Appellate Court in Federal Contentious Administrative Matters, December 11, 2008; Basso, Gustavo
Ral y otro c. Poder Ejecutivo Nacional s/amparo, IInd. Chamber of the Appellate Court in Federal Civil and
Commercial Matters, February 5, 2009; P., J. E. y otra c. Estado Nacional y otro s/ amparo Supreme Court of the
Province of Buenos Aires, July 3, 2013.
25
See, e.g., Ca. Azucarera Bella Vista S.A. c. Ca. Nacional Azucarera S.A. y otro, Federal
Supreme Court docket No. C. 623, XLI, November 6, 2007; Valn, Alberto Alfredo y otros c. PEN - M de
Economa s/ accin de amparo, Federal Supreme Court docket No. V. 468, XXXIX, May 24, 2011; Gaitn,
Mara Carolina y otros c. Estado Nacional s/accin de amparo, Federal Supreme Court docket No. G. 1534, XLI,
June 26, 2012.
22

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23.

The terms of the 2005 Exchange and the 2010 Exchange specify that:
Solely for purposes of the Offer, Eligible Securities originally
denominated in a currency other than pesos and governed by
Argentine law will be treated as if they were denominated in the
currency in which they were originally issued.26

In other words, although all Argentine Law Eligible Securities were now-Peso denominated (and
Peso-payable) securities, Argentina still offered holders of these securities the option to
exchange them for U.S. dollar-denominated Argentine Law Bonds. In no case did this option
cause the Argentine Law Eligible Securities to become payable in any currency other than Pesos.
Any Argentine Law Eligible Securities not effectively exchanged in the 2005 Exchange and
2010 Exchange continue being securities payable exclusively in Pesos.
24.

Thus, in the case of the Argentine Law Bonds that were issued in the 2005

Exchange and 2010 Exchange, such Argentine Law Bonds were issued in exchange for bonds
that were payable in Pesos, the lawful currency of Argentina.27

26

The quoted provision appears in the 2005 Procedimientos. Similar provisions are contained in
each of the 2005 Prospectus Supplement, the 2010 Procedimientos, and the 2010 Prospectus Supplement.
27
Additionally, for purposes of satisfying Argentinas obligations under the Rights Upon Future
Offers provisions (the RUFO Provisions) in the securities issued by Argentina in the 2005 Exchange, the
holders of such securities were offered the right to participate in the 2010 Exchange. The 2010 Procedimientos
indicate that holders of 2005 Argentine Law Bonds were being offered a chance to participate in the 2010 Exchange
in conformity with the RUFO Provisions, but add a statement to the effect that Participation in the Invitation may
be unattractive to holders of [2005 Argentine Law Bonds]. In the case of 2005 Argentine Law Bonds being
tendered again in 2010 pursuant to the RUFO Provisions, the holder was treated as tendering the original Argentine
Law Eligible Securities that were payable in Pesos, the lawful currency of Argentina. The RUFO Provisions
specifically indicate that securities obtained in the 2005 Exchange would be treated as though they were Eligible
Securities that: [ ] are in the same currency as such Pars, Discounts or Quasi-Pars [e.g., the 2005 Argentine Law
Bonds], and [ ] have an Eligible Amount equal to the Eligible Amount of the Eligible Securities that would have
been originally exchanged for such Pars, Discounts or Quasi Pars pursuant to the Offer (determined by applying the
inverse of the relevant exchange ratio applied in the Offer). 2005 Prospectus Supplement at S-69. Therefore,
Argentina established terms of the 2010 Exchange under which the holder tendering 2005 Argentine Law Bonds
was treated as tendering the same Argentine Law Eligible Securities that had been originally tendered in 2005. That
is the reason why in such case, when determining the Eligible Amount of the 2005 Argentine Law Bonds being
tendered in 2010which is used to calculate the number of 2010 Argentine Law Bonds that the holder will
receivethe actual amount of 2005 Argentine Law Bonds is multiplied by the inverse of the relevant exchange ratio
applied in the 2005 Exchange. This calculation results in an Eligible Amount that is equal to the Eligible
Amount of Argentine Law Eligible Securities that the holder had tendered in the 2005 Exchange (and which, as
indicated above, had been converted into Pesos), as if those were the securities actually being tendered again in
2010.

10

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C.

Category 3: Argentine Law Bonds Not Offered in Exchanges

25.

As noted above in paragraphs 1213, Argentina issued additional AR 113 Bonds

in various transactions outside of the 2005 Exchange and 2010 Exchange. I understand that
because these AR 113 Bonds were not offered in the 2005 Exchange and the 2010 Exchange,
they may not be relevant to the matter pending before the Court. In any event, the resolutions
and governing documents for these transactions indicate that the additional AR 113 Bonds were
offered exclusively in Argentina.
(i)
26.

Argentine Law Bonds Issued Under Local Placement Procedures

Several Joint Resolutions of the Ministry of Economy and Public Finance issued

from 2007 through 2011 (each of them a Local Placement Issuance Resolution and jointly
the Local Placement Issuance Resolutions)28 authorized the issuance of Argentine Law
Bonds to raise new capital. The Local Placement Issuance Resolutions indicate that the
Argentine Law Bonds to be issued thereunder would be placed in accordance with the
Procedures for the Placement of Public Debt Instruments approved in Section 3 of the Joint
Resolutions No. 205/2007 and No. 34/2007 (Ex. J) (the Local Placement Procedures).
27.

The Local Placement Procedures are rules that apply to the placement in the local

Argentine market of local or foreign currency public debt instruments (including the Argentine
Law Bonds) and, consequently, the Local Placement Procedures were officially published only

28

See Joint Resolutions No. 449/2007 and No. 94/2007, dated November 22, 2007 and published in
the Official Gazette on November 26, 2007 (Ex. K); Joint Resolutions No. 62/2010 and No. 21/2010, dated March
15, 2010 and published in the Official Gazette on June 11, 2010 (Ex. L); Joint Resolutions No. 77/2010 and No.
29/2010, dated March 31, 2010 and published in the Official Gazette on June 11, 2010 (Ex. M); Joint Resolutions
No. 198/2010 and No. 57/2010, dated July 26, 2010 and published in the Official Gazette on September 10, 2010
(Ex. N); Joint Resolutions No. 83/2011 and No. 21/2011, dated March 23, 2011 (Ex. O); Joint Resolutions No.
175/2011 and No. 45/2011, dated May 30, 2011 and published in the Official Gazette on December 2, 2011(Ex. P);
Joint Resolutions No. 242/2011 and No. 68/2011, dated July 18, 2011 and published in the Official Gazette on
December 7, 2011 (Ex. Q); Joint Resolutions No. 364/2011 and No. 98/2011, dated Sept. 28, 2011 and published in
the Official Gazette on December 7, 2011 (Ex. R).

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in Spanish. The Local Placement Procedures contemplate that such placements can be made
either through public bidding processes or through direct placements.
28.

In the case of placements through public bidding processes, the price or prices at

which the public debt instruments shall be sold are set after taking in all bids. Bids must be
submitted to the National Office of Public Credit through the Communications System
implemented by the Mercado Abierto Electrnico (MAE), a local electronic securities and
foreign-currency trading market, indicating the purchase price at which the bidder is willing to
purchase a given amount of such debt instruments. The only participants in the bidding
processes who may submit bids are (a) stockbrokers or broker-dealers with cash positions
credited in the account of the Mercado de Valores de Buenos Aires at Central de Registracin y
Liquidacin de Instrumentos de Endeudamiento Pblico (CRYL),29 or (b) MAE agents with
accounts at CRYL (and other persons interested in participating in such public bidding processes
must do so exclusively through entities referred to in the preceding (a) or (b)). Upon completion
of each public bidding process, the Public Debt Administration Directorate deposits with CRYL
the global notes evidencing the applicable public debt instruments and identifies (i) the accounts
at CRYL where interests in such global certificates must be credited, and (ii) the cash accounts at
the Central Bank from which the purchase price must be debited. Next, the Central Bank settles
the transaction by making the required credits and debits and transfers the purchase price to the
cash accounts of the National Treasury.
29.

In the case of direct placements, upon receipt of any proposal to enter into any

such transaction, the National Office of Public Credit shall prepare a Technical Report and send

29

CRYL is a clearinghouse system organized in 1996 by the Central Bank in furtherance of the
provisions of Decree No. 340/1996 (published in the Official Gazette on April 3, 1996). The purpose of CRYL is to
act as a registry for the registration, clearance and settlement of transactions involving debt securities issued by
Argentina.

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it to the Subsecretary of Finance who, absent any objections shall approve it and send it to the
Entity Responsible for the Coordination of the Financial Management Systems which in turn,
and absent any objections, shall approve it and send it to the National Office of Public Credit for
the implementation of the appropriate placement. Notification of such placement is transmitted
to the Public Debt Administration Directorate for it to debit the current account of the
participating financial entities in the Central Bank, issue the applicable global note to be sent to
CRYL and make all the registrations in accordance with the instructions of the National General
Accountant.
30.

Under the resolutions authorizing their issuance, all of these AR 113 Bonds were

required to be offered exclusively in the local markets under the Local Placement Procedures.
(ii)
31.

Argentine Law Bonds Issued Under the Tax Credits Exchange

Additionally, on July 25, 2011, the Minister of Economy and Public Finance

issued Resolution No. 439/201130 (Ex. S), which authorizes the exchange of certain local Tax
Credit Certificates and Custody Certificates (the Tax Credit Eligible Instruments) for
AR 113 Bonds, plus a cash payment (the Tax Credits Exchange). The Tax Credits
Exchange was to be performed pursuant to the terms and conditions contained in the operating
procedures (the Tax Credits Procedimientos) attached to Resolution No. 439/2011. The Tax
Credit Certificates and Custody Certificates had originally been issued locally in exchange for
cash or Argentine debt instruments primarily for the purpose of being applied to the timely
cancellation of certain Argentine tax liabilities.
32.

Under the Tax Credits Procedimientos, which were officially published only in

the Spanish language, all offers to exchange Tax Credit Eligible Instruments for Argentine Law
Bonds in the Tax Credits Exchange had to be made exclusively through Caja de Valores, S.A.
30

Published in the Official Gazette on July 27, 2011.

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(Caja).31 To that effect, the holders of Tax Credit Eligible Instruments had to instruct their
depositors in Caja to transfer their tendered Tax Credit Eligible Instruments to a designated
account of the Secretary of Finance at Caja. Upon acceptance of the offer, the Secretary of
Finance would cause the corresponding Argentine Law Bonds to be credited to the sub-accounts
at Caja from which the tendered Tax Credit Eligible Instruments were originally transferred.
33.

Therefore, all of the AR 113 Bonds issued in the Tax Credits Exchange were

offered exclusively through Caja in Argentina, in accordance with the Tax Credits
Procedimientos.
(iii)
34.

Argentine Law Bonds Issued Under the Repsol Settlement

On February 29, 2014, Repsol S.A., Repsol Capital S.L. and Repsol Butano S.A.

(jointly Repsol) entered into an Amicable Solution and Expropriation Settlement Agreement
(the Repsol Settlement Agreement) (Ex. T) with Argentina pursuant to which the parties
thereto settled the conflicts between them resulting from the expropriation by Argentina of
certain shares of YPF S. A. and YPF Gas S. A., the Argentine subsidiaries owned by Repsol.
The Repsol Settlement Agreement was executed in the City of Buenos Aires and in its Whereas
provisions the parties indicated that they had pursued
[a]micable negotiations in Argentine territory as a result of which
they agreed to enter into this [Settlement Agreement], including all
of its Annexes . . . pursuant to which the Argentine Republic and
Repsol put an end to the [c]ontroversy.
35.

Under the terms of the Repsol Settlement Agreement, (i) Argentina offered to

Repsol the sum of U.S. $5,000,000,000 (the Compensation) as indemnification for, inter alia,

31

Caja is a privately owned corporation incorporated in 1974 in Buenos Aires, Argentina. Caja has
been authorized both by Law No. 20,643 and by the Argentine National Securities Commission to operate as a
securities depositary. As such, Caja provides central depositary facilities for securities and acts as a transfer and
paying agent, providing custodial and clearing services to assist customers in the completion of domestic and
international securities transactions. Argentina owns no shares in and has no corporate control over Caja.

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the expropriation of its shares of YPF S.A. and YPF Gas S.A. (see Section 1 of the Repsol
Settlement Agreement), (ii) Repsol accepted such offer (see Section 2 of the Repsol Settlement
Agreement), and (iii) Repsol agreed that the Compensation be paid through the delivery of
Argentine internal public debt instruments DOLLAR BONDS OF THE ARGENTINE
REPUBLIC (hereinafter, the PUBLIC SECURITIES), of the type and amount identified in
ANNEX IV (see Section 3 of the Repsol Settlement Agreement).
36.

Annex IV of the Repsol Settlement Agreement, when listing the types of

PUBLIC SECURITIES to be issued for purposes of the payment of the Compensation,

includes AR 113 Bonds in a nominal aggregate amount of U.S. $1,250,000,000.
37.

The Repsol Settlement Agreement was ratified by Law No. 26,932,32 which also

authorized the Secretary of Finance to issue the securities to be applied to the payment of the
Compensation. The AR 113 bonds were issued pursuant to the provisions of Resolution No.
26/201433 dated April 30, 2014.
38.

Therefore, all the Argentine Law Bonds issued under the Repsol Settlement

Agreement were offered exclusively within Argentina in a transaction where (i) all negotiations
between the parties were performed in Argentina, (ii) the relevant Repsol Settlement Agreement
was executed in Argentina and governed by Argentine law, (iii) pursuant to the terms of the
Repsol Settlement Agreement, Argentina offered, and Repsol accepted, Argentine Law Bonds,
(iv) the Argentine Law Bonds were characterized as Argentine internal public debt
instruments, (v) Argentina ratified the Repsol Settlement Agreement pursuant to a special law,
(vi) pursuant to the terms of issuance, the Argentine Law Bonds were represented by a global
note that was deposited with CRYL.

32
33

Published in the Official Gazette on April 28, 2014.

Published in the Official Gazette on May 8, 2014.

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V.

Common Characteristics of All Categories of Argentine Law Bonds

39.

Under the terms of the 2005 Restructuring Issuance Decree and the 2010

Restructuring Issuance Decree, Argentine Law Bonds (including the additional AR 113 Bonds)
would be evidenced by global notes issued in the name of, and deposited with CRYL.34
40.

CRYL holds for its participants securities in the form of global notes and

facilitates the clearance and settlement of transactions through electronic book-entry changes in
its participants accounts. In addition to accounts where they hold proprietary assets, participants
in CRYL (such as Caja) may also maintain segregated sub-accounts for customer assets. A
beneficial interest in securities deposited at CRYL can be held directly by a participant that has
an account with CRYL or indirectly through a participant that has an account with CRYL.
41.

In addition, stockbrokers, banking and financial institutions (such as Citibank

Argentina), and mutual funds (collectively, the Depositors) are authorized to hold securities
through Caja. Each Depositor holds at least one securities account and one money account with
Caja. Such securities accounts in turn have sub-accounts where the holdings or beneficial
interests of the Depositors clients are registered.
42.

Because the global notes for all Argentine Law Bonds are registered in the name

of, and deposited with, CRYL, the only way in which any person can hold an interest in an
Argentine Law Bond is either directly through an account with CRYL or indirectly through an
institution that has an account with CRYL, such as Caja.

34

The global notes for the Argentine Law Eligible Securities were also all deposited in Argentina,
either at CRYL or Caja. As part of the 2005 Exchange, on December 23, 2004, the President issued Decree
No. 1911/2004 (published in the Official Gazette on December 30, 2004) (Ex. U), which approved, inter alia, the
Exchange Agent Agreement entered into with The Bank of New York. Annex F to the Exchange Agent Agreement
lists the 2005 Eligible Securities (including the Argentine Law Eligible Securities) and includes a column labeled
Global Note Location which indicates where such securities are located. In all cases, the location of each
Argentine Law Eligible Security is either CRYL or Caja.

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43.

Consistent with such terms and conditions, Argentina, when offering to issue

Argentine Law Bonds in the 2005 Exchange, the 2010 Exchange, the Local Placement
Procedures, and the Tax Credits Exchange, specified that the Argentine Law Bonds to be
delivered would be credited at accounts held only at CRYL or through Caja.35
44.

Under the terms of the 2005 Exchange and 2010 Exchange, by making a tender of

securities, holders of tendered securities were deemed to have accepted unconditionally such
exchange terms and thus consented to (i) the issuance of the Argentine Law Bonds in the form of
global notes deposited with CRYL, and (ii) holding an interest in such Argentine Law Bonds
exclusively through an account with CRYL or through an institution that has an account with
CRYL, including Caja.
VI.

Argentine Public Debt Classification.

45.

Section 58 of the Implementing Regulations of Law No. 24,156 (issued pursuant

to Decree No. 1344/0736) (Ex. V) states that, in the case of the placement of securities by
Argentina, the placements to which Argentine law applies shall be deemed internal
indebtedness and those whose jurisdiction or applicable law is not under Argentine law shall be
deemed external indebtedness.
46.

Based on the terms of issuance of the Argentine Law Bonds, and because they are

governed by Argentine law, paid only in Argentina, and not subject to enforcement outside
Argentina, I conclude that the Argentine Law Bonds constitute internal indebtedness. In

35

See, e.g., 2005 Prospectus Supplement at S-20, S-56 and S-73; 2010 Prospectus Supplement at
S-39, S-90 and S-115; 2010 Procedimientos at (V)(f); Sections 1.13.1, 1.13.2 and 2 of the Local Placement
Procedures; Article III of Tax Credits Procedimientos.
36
Published in the Official Gazette on October 5, 2007.

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