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France and UK ask New York court to freeze Hamilton case for six months

France and UK ask New York court to freeze Hamilton case for six months

14 Sep 2023 | By Imesh Ranasinghe


 


France and the United Kingdom (UK) have jointly made a request in favour of Sri Lanka to the court of the Southern District of New York, for a six-month freeze on any litigation in the Hamilton Reserve Bank case until Sri Lanka’s external debt restructuring is completed, the Financial Times reported.

Accordingly, last week the two countries filed a joint “amicus curiae” to the New York judge hearing the case, arguing in favour of Sri Lanka’s request for a six-month freeze on any litigation.

The co-signatories in their “amicus curiae” want the judge to grant Sri Lanka the six-month stay it has requested, because they worry that the lawsuit by Hamilton Reserve Bank/Benjamin Wey could wreck ongoing restructuring talks.

“A judgement in favour of the plaintiff before the completion of the debt restructuring process would risk disrupting the ongoing negotiations by creating an incentive for holdout creditors, thereby jeopardising the comparability of treatment between different categories of creditors,” the filing said.

It also said that the relevant principle is at the core of all sovereign debt restructuring processes, as it is key to securing the consent of all creditors, and that disruption would lead to delays in the negotiations, delaying the cash disbursement by the International Monetary Fund to the debtor country and resulting in significant costs for Sri Lanka and the official creditors’ taxpayers.

France is naturally interested in the Sri Lanka lawsuit as it hosts the so-called Paris Club, where government-to-government debts are restructured. The UK is part of the Paris Club but presumably cosigned the amicus brief because it historically oversaw the London Club, the less formal group for private creditors to negotiate with sovereign borrowers.

Last month, the Financial Times also reported that the United States (US) Government has also intervened in the matter where “the US is actively considering whether to file a Statement of Interest with respect to the pending motion to stay”.

The Hamilton Reserve Bank vs. Government of Sri Lanka case was filed in June 2022 after Sri Lanka declared bankruptcy and defaulted on $ 1 billion of this particular bond issue, of which Hamilton Reserve Bank holds $ 250 million.







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