UPDATE 1-Argentina calls for U.S. intervention in its debt battle
(Adds comment from State Department official, paragraphs 6-7)
BUENOS AIRES Aug 11 (Reuters) - Argentina on Monday called on Washington to intervene in a court case over the country's defaulted debt after a U.S. district judge threatened the South American country with contempt for making what he called false statements.
U.S. Judge Thomas Griesa, overseeing Argentina's long-running battle with hedge funds over defaulted debt, said on Friday he would issue a contempt of court order unless the government stopped publicly claiming it had met its obligations and was not in default.
Cabinet chief Jorge Capitanich countered on Monday that a contempt order would violate Argentina's sovereign immunity and he called on the Obama administration to rein in Griesa.
"When it comes to a bilateral relationship with a sovereign country and the violation of its immunities, it is necessary for the executive branch to intervene," Capitanich said. "The executive has a monopoly on relations with other countries."
"The United States is responsible for the actions of its branches of power, in this case the judicial branch, regardless of the independence of the functioning of those branches," he said.
The U.S. Department of Justice declined to comment. A senior U.S. State Department official said Washington continued to urge the Buenos Aires government to engage with its creditors to break the deadlock.
"With respect to the U.S. court, we cannot speculate on any possible developments or actions in the litigation," said the official who requested anonymity.
In 2002 Argentina defaulted on about $100 billion in sovereign bonds. It restructured most of that debt in a deal that gave holders less than 30 cents on the dollar while a group of hedge funds went to court for full repayment.
In 2012 Griesa ruled that Argentina could not repay holders of restructured debt without also paying hedge funds their court-award of $1.33 billion plus interest at the same time.
Argentina says it met its obligation to the holders of restructured bonds when it deposited $539 million into the account of intermediary Bank of New York Mellon in June. Griesa called the deposit illegal and ordered the money frozen.
As a result, Argentina effectively missed the coupon payment after a grace period ended on July 30, pushing it into default on its restructured debt. Griesa reiterated on Friday that "there has been no payment."
Argentina has long accused the judge of overstepping his bounds and being partial toward the funds, which bought Argentine bonds at steep discounts and are characterized by President Cristina Fernandez as "vultures" out to wreck her country's finances in their pursuit of huge profits.
The U.S. Government filed an amicus curiae or friend-of-the-court brief in 2012 that asked the 2nd Circuit Court of Appeals to reverse Griesa's decision, arguing that his ruling could undermine future sovereign restructuring mechanisms.
However, Washington did not in writing favor Argentina, or "condone or excuse a foreign state's failure to comply with the judgment of a U.S. court imposing liability on the state." ( here )
Argentina has published paid advertisements in newspapers in Europe and the U.S. in recent weeks disparaging Judge Griesa and court-appointed mediator Daniel Pollack, who succeeded in getting the two sides to meet face-to-face for the first time in nearly 13 years but could not get them to an agreement by July 30. Those negotiations are to continue.
But Argentina says it cannot make a deal with the holdouts that is better than the terms offered in its two restructurings based upon a clause in its agreement known as the Rights Upon Future Offers (RUFO). The RUFO clause expires on Dec. 31, 2014.
In June the U.S. Supreme Court declined to hear Argentina's appeal of the case, effectively exhausting Buenos Aires' recourse in the U.S. legal system. (Additional reporting by Walter Bianchi in Buenos Aires, Daniel Bases in New York and Arshad Mohammed in Washington; Editing by Clive McKeef and Ken Wills)
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