Supreme Court decision on "pesification" of bank deposits

In re: "Cabrera, Gerónimo Rafael y otro c/ Poder Ejecutivo Nacional - Ley Nº 25.561 - Decreto Nº 1.570/01 y 214/02 s/ amparo sobre Ley Nº 25.561", Argentina's Supreme Court of Justice has issued a decision ruling that those who have collected their US dollar-denominated bank deposits converted into pesos, without express reservation of rights, can no longer demand the difference in relation with the current dollar price.

Although this ruling is only applicable to this specific case, it is widely expected to set a guideline in lower courts that have to rule on cases that have remained in suspense awaiting definitions from the Supreme Court.

A brief description of the case follows below.

1. The case

The depositor Mr. Gerónimo Cabrera filed a writ of amparo against Citibank and the Executive Branch claiming the payment of the difference between the sum he actually received in pesos at the exchange rate established by Section 2 of Decree No 214/2002 (US$ 1 = AR$ 1.40) and the original amount of its deposit in dollars at the free market exchange rate (currently approximately US$ 1 = AR$ 2.97).

Cabrera requested the declaration of unconstitutionality of Law No 25,561 (the Emergency Law), Decrees No 1570/01 (the Corralito Decree) and 214/02 (the Pesification Decree). Cabrera’s deposit was converted into pesos at the exchange rate provided in Decree No 214/02, referred above, and, before filing its claim, he withdrew the pesified amount without any express reservation of rights.

2. The decision

The decision was announced on July 13, 2004 and confirmed the ruling of the Federal Administrative Court of Appeals which rejected the writ of amparo. In Argentina, there is no stare decisis. Thus, this decision is not automatically applicable to similar cases. However, lower Courts tend to follow the decisions of the Supreme Court.

3. The majority opinion

Four Justices concurred in the majority opinion: Justices Zaffaroni, Maqueda, Belluscio and Highton de Nolasco. They rejected the writ of amparo based on an old doctrine of the Supreme Court, under which the voluntary submission to a legal regime without proper reservation of rights implies the waiver to later challenge that same legal regime. This doctrine is similar to the estoppel of the common law. The Supreme Court expressly stated that the ruling does not imply any decision on the validity of the challenged legislation.

The Supreme Court has not explained what constitutes an express reservation of rights. Also, it has not stated when such reservation of rights should have been made.

4. Concurring opinions

Three other Justices filed concurring opinions as follows:

Justice Fayt concurred with the grounds of the majority opinion, but expressly referred to one of the concurring votes in the “San Luis” case.

Justice Boggiano rejected the amparo on procedural grounds. In his opinion, the writ of amparo is not the proper legal procedure to discuss if the submission to the pesification regime was mandatory or voluntary. He also stated that the legal regime challenged by the depositor is not clearly illegal or arbitrary.

Justice Vázquez concurred with the grounds of the majority opinion. However, he expressly stated that the legal doctrine applied in the “Smith” and “San Luis” cases was not applicable to the current case, due to the voluntary withdrawals made by the plaintiff. He warned that such doctrine (which declared the corralito and the pesification unconstitutional) may be applicable to the cases in which no express or implied consent to the pesification was given by the plaintiff.

Marval, O’Farrell & Mairal acted as counsel to Citibank N.A. through the so-called “Corralito litigation team”, lead by partner Ricardo A. Ostrower and integrated by more than 100 litigation lawyers assisted by 150 paralegals. Presently, more than 22,000 legal proceedings are being handled by the “Corralito litigation team”.