The U.S. Court of Appeals for the Second Circuit (Court) has affirmed the ruling of the U.S. District Court for the Southern District of New York (District Court) that Argentina violated the pari passu clause in its Fiscal Agency Agreement Bonds (FAA Bonds) when it refused to pay holdout FAA Bond holders who had not exchanged their bonds in recent exchange offers.  Plaintiffs in this suit include hedge funds NML Capital, Ltd. and Olifant Fund, Ltd., several funds managed by Aurelius Capital Management, L.P. and several individual owners of FAA Bonds.  Plaintiffs claim that they are owed $1.3 billion in unpaid principal and interest on their FAA Bonds.  While agreeing that Argentina may not refuse to pay on the defaulted FAA Bonds while making payments on newly issued bonds, the Court remanded the case to the District Court for clarification on how its injunctions requiring Argentina to make payments on all of its bonds “ratably” would operate and how those injunctions would affect third party intermediary banks.  This article summarizes the Court’s decision and reasoning.  For our previous coverage of related litigation, see “United Kingdom’s High Court Finds Argentina’s Sovereign Immunity Doctrine Cannot Prevent a Hedge Fund from Seeking to Enforce an American Judgment against Argentina in English Courts,” Hedge Fund Law Report, Vol. 4, No. 25 (Jul. 27, 2011); and “If a Hedge Fund Holder of Defaulted Sovereign Debt Obtains a Judgment Against the Defaulting Sovereign, What Assets Can the Hedge Fund Go After to Satisfy the Judgment?,” Hedge Fund Law Report, Vol. 4, No. 21 (Jun. 23, 2011).