(MENAFN- AFP) Argentina passed a measure on Thursday aimed at side-stepping a US court order that has blocked the country from paying back debt tied up in a feud with hedge funds.
The law, approved by the senate last week, got the green light in the lower house of the legislature by a vote of 134 in favour to 99 against, with five abstentions.
The immediate goal is to allow Argentina to make good on a debt payment of $200 million that comes due on September 30.
It is the latest move by President Cristina Kirchner's administration in a legal tussle with creditors who have refused to join a restructuring deal following Argentina's 2001 default on $100 billion of debt.
Under the restructuring deal, 93 percent of the country's creditors accepted a cut of 70 percent of the face value of their Argentine holds.
But two foreign hedge funds, NML Capital of US billionaire Paul Singer and US-based Aurelius Capital Management, refused to accept the write-down on $1.3 billion owed to them and won a court battle that led to a new Argentine default in July.
A New York judge, Thomas Griesa, ordered Argentina to pay the funds in full, and prevented the country from repaying its other creditors until it fulfills the requirement.
Under the new Argentine law, the repayment location is moved from New York to either Buenos Aires or Paris - defying the US judge's ruling that to move the repayment site outside the United States would be illegal.
The vote came after a marathon 17-hour session in congress that began at midday Wednesday. Kirchner used her majority in the legislature to get the bill through.
To pressure the government, Judge Griesa froze $539 million that Buenos Aires deposited at the Bank of New York Mellon (BoNY) to pay the bond holders that accepted debt restructuring deals in 2005 and 2010.
Argentina was declared in selective default by international credit rating firms after the grace period on the $539 million in interest payments expired on July 30.
The hedge funds have warned that they would take new legal action in the United States against Argentina's legislation.
Under the new law the government can deposit the funds in an Argentina central bank trust or in an account in a Paris-based financial institution.
A third option under the legislation opens the possibility for a bond holder to propose an alternative mechanism to collect the debt.
Investors who back the legislation include Mexican magnate David Martinez Guzman, owner of the investment fund Fintech Advisory, who holds almost $1 billion worth of Argentine bonds.
Tulio Zembo, who represents 450,000 small Italian investors, also backs the alternative.
But some companies are not legally allowed to accept repayment sites outside New York. Griesa warned of sanctions against firms that help Argentina circumvent his order.
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