By Nate Raymond
NEW YORK (Reuters) - A U.S. appeals court on Tuesday rejected Argentina's bid to reverse a decision requiring the country and various banks to provide holdout creditors with information about the country's assets, including military equipment and diplomatic property.
The 2nd U.S. Circuit Court of Appeals in New York affirmed the 2013 ruling, which ordered the banks and Argentina to comply with subpoenas and information requests served by bondholders suing for full payment of debts after Argentina's $100 billion default in 2002.
The holdouts are creditors that declined to accept the terms of 2005 and 2010 Argentina debt restructurings, in which it swapped about 92 percent of its bonds for new obligations.
While the court upheld U.S. District Judge Thomas Griesa's ruling, the three-judge panel stressed "that Argentina - like all foreign sovereigns - is entitled to a degree of grace and comity."
Saying those concerns were of "particular weight" when it came to a country's diplomatic and sovereign affairs, the 2nd Circuit urged Griesa to prioritize the production of documents "unlikely to prove invasive of sovereign dignity".
Neither a U.S. lawyer for Argentina nor a representative for a lead hold bondholder, Elliott Management's NML Capital Ltd, responded to requests for comment.
Argentina defaulted in July of this year after refusing to honor orders barring it from paying holders of its restructured bonds without also paying $1.33 billion plus interest to holdout creditors including NML.
Argentina's latest default came after it refused to obey Griesa's order on paying the holdouts. Griesa held Argentina in contempt in September.
Argentina has said it cannot pay the holdouts until the Dec. 31 expiration of a clause that prevents it from paying them on better terms than it pays holders of restructured debt.
The appeal that the 2nd Circuit ruled on Tuesday concerned an order compelling Argentina and 29 banks to comply with subpoenas and information requests by the holdouts aimed at finding assets outside the country to fulfill unpaid judgments.
Argentina contended the order would effectively allow an inventory of military and diplomatic assets that were protected from seizure by U.S. law and various treaties.
But the 2nd Circuit said that insofar as the information demands reached diplomatic or consular property immune from being pursued by the creditors, Argentina should object when the bondholders seek to execute on such property.
Argentina may also present certain other objections regarding producing the documents to Griesa on privilege and treaty grounds, the appeals court said.
(Reporting by Nate Raymond in New York; Editing by Chizu Nomiyama; and Peter Galloway)