BIZARRO

The Argentinian frigate Libertad, seized in Ghana in connection with a debt dispute. Photograph: David Adadevoh/AFP/Getty Images

Guardian.co.uk, Wed 10 Oct 2012 19.26

For the naval officers lounging onboard the Argentinian naval vessel ARA Libertad, there could perhaps be worse places to be stranded than the bustling port of Tema, on Ghana's Atlantic coast.

But the crew of the three-masted ship may be forced to prolong their stay indefinitely amid a legal dispute between the government of Argentina and a US-based "vulture fund".

The Ghanaian high court will on Thursday begin hearing a case to determine whether the Libertad is allowed to sail on, or forced to stay in Tema until the Argentinian government pays up $1.6bn claimed by US-based investment fund NML Capital.

The fund – backed by US billionaire Paul Singer – is suing Argentina on the basis of debts arising from the country's defaulted bond swaps in 2005 and 2010. NML Capital bought bonds from the heavily indebted Argentinian government in 2000, a year before the country's $100bn sovereign default saw most of its debt restructured.

The Libertad was detained after the fund – which has obtained judgments in New York and London awarding it more than $1.6bn (£1bn) from Argentina – applied to the Ghanaian courts. Previous attempts to seize sovereign assets, including the Argentinian presidential jet, have so far been successfully avoided.

"NML already have five judgments against Argentina, but the problem is you get judgment but there are no assets to enforce it," a source close to the case told the Guardian.

"So the lawyers chose Ghana because Argentina had the Libertad – an asset within the jurisdiction."

" Argentina is not even flying its presidential plane anywhere until it has the assurance of the destination country that they are not going to seize it at the request of NML."

The case has reignited criticism of international investors like Singer, who buy up foreign debt default. Argentina's President Cristina Fernández often lashes out at funds like NML, describing them as "vultures" preying on debtor countries.

"The vulture funds have crossed a new line in their attack against Argentina," said the foreign ministry in a statement, pledging to "clear up this hoax staged by unscrupulous financiers".

Although Argentina has little trade with Ghana and no embassy there, the two nations have – until now – had friendly ties.

"The Fragata Libertad was visiting the port of Tema upon the official invitation of the government of Ghana," said Arturo Antonio Puricelli, Argentinian minister of defence, in a written statement filed before the Ghana high court. Argentina argues the action is a breach of warship immunity under international law, and is expected to argue that the Libertad should be immediately released.

"The annual voyages around the world of the Libertad serve the important role of promoting goodwill relations between the republic and other nations like Ghana," said Puricelli. "Any delays in leaving the port of Tema will jeopardise this official schedule and put at risk the training voyage and mission."

This is not the first time Singer has clashed with a debt-ridden South American economy. The 68-year-old founder of a $19bn hedge fund called Elliott Management hit the headlines in the late 1990s when he bought debt that Peru had defaulted on for $11.4bn and took the country to court demanding full payment. After a hard-fought legal battle Singer emerged the victor with a $58m payoff.

In another case Elliott went after the government of Congo-Brazzaville, uncovering corruption during the court case that eventually forced the government to settle for an estimated $90m on debt for which Elliott paid less than $20m.

But it was the financial crisis that made him. In 2006 Singer was warning that banks were creating "radioactive" investments from subprime mortgages and other investments that could trigger a global financial crisis. Elliott correctly made a bet that this would be the case, adding to a personal fortune now estimated to be over $1bn. Singer, a prominent backer of the Republican party, has donated $1m to Mitt Romney's election campaign.

Ghanaians are also questioning their role in the saga, as the economic consequences of the Libertad's detention at Tema begin to be felt in the west African country.

"This is creating problems for us," said Lawrence Atumbine of the Ghana port and harbour authority. "The berth the Libertad is occupying is where we handle local vessels to be offloaded. It is a very large vessel – 104 metres – and we cannot use the berth whilst it is there."

Naval officers on board the Libertad, which serves as a school ship in the Argentian navy, refused to comment on the case but expressed surprise at the court order detaining the ship.

"We are ambassadors and we stay here to build better relationships with the countries we visit," said Luís Melicán, chief of communications on board the Libertad.

"But we have been visiting lots of tourist sites whilst the ship is held in the port. We have been to hotel swimming pools and we have been going to the mall. It's not too bad for us."