Argentina warned Monday that the United States would be liable for "unlawful interference" in its affairs if a New York court finds Buenos Aires in contempt in its debt case.
In a letter to US Secretary of State John Kerry, Argentina's US ambassador Cecilia Nahon said a contempt declaration "would result in an unprecedented escalation in the conflict" between the country and hedge funds who sued it for bond payments.
Such a decision "would not only fall outside the jurisdiction of said courts, but also be an unlawful interference in the domestic affairs of the Argentine Republic, triggering the international liability of the United States of America."
The letter came as lawyers for Argentina and for the hedge funds appeared before Federal District Judge Thomas Griesa in New York Monday, who was to decide whether the country's efforts to get around his rulings on debt payments amounted to contempt.
Griesa earlier this year banned Argentina from making payments on restructured bonds -- debt from its 2001 default -- without first paying the hedge funds, NML Capital and Aurelius Capital Management.
The two firms, who hold some $1.3 billion worth of Argentine bonds scooped up at huge discounts after the default, refused to take part in the restructuring with the majority of creditors, and instead have sought full payment on the bonds.
Argentina has refused to pay what it calls the "vulture funds", and Griesa's effective block on paying the other creditors forced the country into a new default at the end of July.
Since then it has taken steps to try to organize the restructured debt outside the jurisdiction of US courts in order to make the payments, while still not paying the hedge funds.
If Griesa finds the country in contempt, it could result in a fine of $50,000 a day.
Nahon said a contempt ruling "would result in an unprecedented escalation in the conflict and would be even more serious than the decision to interfere with the collection of payments made to restructured bondholders.
"Indeed, such a declaration would not only affect the rights of third parties, but also further violate the sovereignty of the Argentine Republic."