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Sovereign Debt Management edited by Lastra, Rosa M; Buchheit, Lee (16th January 2014)

Part II Enforcement of Sovereign Debt, 12 Sovereign Arbitration

Karen Halverson Cross

From: Sovereign Debt Management

Edited By: Rosa M Lastra, Lee Buchheit

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2015. All Rights Reserved.date: 23 February 2020

Subject(s):
Statutory sovereign debt resolution mechanism (SRDM)

(p. 151) 12  Sovereign Arbitration

1. Introduction

12.01  In August 2011, an arbitration tribunal at the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) upheld jurisdiction to adjudicate an investment treaty claim brought by 60,000 holders of Argentine defaulted debt against Argentina. Issued just months before Greece’s controversial debt restructuring in March 2012, the jurisdictional award Abaclat v. Argentine Republic1 focused public attention on the use of arbitration to resolve sovereign debt disputes. This chapter reviews the use of international commercial arbitration clauses in sovereign debt contracts, and then discusses investment arbitration of sovereign debt claims, including the Abaclat dispute.

2. Arbitration Clauses in Sovereign Debt Contracts

A. General

12.02  In contrast with other international commercial contracts, international loan agreements, including sovereign debt contracts, rarely provide for arbitration of disputes.2 During the early part of the twentieth century, until sovereign borrowing ceased in the wake of the Great Depression, arbitration clauses were utilized in sovereign debt contracts with some frequency. But ever since sovereign borrowing resumed in the 1960s, sovereign debt instruments tend to provide for enforcement in a court of the creditors’ choosing—typically a financial centre such as New York or London.3 The general absence of arbitration clauses from international loan agreements is interesting, in light of the difficulties associated with enforcing judgments against sovereign debtors.

(p. 152) B. Historic use

12.03  Sovereign debt instruments issued during the early 1900s not infrequently provided for arbitration of disputes.4 In 1939, a committee of legal and financial experts appointed by the League of Nations ‘strongly’ recommended that sovereign loan contracts in all cases should include an arbitration clause, at least with respect to matters of contract interpretation, and that the arbitrators should be appointed by an international body.5

12.04  Early sovereign debt contracts were even less enforceable against a sovereign then than they are today.6 Mark Weidemeier contends that arbitration clauses were likely employed at the time to encourage the creditors’ home state to participate in resolving any disputes arising out of the loan agreement, and to signal to investors that the state supported the loan.7 Writing in 1957, Edwin Borchard suggested that arbitration clauses in sovereign debt contracts were likely used to address disputes over interpretation, especially difficulties in determining choice of governing law or forum.8 As the League of Nations committee observed in 1939, courts of countries other than the debtor state ‘generally declare[d] themselves incompetent’ to adjudicate disputes arising out of sovereign debt contracts, and international tribunals at the time were not empowered to resolve investor–state disputes.9 At a time when states adhered to the absolute theory of sovereign immunity, and courts were hostile to choice of law and forum selection clauses, arbitration may have been perceived as less problematic than other dispute settlement options. Whatever the justification, the historic use of arbitration clauses in sovereign debt contracts is well documented.

C. Current practice

12.05  Notwithstanding the enforcement advantages of arbitration, modern international loan agreements rarely provide for arbitration of disputes, but instead typically require the borrower to consent to the jurisdiction of the court of a creditor-friendly state such as England or New York.10 Under the New York11 and ICSID Conventions,12 arbitral awards can be enforced with greater finality and broader reach than can foreign judgments.13 Additionally, at least under US law, the exception to immunity for attachment and execution of sovereign (p. 153) assets is somewhat broader when enforcing foreign arbitral awards.14 Nonetheless, lenders generally prefer litigation of debt disputes, even where the debtor is a sovereign.15

12.06  Examples of arbitration clauses in sovereign debt contracts do exist. Loan documentation from the World Bank and other multilateral financial institutions typically provide for arbitration of disputes.16 A few sovereign issuers, such as Brazil and El Salvador, are prohibited under domestic law from submitting to the courts of a foreign jurisdiction, and therefore agree only to arbitration of disputes.17 Finally, English-law-governed sovereign bond instruments of certain former Eastern bloc issuers have allowed lenders the option of either litigating or arbitrating disputes in England.18 An arbitration option was likely included in these contracts because the issuer was not subject to EU law governing the recognition and enforcement of foreign judgments.19 Weidemaier conducted a study of enforcement-related provisions in sovereign debt contracts. Out of his sample of seventy-two sovereign bond issuers, loan documentation of only two provided for arbitration of disputes, and that of another five allowed creditors the option of arbitration or litigation of disputes.20

12.07  To summarize, in contrast with general international commercial practice, for the past half-century, arbitration clauses have appeared only infrequently in sovereign debt contracts. In light of this fact, it is notable that creditors have begun to explore investor–state arbitration as a means of resolving sovereign debt claims—a development that is discussed in detail next.

3. Investor–State Arbitration of Sovereign Debt Disputes

A. Background

i. International investment agreements (IIAs)

12.08  The first bilateral investment treaties (BITs) were concluded in 1959, when Germany, forced to rebuild its foreign investment programme after the Second World War, concluded treaties with Pakistan and the Dominican Republic.21 Responding to a lack of meaningful protections for foreign investors under customary international law, other capital-exporting states eventually developed their own BIT programmes.22 After the fall of the Eastern bloc, capital-exporting states continued to expand their BIT programmes and capital-importing states (p. 154) competed to attract foreign direct investment (FDI). During the 1990s, the number of BITs worldwide more than quadrupled, from 446 in 1990 to 1,941 ten years later.23 Free trade agreements (FTAs) also include investment chapters that mirror the provisions contained in a BIT. Referring collectively to the BITs and FTAs as international investment agreements (IIAs), by the end of 2008, the number of IIAs worldwide had increased to almost 3,000.24

12.09  International investment agreements provide eligible investments with powerful substantive protections. These protections typically include: guarantees of fair and equitable treatment (FET) to investments; promises to allow free transfers of investment returns; promises not to discriminate in favour of investments of nationals——that is, national treatment—or in favour of investors from third countries—that is, most-favoured nation (MFN) treatment; guarantees against expropriation without prompt, adequate, and effective compensation; and, somewhat less typically,25 so-called ‘umbrella clauses’, or promises to honour contractual undertakings with respect to investments. Until recently, however, the applicability of these protections to sovereign debt instruments was uncertain. There is only one known case, Fedax NV v. Republic of Venezuela,26 in which a tribunal awarded damages to the holder of sovereign debt instruments for violation of a BIT.27 The Fedax tribunal briefly cited the treaty’s umbrella clause, but did not discuss in any detail why Venezuela’s default on the debt violated the substantive protections of the BIT.28 The pending Abaclat dispute, in contrast, involves a mass sovereign debt claim alleging violation of several core provisions of the Italy–Argentina BIT.29

12.10  While coercive or discriminatory acts of a defaulting sovereign may provide grounds for a treaty violation, it is debatable whether declaring a moratorium on servicing debt or otherwise defaulting on a sovereign debt instrument, without more, would be found to violate an IIA’s core substantive protections. According to Thomas Wälde, treaty guarantees against expropriation, of FET, and of national treatment ‘do not provide an unequivocal foundation (p. 155) for simply enforcing sovereign debt’.30 Similarly, notwithstanding the Fedax decision, Wälde has suggested that a treaty’s umbrella clause should be read to apply only to abusive deployment of government power, as opposed to debt moratoria applied in a non-discriminatory way and as a means of achieving a debt restructuring in consultation with all affected creditors.31 However, other commentators have argued that umbrella clauses should be read literally, so that any breach of contract would constitute a violation of the treaty.32 Finally, in the context of a sovereign debt crisis, the imposition of exchange controls would be likely to violate an IIA’s free transfer clause, although the transfer clause may provide an exception for financial crises, as does, for example, the Italy–Argentina BIT.33

12.11  As discussed at paragraph 12.21, the Abaclat claimants argue that Argentina’s actions in connection with its default and 2005 debt restructuring were both arbitrary and unilateral.34 In particular, Argentina’s enactment of Law 26,017, concurrent with its 2005 exchange offer, might be found to be coercive. Law 26,017 prohibits the government from reopening the exchange process or entering into any other type of settlement with those bondholders that did not participate in the exchange.35 The success of claimants’ argument that Law 26,017 is expropriatory (or a violation of FET) will likely hinge on whether the law is found to have been adopted merely to enhance the credibility of the exchange offer, as opposed to as a measure targeted at uncooperative bondholders.36 The Abaclat claimants also allege discriminatory treatment—that is, that Argentina afforded preferential treatment to local pension funds in violation of the national treatment obligation.37 When dealing with a financial crisis, however, a sovereign debtor may adopt measures that violate national treatment out of legitimate considerations of economic necessity and/or political feasibility.38

12.12  Even when a defaulting sovereign’s actions are found to violate an IIA, the sovereign may argue that a financial crisis was an excusing event, either under the customary international law doctrine of necessity, or, if available, under a clause in the treaty.39 Argentina successfully invoked its 2001 financial crisis as an excusing event in LG&E Energy Corp v. Argentine Republic.40 One of the arbitrators on the LG&E tribunal, Albert Jan van den Berg, also sits on (p. 156) the Abaclat tribunal. LG&E involved a claim under the United States–Argentina BIT, which contains a ‘non-precluded measures’ clause, or a clause providing that the treaty will not preclude a party from applying measures ‘necessary for...the protection of its own essential security interests’.41 Although the LG&E tribunal upheld Argentina’s necessity defence, it relied at least in part on the non-precluded measures clause in the BIT.42 Additionally, the LG&E panel excused Argentina’s treaty obligations for only a temporary period, beginning with the onset of the crisis in December 2001 through to April 2003.43 Since the BIT at issue in Abaclat lacks a non-precluded measures clause, any defence along these lines could be based solely on the doctrine of necessity.

12.13  To summarize, creditors that resort to investment arbitration to enforce a sovereign debt obligation will likely need to establish more than mere breach of contract, although a default alone might constitute a treaty violation if the applicable IIA contains an umbrella clause. Where the default is precipitated by a financial crisis, the sovereign debtor will most likely invoke a non-precluded measures clause in the treaty, if one exists, and/or the customary international law defence of necessity. Finally, creditors will need to demonstrate that the debt instruments fall within the scope of protected investments in the applicable IIA—a topic addressed later in the chapter.44

ii. Investor–state arbitration

12.14  The protections of an IIA would be less effective if an aggrieved investor were limited to enforcing those rights indirectly, through arbitration or diplomatic intervention by the home state. Historically, private parties typically lacked standing to bring claims before international tribunals; however, most IIAs grant an aggrieved investor direct enforcement rights, by providing for investor–state arbitration of disputes.

12.15  The vast majority of IIAs allow investors of one party to enforce treaty obligations against another party directly by bringing claims to arbitration.45 Often, the treaty allows the investor to choose between ad hoc arbitration under the rules of the United Nations Commission on International Trade Law (UNCITRAL) or, if both states are party to the ICSID Convention, ICSID arbitration.46 For example, the BIT at issue in Abaclat allows an investor to submit an arbitration claim either to ICSID or to ad hoc arbitration under UNCITRAL rules, if local remedies have been exhausted.47

12.16  ICSID arbitration awards enjoy potential enforcement advantages over other international commercial arbitration awards. In contrast to awards under the New York Convention, which require judicial recognition and enforcement (potentially subjecting the award to challenge on public policy or other grounds), an ICSID award is directly enforceable in a (p. 157) court of an ICSID Convention signatory state ‘as if it were a final judgment of a court in that State’, subject only to local law governing immunity of sovereign assets from execution.48 Additionally, with the exception of recent awards arising out of Argentina’s 2001 financial crisis, ICSID awards have generally enjoyed a high degree of voluntary compliance.49 Although it is uncertain whether potential World Bank pressure affects the propensity of states to comply with ICSID awards, according to one commentary, the Bank’s backing of ICSID ‘may well be the most important factor in the ultimate success’ of the ICSID regime.50

12.17  Notwithstanding potential enforcement advantages, however, prior to Abaclat, creditors seeking to enforce sovereign debt contracts did not commonly resort to ICSID arbitration. Exceptions are Fedax and CSOB.51 Indeed, whether a sovereign debt instrument should even qualify as an ‘investment’, either for purposes of the ICSID Convention or for purposes of an investment treaty, has been subject to debate, as discussed at paragraphs 12.23–12.24.

B. The Abaclat decision

i. Factual background

12.18  Abaclat is one of many investment arbitration claims brought against Argentina in the aftermath of its most recent debt crisis, but it was the first claim arising out of Argentina’s debt default. After defaulting on its outstanding debt in 2001, Argentina succeeded in restructuring most of the debt in 2005, and restructured an additional amount in 2010. However, the holdout creditors who refused to participate in the restructurings have persevered in their efforts to enforce the defaulted debt, filing hundreds of lawsuits against Argentina in New York, Italy, Germany, and elsewhere.52

12.19  Creditors have encountered significant difficulty enforcing Argentina’s defaulted debt, in part because Argentina is immune from suit in some jurisdictions,53 but more significantly because Argentina’s overseas assets generally enjoy sovereign immunity against execution. US hedge funds NML Capital and EM Ltd obtained judgments on Argentine defaulted debt,54 but tried for years without success to attach funds held by Argentina’s Central Bank at the Federal Reserve Bank of New York as a means to enforce the judgments.55 The hedge funds did succeed in attaching approximately US$3 million in a New York bank account used by an Argentine ministry to pay sellers of scientific equipment on behalf of grant beneficiaries.56(p. 158) NML Capital went so far as to obtain a Ghanaian injunction to seize an Argentine naval vessel on tour in Africa,57 which prompted Argentina to obtain a provisional order from the United Nations International Tribunal for the Law of the Sea (ITLOS) to compel Ghana to release the vessel.58 The Second Circuit’s recent decision in NML Capital, Ltd v. Republic of Argentina,59 which upheld an injunction prohibiting Argentina from making payments on its restructured debt unless it pays the holdout creditor plaintiffs, has improved NML Capital’s enforcement prospects.

12.20  Thousands of Argentina’s holdout creditors are Italian retail investors, who purchased Argentine debt from Italian banks. After the default, when Italian regulators began investigating the sales to retail investors,60 Task Force Argentina (TFA), a consortium of Italian banks, drafted a mandate package that it presented to Italian holders of Argentine defaulted debt, inviting the bondholders to participate in an ICSID arbitration claim against Argentina.61 Under the terms of the mandate, any claimant who participates in the ICSID proceeding agrees to act through the legal representative appointed by TFA and is prohibited from bringing legal action against the bank that sold the debt to it.62 Thus, by organizing and funding the arbitration, TFA effectively protected itself from the risk of lawsuits from the retail investors.63 Although more than 180,000 bondholders accepted TFA’s mandate in 2006, the size of the claimant class fell to 60,000 after Argentina’s 2010 exchange offer.64

12.21  In September 2006, the bondholders filed with ICSID a request for arbitration against Argentina.65 The request for arbitration alleges that, by defaulting on its debt and subsequently pursuing a ‘punitive, unilateral’ restructuring, Argentina violated the 1990 Italy–Argentina BIT.66 Argentina challenged ICSID’s jurisdiction over the dispute. In August 2011, the tribunal issued its decision on jurisdiction and admissibility, finding that ICSID had authority to decide the bondholders’ claim. The arbitrator appointed by Argentina, Georges Abi-Saab, dissented from the majority decision in an opinion that was issued more than two months later.

ii. Decision on jurisdiction and admissibility

12.22  The Abaclat tribunal made two novel findings that will potentially expose sovereign debtors to future investment arbitration claims: first, that claims based on breach of a sovereign debt instrument fall within ICSID’s jurisdiction; and second, that mass claims of a BIT violation can be adjudicated before an ICSID tribunal. Each of these findings is discussed in the following paragraphs.

12.23  As to the first issue, Argentina argued that the bonds on which the mass claims are based are not ‘investments’, either for purposes of the Italy–Argentina BIT (the asserted basis (p. 159) for Argentina’s consent to arbitration) or for purposes of the ICSID Convention, which limits ICSID’s jurisdiction to disputes arising directly out of ‘investment[s]’.67 Rejecting Argentina’s argument, the tribunal found that the sole criterion to consider in this regard is whether the bonds ‘create the value’ that Argentina and Italy intended to protect under their BIT.68 Like most BITs concluded at the time, the Italy–Argentina BIT contains a very broad definition of ‘investment’, including in the definition ‘obligations, private or public titles or any other right to performances or services having economic value’.69 The tribunal concluded that the bonds fell within this definition, and therefore were eligible investments for the purposes of the BIT and the ICSID Convention.70

12.24  George Abi-Saab’s dissent disputed the majority’s approach to interpreting ‘investment’ for the purposes of determining the ICSID’s jurisdiction, asserting that the term has a core meaning that cannot be waived, even by concluding a BIT.71 In fact, other tribunals have applied additional criteria in this context—criteria such as the expected duration of the investment and its contribution to the host state’s development.72 The dissent also argued that the bonds lack a jurisdictional link to Argentina and therefore fall outside the scope of the BIT, the intent of which is to protect investments made by nationals of one party ‘in the territory of the other’.73 Because the bonds were sold on the international financial markets, with payment taking place abroad and with choice of law and forum selection clauses designating laws and fora outside of Argentina, the debt transactions were deliberately arranged so as to have their situs located outside of Argentina.74

12.25  As to the second issue, Argentina argued that its consent to investor–state arbitration in the BIT could not be construed to cover an unprecedented mass action relating to a sovereign debt restructuring. Allowance of mass claims would fundamentally change the nature of ICSID proceedings by making it impossible to evaluate the individual circumstances of each claimant, requiring the tribunal to ignore the particulars ‘in favor of the lowest common denominator’.75 In response, the tribunal found that Argentina’s specific consent was not required regarding the ‘form’ of collective proceeding, characterizing the relevant question not as one of consent, but of whether an ICSID arbitration can be conducted in such a form.76 It acknowledged that the ICSID framework is silent as to collective proceedings, but found that it would be ‘contrary to the purpose of the BIT and to the spirit of ICSID’ to interpret such silence as a prohibition.77 Although the tribunal admitted that it would not be in a position to examine group claims in the same way as it could with individual claimants, (p. 160) it weighed this consideration against the consequences of rejecting the bondholders’ claims and found that the rejection could result in a ‘shocking’ denial of justice to the claimants.78

12.26  On this issue, the dissent also took a different view, arguing that the tribunal’s characterization of the issue as one of admissibility was ‘conceptually wrong’ and that Argentina’s consent to arbitrate investor claims under the BIT could not be interpreted to include mass claims actions.79 Professor Abi-Saab relied in part on the US Supreme Court decision in Stolt-Nielsen SA v. AnimalFeeds Int’l Corp, which held that ‘the differences between bilateral and class-action arbitration are too great for arbitrators to presume...that the parties’ mere silence on the issue of class-action arbitration constitutes consent to resolve their disputes in class proceedings’.80 He also argued emphatically that devising new procedures to handle mass claims would not only manifestly exceed the tribunal’s powers, but also deprive Argentina of its due process right to ‘individual adversarial examination’ of the differentiated mass claims.81

12.27  Within days after issuing his dissenting opinion, Professor Abi-Saab withdrew from the Abaclat tribunal. Argentina subsequently filed a request for the ICSID to disqualify the remaining two arbitrators. This request was denied, and the arbitral tribunal was reconstituted in January 2012, with Dr Santiago Torres Bernárdez replacing Professor Abi-Saab. Since any request to annul the tribunal’s decision on jurisdiction can be brought only after the tribunal issues a final award,82 the Abaclat claims have proceeded to the merits. Given the size of the claimant class and the unprecedented nature of the proceeding, an award on the merits is unlikely to be forthcoming until 2014 or later.

12.28  In addition to Abaclat, there are two other bondholder arbitration claims against Argentina pending at the ICSID. In February 2013, one of the tribunals, Ambiente Ufficio SpA v. Argentine Republic,83 issued an award upholding jurisdiction to hear the bondholders’ claims. Although the tribunal’s reasoning departed from that of Abaclat in certain respects,84 the Ambiente Ufficio majority ultimately concluded, similar to the Abaclat majority, that the bond instruments at issue qualified as ‘investments’ for purposes of the ICSID Convention and the Italy–Argentina BIT,85 that Argentina’s consent to ICSID arbitration in the BIT can be construed to cover multi-party proceedings,86 and that such proceedings are consistent with the ICSID framework.87 However, the size of the claimant group in Ambiente Ufficio—reduced to ninety claimants after the 2010 exchange offer88 —is significantly smaller than that in Abaclat. The Ambiente Ufficio majority distinguished Abaclat on this basis, refusing to characterize the claims at issue in Ambiente Ufficio as ‘mass claims’.89 Nonetheless, the majority acknowledged (p. 161) that the Abaclat decision significantly influenced its own reasoning.90 Argentina’s appointed arbitrator, Dr Santiago Torres Bernárdez, dissented.91 The jurisdictional challenge in the third case, Giovanni Alemanni and ors v. Argentine Republic,92 is still pending.

C. The implications of Abaclat for sovereign debt

12.29  Abaclat is the first mass claim adjudicated under the ICSID Convention.93 It is also the first known investment arbitration proceeding arising out of a sovereign debt restructuring. As discussed, the Abaclat tribunal interpreted the Italy–Argentina BIT as encompassing sovereign debt instruments and providing Argentina’s consent to arbitrate a mass claim brought against it by 60,000 bondholders. This dramatic result may prompt states to revisit the definition of ‘investment’ in future IIAs. Finally, the timing of decision on jurisdiction—occurring in the midst of the European debt crisis and just months before Greece completed the largest debt restructuring in history—focused attention on the implications of the decision for future sovereign debt disputes.

12.30  In its challenge to the Abaclat tribunal’s jurisdiction, Argentina argued that allowing ICSID arbitration of creditor claims is not appropriate in the context of a sovereign debt restructuring, because it would complicate ongoing efforts to modernize the restructuring process.94 The majority found this argument to be irrelevant to the question presented, noting that such policy arguments are for states to take into account when negotiating BITs, not for the tribunal to take into account ‘in order to repair an inappropriately negotiated or drafted BIT’.95 In contrast, while noting that policy considerations alone should not be determinative, the dissent raised concerns about the potentially disrupting effect of upholding jurisdiction over the bondholders’ claims:

[I]n view of the actual profound structural crisis of the international financial system; the absence of agreed international procedures regulating State bankruptcy; and the intense international discussions and efforts to improve the sovereign debt restructuring process, the present case raises, in an acute manner, an international public policy issue about the workability of future sovereign debt restructuring, should ICSID tribunals intervene in sovereign debt disputes.96

12.31  TFA’s involvement in organizing the claimant class in Abaclat may have been a unique circumstance.97 Nonetheless, in light of increasing acceptance of contingency-fee financing of claims98 and the tendency of hedge funds to acquire sovereign debt for a fraction of its face (p. 162) value in order to make a profit, the Abaclat decision may prompt additional investment arbitration claims, including mass claims, by creditors against sovereign debtors. Indeed, the two additional group bondholder claims currently pending at ICSID against Argentina are being funded on a contingency-fee basis.99 On the one hand, facilitating creditor claims against a defaulting sovereign can have positive effects, such as discouraging default and promoting trust in the sovereign debt market. However, in the absence of an international bankruptcy regime that could provide a sovereign with automatic stay protection against individual creditors, encouraging investor claims may not be desirable from the policy perspective of promoting an orderly debt restructuring.

12.32  In any event, the ultimate impact of Abaclat remains to be seen. Even if the tribunal issues an award on the merits in favour of the creditors, Argentina is likely to seek to have the award annulled.100 Finally, the jurisdictional challenge in the Alemanni case101 is still pending. Although unlikely, it is possible that the Alemanni tribunal might issue a jurisdictional award that is inconsistent with Abaclat and Ambiente Ufficio. In the meantime, creditors aggrieved by the recent Greek restructuring have been assessing their options against Greece, including possible recourse to investment arbitration, as discussed next.

i. Implications for European debt crisis

12.33  In March 2012, Greece completed the largest debt restructuring in history, exchanging €197 billion of its debt for debt instruments that represent a 75 per cent loss to Greece’s private creditors.102 Greece achieved a very high participation rate in the restructuring, but by legislative fiat. Several weeks before the debt exchange, Greece’s parliament adopted legislation that retroactively inserted collective action clauses (CACs) into Greek sovereign debt instruments governed by local law.103 The effect of the legislation was to allow Greece to change the payment terms of all of its Greek-law bonds so long as two-thirds of a quorum of at least 50 per cent of all Greek-law bondholders agreed to the change.104 The CACs were therefore triggered in order to forcibly increase the participation rate in the March 2012 debt exchange from 86 per cent to almost 96 per cent.105

(p. 163) 12.34  A German law firm representing non-consenting creditors whose debt instruments plummeted in value as a result of the debt exchange immediately began exploring legal action against Greece.106 Similarly, the German investor group Deutsche Schutzvereinigung für Wertpapierbesitz eV (DSW) organized an association of Greek bondholders (Arbeitsgemeinschaft Griechenland Anleihen) and is investigating avenues of recovery for holders of Greek debt.107 Will Abaclat open the floodgates to investment arbitration claims against Greece and other sovereign debtors affected by the European debt crisis?

12.35  One issue to consider in this context is whether an intra-European Union BIT claim (an investor claim brought under a BIT concluded between two EU states) would run afoul of EU law and policy. The Lisbon Treaty, which now defines EU commercial policy as encompassing FDI,108 calls into question the continuing legality of intra-EU BITs.109 Although the European Commission has argued that these treaties are no longer valid because of the supremacy of EU law, investment arbitration tribunals nonetheless have upheld jurisdiction to hear investor claims under intra-EU BITs.110 One such jurisdictional decision, Eureko BV v. Slovak Republic,111 was upheld on appeal by the Frankfurt Court of Appeals, and may eventually be referred to the European Court of Justice.112 Even if the Court of Justice were to find intra-EU treaties to be invalid as a matter of EU law, such a decision would not be binding on arbitral tribunals. However, such a decision would subject an award issued under intra-EU BITs to the risk of being set aside or refused enforcement on public policy grounds (although ICSID awards, which are directly enforceable, would not be subject to such a risk).113

12.36  Most of the Greek BITs in force are with countries that are unlikely to be home to Greece’s significant creditors. Greece’s BIT partners include developing countries, emerging market economies such as Russia, India and China, and former Eastern bloc countries.114 However, Greece does have BITs in force with Germany and Cyprus, countries that are home to holders of significant amounts of Greek debt.115 In fact, in November 2012, Laiki Bank, a Cypriot holder of Greek sovereign debt, filed notice of an impending investment arbitration claim against Greece under the Cyprus–Greece BIT.116 But in spite of reports of possible (p. 164) investment arbitration claims by German creditors, these creditors lack standing to bring direct claims against Greece under the Germany–Greece BIT.

12.37  Concluded in 1961, the Germany–Greece BIT was one of the earliest investment treaties.117 The treaty guarantees eligible investments national and MFN treatment,118 free transfer of investment returns,119 and guarantees against expropriation.120 Although the treaty does not include an FET clause, it guarantees full protection and security to eligible investments.121 Most notably, however, the Germany–Greece BIT does not provide for investor–state arbitration of disputes, providing only for state-to-state arbitration of disputes regarding the interpretation or application of the treaty.122 Therefore German holders of Greek debt seeking to enforce the treaty will be limited to pursuing such claims, if they do so at all, through the German government. To this end, German creditors have pressed the government to pursue a treaty claim against Greece on their behalf, but so far the government has declined to act.123

12.38  In addition to Greece, other European countries that are at heightened risk of default owing to the ongoing financial crisis—Portugal, Ireland, Italy, and Spain—similarly have BITs in force.124 As with Greece, most of these treaties were concluded with countries that are unlikely to be home to most creditors: other developing countries, former Eastern bloc countries, or emerging market economies. Creditors may therefore try to obtain protection under these treaties through treaty shopping. ‘Treaty shopping’, in the investment treaty context, refers to an investor structuring its investment in such a way so as to take advantage of an IIA’s protections. Many IIAs define ‘investor’ as including any legal person organized in accordance with the law of one of the parties to the treaty.125

12.39  The potential for investors to treaty shop is particularly significant in the sovereign debt context, in which debt instruments trade on the secondary market, allowing a bondholder to change nationality ‘in a matter of minutes’.126 Therefore a creditor holding distressed sovereign debt might attempt, through assignment or corporate reorganization, to invoke the protections of an IIA concluded with the issuer. For example, the Czech Republic has a BIT in force with Spain;127 could a US holder of Spanish debt assign the debt to a Czech entity so as to enable the Czech entity to invoke, if necessary, the protections of the Spain–Czech BIT?

(p. 165) 12.40  Some IIAs contain ‘denial of benefits’ clauses that allow the host state to deny the benefits of the treaty to an investor that is owned or controlled by a national of a non-treaty party if the investor has ‘no substantial business activities’ in the territory of the state under the laws of which it is organized.128 Other IIAs narrow the definition of ‘investor’, requiring not only that the entity be organized in accordance with the law of a party to the treaty, but also that the entity actually does business there.129 Subject to such treaty language, however, investment arbitration tribunals generally have allowed investors to structure their investments so as to take advantage of IIAs.130 In Saluka Investments BV (The Netherlands) v. Czech Republic,131 the tribunal expressed ‘some sympathy’ for the argument that a shell company set up solely to invoke the protections of an investment treaty should be denied the treaty’s protections. It nonetheless ruled for the investor, reasoning that it could not impose on the treaty parties a definition of ‘investor’ to which they had not agreed.132 In other words, notwithstanding the concern expressed in Saluka regarding treaty shopping, arbitral decisions so far tend to allow it, so long as such practice is consistent with the applicable treaty language.133

12.41  As for the hypothetical example suggested in paragraph 12.39, the Spain–Czech BIT lacks a denial of benefits clause and defines ‘investor’ (in the case of a legal person) by reference to the territory in which the company is ‘located’, in addition to the law under which the company is established.134 Thus a Czech holder of Spanish debt that acquired the debt in anticipation of a potential violation135 of the BIT by Spain would be likely to be able to invoke the protections of the Czech–Spanish BIT, so long as it could demonstrate that it is organized under Czech law and ‘located’ in the Czech Republic.

12.42  On the other hand, even if our hypothetical Czech bondholder were to prevail in an enforcement action against Spain under the Spain–Czech BIT, in awarding damages the tribunal likely would take into consideration the circumstances surrounding the bondholder’s acquisition of the debt, including its knowledge that the debt was at substantial risk of default. Investment treaties protect the ‘legitimate expectations’ of an investor. In the sovereign debt context, awarding recovery of the debt’s full nominal value would be unlikely to reflect its fair market value at the time of acquisition and thus arguably would provide the investor with a windfall.136

12.43  The example of Rosinvestco UK Ltd v. Russian Federation137 is instructive. The claimant, an affiliate of the hedge fund Elliott International, acquired shares in Yukos Oil in late 2004, (p. 166) shortly before Russia carried out a series of actions that led to the company’s bankruptcy. Claimant sold its economic interest in the shares to its affiliate in the Cayman Islands, but repurchased the interest in 2007.138 The tribunal found that the participation agreement concluded between the claimant and its affiliate did not deprive it of investor status under the UK–Soviet BIT,139 and that Russia’s actions amounted to an expropriation.140 However, the tribunal limited damages to US$3.5 million—a tiny fraction of the amount claimed.141 It reasoned that, by the time the claimant acquired the shares, the market had ‘priced in’ the likelihood of the Russian government’s actions with respect to Yukos.142 The tribunal found that the claimant had made a ‘speculative investment consistent with the modus operandi of Claimant and the Elliott Group’.143 Additionally, since the claimant had no real economic interest in the shares while the participation agreement was in effect, the value of the claimant’s investment was calculated as of the date of the agreement’s termination in 2007.144

12.44  To summarize, notwithstanding Abaclat, the likelihood that a flood of investment arbitration claims will arise out of the European debt crisis is relatively modest. The conformity of intra-EU BITs with EU policy remains somewhat uncertain. Most BITs concluded by Greece and other European debtor countries are with treaty partners that are unlikely to be the creditors’ home state. A principal exception, the Germany–Greece BIT, does not provide for investor–state arbitration. The possibility remains that creditors will treaty shop, for example by transferring their debt to bondholders located in a treaty state in anticipation of a sovereign default or restructuring. But in such a case, taking account of the investor’s legitimate expectations at the time that it acquired the debt would very possibly limit any compensation awarded to the investor under the applicable BIT.

D. IIA clauses excluding or limiting protection of sovereign debt

12.45  As discussed,145 an issue that split the majority and dissent in Abaclat was whether a sovereign debt instrument issued on the international financial markets constitutes an ‘investment’ for purposes of the ICSID Convention or the Italy–Argentina BIT. The Abaclat majority answered this question by focusing solely on the BIT’s definition of ‘investment’. This focus on the BIT calls into question whether a narrower treaty definition would be desirable as a matter of policy. Older IIAs, including the 1990 Italy–Argentina BIT, typically define ‘investment’ very broadly; since the early 1990s, many IIAs define ‘investment’ with greater precision. In particular, a growing number of IIAs expressly exclude sovereign debt from the definition of ‘investment’, or add provisions to the treaty that subject sovereign debt to special treatment.

12.46  Perhaps the first example of a sovereign debt exclusion from an IIA is the investment chapter of the North American Free Trade Agreement (NAFTA). The Agreement expressly excludes from the definition of ‘investment’ any loan to, or debt security of, a ‘state enterprise’.146(p. 167) Daniel Price, a principal US negotiator of NAFTA, emphasized that NAFTA’s drafters, while intending to define ‘investment’ very broadly, made a deliberate decision to carve out sovereign debt:

[T]he scope of Chapter 11, as is the case with most bilateral investment treaties, is enormously broad. This is not an accident. The parties did not stumble into this. The parties did not inadvertently do this. This was a carefully crafted definition. Where parties wanted to carve something out, such as public debt, they did. The carve-out is there.147

12.47  NAFTA does not exclude all public debt from the definition of ‘investment’; only loans to or debt of a ‘state enterprise’. Since the conclusion of NAFTA, however, Mexican IIAs tend to exclude not only state enterprise debt, but also all public debt.148 US IIAs, in contrast, generally do not exclude sovereign debt from the definition of ‘investment’.149 Although Canada’s 2004 model Foreign Investment Protection Agreement excludes sovereign debt,150 several BITs that Canada concluded since 2004 do not retain the exclusion.151

12.48  In contrast to the exclusions described in the previous paragraph, several IIAs contain provisions that subject sovereign debt to special treatment. For example, the US–Chile FTA152 excludes the rescheduling of Chile’s debts from the investment protection guarantees contained in the agreement, except for national treatment, MFN treatment, and investor–state arbitration.153 Similarly, the US–Colombia FTA154 imposes temporal restrictions on claims (other than alleged breaches of national or MFN treatment) brought by a US investor against Colombia with respect to sovereign debt restructuring.155 These provisions, however, may be vulnerable to attempts by investors to use the MFN clause to incorporate more investor-friendly provisions from other treaties. For example, a creditor arguing that a Chilean sovereign debt default expropriated its investment might invoke the more favourable treatment available under the UK–Chile BIT, which does not exclude sovereign debt rescheduling from its expropriation guarantee.156

12.49  On the other hand, it is debatable whether an MFN clause would apply to treaty provisions that limit investor–state dispute settlement of sovereign debt claims. Investment arbitration tribunals have disagreed over whether the MFN clause in an IIA may be invoked (p. 168) to circumvent limitations in the treaty on a state’s consent to investor–state arbitration.157 Therefore the temporal limitations on investor–state arbitration claims contained in the US–Colombia FTA might be upheld by a tribunal in spite of the FTA’s MFN clause.

12.50  Table 12.1 contains a non-exhaustive list of IIA provisions that exclude sovereign debt or subject sovereign debt to special rules. Over half of the fifty-seven agreements listed in the table are Mexican IIAs. In contrast to the provisions described in the preceding paragraphs, an IIA that excludes sovereign debt from the definition of covered investment similarly excludes it from the scope of that treaty’s MFN clause. All but one of the treaties listed in the table were concluded by at least one Latin American party.

Table 12.1  IIA provisions excluding sovereign debt or subjecting sovereign debt to special treatment

Agreement/parties

Year agreement signed

Provision

Type of provision

NAFTA (Canada, US, Mexico)

1992

Art. 1139

Definition of investment excludes loans to or debt of a state enterprise

Mexico–Colombia–Venezuela FTA

1994

Art. 17–01

Definition of investment excludes debt obligations of, or the granting of loans to, the state or a state enterprise

Mexico–Costa Rica FTA

1994

Art. 13–01

Definition of investment excludes debt issued by the state or a state enterprise

Mexico–France BIT

1994

Art. 1(1)

Definition of investment excludes debt issued by the state or a state enterprise

Cuba–Bolivia BIT

1995

Art. 1.1

Definition of investment excludes debt of a state enterprise

Mexico–Switzerland BIT

1995

Art. 1(3)

Definition of investment excludes debt issued by the state or a state enterprise

Canada–Chile FTA

1996

Art. G-40

Definition of investment excludes loans to, or debt securities issued by, the state or a state enterprise

Mexico–Argentina BIT

1996

Art. 1(a)(x)

Definition of investment excludes debt issued by the state or a state enterprise

Mexico–Nicaragua FTA

1997

Art. 16–01

Definition of investment excludes loans to or debt of a state enterprise

Mexico–Austria BIT

1998

Art. 1(2)

Definition of investment excludes loans to, or debt issued by, the state or a state enterprise

Mexico–Chile FTA

1998

Art. 9–01

Definition of investment excludes loans to, or debt issued by, the state or a state enterprise

Mexico–Germany BIT

1998

Art. 1(1)

Definition of investment excludes debt issued by the state or a state enterprise

Mexico–Netherlands BIT

1998

Art. 1(2)

Definition of investment excludes debt issued by the state or a state enterprise

El Salvador–Nicaragua BIT

1999

Art. 1

Definition of investment excludes debt issued by the state or a state enterprise

(p. 169) Mexico–Italy BIT

1999

Art. 1.1(c)

Definition of investment excludes debt issued by the state or a state enterprise

Mexico–Portugal BIT

1999

Art. 1(1)

Definition of investment excludes debt issued by the state or a state enterprise

Mexico–Uruguay BIT

1999

Art. 1(1)

Definition of investment excludes debt issued by the state or a state enterprise

Mexico–Denmark BIT

2000

Art. 1(1)

Definition of investment excludes debt issued by the state or a state enterprise

Mexico–Greece BIT

2000

Art. 1(1)

Definition of investment excludes debt issued by the state or a state enterprise

Mexico–El Salvador–Guatemala–Honduras FTA

2000

Art. 14–01

Definition of investment excludes debt issued by the state or a state enterprise

Mexico–Korea BIT

2000

Art. 1(1)

Definition of investment excludes debt issued by the state or a state enterprise

Mexico–Sweden BIT

2000

Art. 1(3)

Definition of investment excludes debt issued by the state or a state enterprise

Peru–Cuba BIT

2000

Art. 1.1

Definition of investment excludes debt issued by the state or a state enterprise

Mexico–Cuba BIT

2001

Protocolo Ad: Art. 1

Definition of investment excludes debt issued by Mexico or a state enterprise of Mexico

Mexico–Czech Republic BIT

2002

Art. 1.2

Definition of investment excludes debt issued by the state or a state enterprise

Chile–US FTA

2003

Annex 10-B

Excludes Chile’s debt restructuring from treaty obligations, except for MFN treatment, national treatment, and dispute settlement

CAFTA–DR (US, Dominican Republic, Honduras, Nicaragua, Costa Rica, Guatemala, and El Salvador)

2004

  • Annex 10-A

  • Annex 10-E(3)

Excludes a Central American party’s or the Dominican Republic’s debt restructuring from treaty obligations, except for MFN treatment, national treatment, and dispute settlement

Imposes temporal restrictions on investor–state arbitration by a US investor of claims involving short-term sovereign debt

Mexico–Australia BIT

2005

Art. 1(a)(x)

Definition of investment excludes debt issued by the state or a state enterprise

Mexico–Iceland BIT

2005

Art. 1(2)(d)

Definition of investment excludes debt issued by the state or a state enterprise

Peru–Belgium BIT

2005

Art. 1.2

Definition of investment excludes debt issued by the state or a state enterprise

Uruguay–US BIT

2005

Annex G

Imposes temporal restrictions on investor–state arbitration of claims involving sovereign debt

Colombia–Switzerland BIT

2006

Ad Art. 1 (1)(c)

A payment obligation from, or a credit to, the state or a state enterprise is not considered an investment

(p. 170) Colombia–US FTA

2006

Art. 10.28, n. 13

Definition of investment excludes loans issued by the state to another treaty party

Annex 10-F

Investor bears burden to show default or non-payment of sovereign debt violates treaty

Imposes temporal restrictions on investor–state arbitration of claims involving sovereign debt restructuring, except for claims alleging violation of MFN treatment or national treatment

Mexico–Panama BIT

2006

Art. 1.6

Definition of investment excludes debt issued by the state or a state enterprise

Mexico–Spain BIT

2006

Art. 1.4

Definition of investment excludes debt issued by the state or a state enterprise

Mexico–Trinidad BIT

2006

Art. 1.5(j)–(k)

Definition of investment excludes loans to, or debt issued by, the state or a state enterprise

Mexico–UK BIT

2006

Art. 1

Definition of investment excludes debt issued by the state or a state enterprise

Peru–Canada BIT

2006

Art. 1

Definition of investment excludes loans to, or debt issued by, the state or a state enterprise

Peru–US FTA

2006

Art. 10–28, n. 13

Definition of investment excludes loans issued by the state to another treaty party

Annex 10-F

Investor bears burden to show default or non-payment of sovereign debt violates treaty

Imposes temporal restrictions on investor–state arbitration of claims involving sovereign debt restructuring, except for claims alleging violation of MFN treatment or national treatment

Azerbaijan–Croatia BIT

2007

Art. 1.1

Definition of investment excludes debt instruments issued by the state or state enterprise

Colombia–Peru BIT

2007

Art. 42

Definition of investment excludes: (i) loans issued by the state to another treaty party; and (ii) public debt operations

Honduras–El Salvador FTA

2007

Art. 10.01

Definition of investment excludes debt obligations of, or the granting of loans to, the state or a state enterprise

Mexico–India BIT

2007

Art. 1(7)(c)-(d)

Definition of investment excludes loans to, or debt instruments issued by, the state or a state enterprise

Mexico–Slovakia BIT

2007

Art. 1.10(c)-(d)

Definition of investment excludes loans to, or debt instruments issued by, the state or a state enterprise

Panama–Costa Rica FTA

2007

Art. 10.40

Definition of investment excludes debt obligations of, or the granting of a loan to, the state or a state enterprise

(p. 171) Australia–Chile FTA

2008

Art. 10.1(j)(iii)

Definition of investment excludes debt instruments issued by the state or a state enterprise

Colombia–Canada FTA

2008

Art. 838, n. 11

Definition of investment excludes: (i) loans issued by the state to another treaty party; and (ii) public debt operations of the state or a state enterprise

Peru–Singapore FTA

2008

Art. 10.1, n. 10–3

Definition of investment excludes loans issued by the state to another treaty party

Art. 10.18

Investor bears burden to show default or non-payment of sovereign debt violates treaty

Imposes temporal restrictions on investor–state arbitration of claims involving sovereign debt restructuring, except for claims alleging violation of MFN treatment or national treatment

Colombia–China BIT

2008

Art. 1(1.1)

Definition of investment excludes public debt operations

Mexico–China BIT

2008

Art. 1

Definition of investment excludes loans to, or debt instruments issued by, the state or a state enterprise

Mexico–Belarus BIT

2008

Art. 1.5(c)

Definition of investment excludes loans to, or debt instruments issued by, the state or a state enterprise

Colombia–Belgium BIT

2009

Art. 1(2.1(a))

Definition of investment excludes public debt operations

Colombia–India BIT

2009

Art. 1(2.1)

Definition of investment excludes public debt operations

Peru–China FTA

2009

Art. 126, n. 11

Definition of investment excludes loans issued by the state to another treaty party

Annex 8

Investor bears burden to show default or non-payment of sovereign debt violates treaty

Imposes temporal restrictions on investor–state arbitration of claims involving sovereign debt restructuring, except for claims alleging violation of MFN treatment or national treatment

Colombia–UK BIT

2010

Art. 1(2)(b)(i)

Definition of investment excludes public debt operations

Colombia–Japan BIT

2011

Art. 1

Definition of investment excludes debt to the state or a state enterprise

Peru–Mexico FTA

2011

Art. 11.1

Definition of investment excludes debt instruments issued by the state or a state enterprise

Note: BIT = bilateral investment treaty; CAFTA-DR = Dominican Republic–Central America Free Trade Agreement; FTA = free trade agreement; MFN = most-favoured nation; NAFTA = North American Free Trade Agreement

(p. 172) 12.51  Although the number of treaties that exclude sovereign debt from their scope probably comprises a relatively small percentage of all IIAs, that percentage may grow—particularly in light of the notoriety surrounding the Abaclat decision. In 2005, the International Institute for Sustainable Development (IISD) developed a model investment agreement designed to promote sustainable development, and to achieve a balance of rights and duties among investors, home countries, and host countries. To that end, the IISD model agreement excludes sovereign debt and state enterprise debt from the treaty’s definition of ‘investment’.158

4. Conclusion

12.52  It remains to be seen whether the investment treaty regime will provide a viable alternative to court enforcement of sovereign debt contracts. Although Wälde predicts that international investment tribunals are likely to be more responsive to the interests of sovereign debtors than money-centre domestic courts have been,159 Waibel suggests that a shift from litigation to investment arbitration of such disputes may limit a state’s flexibility to respond to sovereign debt crises and make creditors less inclined to participate in a voluntary restructuring.160 Similarly, Louis Wells contrasts investment arbitration practice unfavourably with that of the World Trade Organization (WTO) Dispute Settlement Body, a multilateral institution that has generated a relatively coherent body of decisions and the governing agreements of which include various escape clauses.161

12.53  There have been multiple proposals to establish a multilateral mechanism to resolve sovereign debt disputes. In 2001, the International Monetary Fund (IMF) proposed amending its Articles of Agreement to create a framework for restructuring sovereign debt: a sovereign debt restructuring mechanism (SDRM).162 The proposal envisaged establishing a tribunal to resolve disputes arising out of the restructuring process and, if requested by the debtor and approved by a supermajority of creditors, imposing a temporary stay on enforcement actions during the restructuring process.163 In the face of opposition, the IMF eventually ceased work on the SDRM proposal in 2003.164

12.54  More than sixty years before the SDRM proposal, the League of Nations similarly considered establishing a permanent international tribunal to resolve sovereign debt claims.165 In 1935, faced with a wave of sovereign debt defaults, the League of Nations adopted a resolution designating a committee, comprising mostly European financial and legal experts, to examine ways in which to improve sovereign debt contracts and to prepare model provisions, (p. 173) ‘if necessary, with a system of arbitration’ for such contracts.166 The committee was presented with a draft League of Nations Convention for the establishment of an International Loans Tribunal, the decisions of which on disputes arising out of sovereign debt contracts would have the same force as if rendered by a national court of last instance in any state acceding to the Convention.167 Certain features of the draft Convention resemble the ICSID Convention—particularly the provision relating to the enforceability of the tribunal’s awards. But the draft Convention, unlike the investment treaty regime, was designed exclusively to address the problem of resolving sovereign debt disputes and envisaged establishing a tribunal available to debtor states, as well as creditors.168

12.55  As with the SDRM proposal, the League of Nations’ proposal was never implemented. The committee was of the view that concluding an international convention to establish an international loans tribunal would be unrealistic under ‘present circumstances’ (the report was issued just months before Germany’s invasion of Poland). Therefore the committee did not examine the draft proposal in detail, merely including it as an annex to the committee report.169

12.56  As the League of Nations’ proposal illustrates, the challenges associated with resolving claims arising out of sovereign debt defaults have existed for many decades. A multilateral solution would be the most effective way in which to resolve these challenges, by preventing a rush on the defaulting sovereign’s assets, ensuring enforceability of the resulting awards, and resolving disputes in a manner that balances investor rights against the long-term developmental interests of the sovereign debtor. The European debt crisis and the Second Circuit’s recent NML Capital decision against Argentina170 have prompted calls to revive the SDRM proposal.171 Unfortunately, notwithstanding renewed interest, it is unlikely that international consensus to adopt such a multilateral solution will be achieved any time soon.(p. 174)

Footnotes:

1  Abaclat and ors (Case formerly known as Giovanna a Beccara and ors) v. Argentine Republic, Decision on Jurisdiction and Admissibility, ICSID Case No. ARB/07/5 (4 August 2011).

3  The sovereign debt market thrived in the early 1900s until the Great Depression. Thereafter, repeated defaults and the advent of the Second World War brought the market to a halt. By the mid-1960s, however, a number of Latin American and Asian issuers reentered the sovereign debt market. See S. Choi, M. Gulati, and E. Posner, ‘The Evolution of Contractual Terms in Sovereign Bonds’ (2012) 4 JLA 131, 150.

4  M. Weidemaier, ‘Contracting for State Intervention: The Origins of Sovereign Debt Arbitration’ (2010) 73 Law & Contemp Probs 335, 343, Table 2; Edwin Borchard, State Insolvency and Foreign Bondholders, Vol. 1 (New Haven, CT: Yale University Press, 1951) 36–7; League of Nations, Report of the Committee for the Study of International Loan Contracts, League of Nations Pub No. C.145.M.93.1939.II.A. (May 1939), Annex III.

5  League of Nations (n. 4), paras 86–7.

6  Weidemaier (n. 4), 337–8. The law on arbitration was still developing, and states at the time still adhered to the absolute theory of sovereign immunity.

7  Weidemaier (n. 4), 336.

8  Borchard (n. 4), 36.

9  League of Nations (n. 4), paras 84–5.

10  Philip Wood, Law and Practice of International Finance (London: Sweet & Maxwell, 2008), para. 32-28; Lee C. Buchheit, How to Negotiate Eurocurrency Loan Agreements, 2nd edn (London: Euromoney, 2000), 134–5.

11  Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10 June 1958, 330 UNTS 38) (the New York Convention).

12  Convention on the Settlement of Investment Disputes between States and Nationals of Other States (Washington DC, 18 March 1965, 575 UNTS 159) (the ICSID Convention).

13  K. Cross, ‘Arbitration as a Means of Resolving Sovereign Debt Disputes’ (2006) 17 Am J Int’l Arb 335, 358–61.

14  Compare Foreign Sovereign Immunities Act, § 1610(a)(6) (exception to immunity from attachment for enforcing foreign arbitral awards) with § 1610(a)(2) (exception to immunity from attachment for property used for the commercial activity on which the claim is based).

15  William W. Park, Arbitration of International Business Disputes: Studies in Law and Practice (Oxford: Oxford University Press, 2006), 559–60; G. Delaume, ‘ICSID and the Transnational Financial Community’ (1986) 1 ICSID Rev 237, 238; Cross (n. 13), 338–41.

16  M. Boeglin, ‘The Use of Arbitration Clauses in the Field of Banking and Finance: Current Status and Preliminary Conclusion’ (1998) 15 J Int’l Arb 19, 24–5; Cross (n. 13), 341.

17  M. Weidemaier, ‘Disputing Boilerplate’ (2009) 82 Temple L Rev 1, 28; Cross (n. 13), 341–3; O. Sandrock, ‘Is International Arbitration Inept to Solve Disputes Arising out of International Loan Agreements?’ (1994) 11 J Int’l Arb 33, 37 (citing older examples).

18  Weidemaier (n. 17), 29 (referring to bonds issued by Georgia, Estonia, Poland, Slovak Republic, and Ukraine).

19  Council Regulation (EC) No. 44/2001 on jurisdiction and the recognition of judgments in civil and commercial matters [2001] OJ L012/1; see Cross (n. 13), 340, fn. 22.

20  Weidemaier (n. 17), 27.

21  J. Salacuse, ‘The Emerging Global Regime for Investment’ (2010) 51 Harvard Int’l LJ 427, 433.

22  J. Salacuse and N. Sullivan, ‘Do BITs Really Work? An Evaluation of Bilateral Investment Treaties and their Grand Bargain’ (2005) 46 Harvard Int’l LJ 67, 68–70.

23  United Nations Conference on Trade and Development (UNCTAD), ‘Quantitative Data on Bilateral Investment Treaties and Double Taxation Treaties’, available online at <http://archive.unctad.org/Templates/WebFlyer.asp?intItemID=3150&lang=1>.

24  UNCTAD, Recent Developments in International Investment Agreements (2008–June 2009), IIA Monitor No. 3, UNCTAD/WEB/DIAE/IA/2009/8 (2009), available online at <http://unctad.org/en/Docs/webdiaeia20098_en.pdf>, 8 (citing 273 FTAs with investment chapters and 2,676 BITs).

25  Many, but not all, investment treaties contain umbrella clauses. See Jeswald W. Salacuse, The Law of Investment Treaties (New York: Oxford University Press, 2010), 274 (citing estimates of 1,000 treaties containing umbrella clauses). Although the Italy–Argentina BIT does not contain an umbrella clause, the Abaclat claimants seek to incorporate one by invoking the MFN clause of the treaty: Abaclat Decision on Jurisdiction (n. 1), para. 242.

26  Award, ICSID Case No. ARB/96/3 (9 March 1998).

27  T. Wälde, ‘The Serbian Loans Case: A Precedent for Investment Treaty Protection of Foreign Debt?’ in T. Weiler (ed.) International Investment Law and Arbitration: Leading Cases from the ICSID, NAFTA, Bilateral Treaties and Customary International Law (London: Cameron, 2005), 383, 401. Another case, CSOB v. Slovak Republic, involved a dispute over sovereign debt incurred in the process of the former Czechoslovakia’s breakup, but ultimately the tribunal’s jurisdiction was upheld on the basis of an arbitration clause in a consolidation agreement between the parties, and not in a BIT: Ceskoslovenska Obchodni Banka, AS v. The Slovak Republic, Decision of the Tribunal on Objections to Jurisdiction, ICSID Case No. ARB/97/4 (24 May 1999), paras 43, 59.

28  Fedax Award (n. 26), para. 29.

29  Treaty between the Republic of Italy and the Republic of Argentina for the Promotion and Protection of Investments (Buenos Aires, 22 May 1990) (the Italy–Argentina BIT); see Abaclat Decision on Jurisdiction (n. 1), para. 312.

30  Wälde (n. 27), 402; see also M. Waibel, ‘Opening Pandora’s Box: Sovereign Bonds in International Arbitration’ (2007) 101 AJIL 711, 742–54 (discussing decisions).

31  Wälde (n. 27), 408–9.

32  Salacuse (n. 25), 283; Andrew Newcombe and Lluís Paradell, Law and Practice of Investment Treaties: Standards of Treatment (The Hague: Kluwer Law International, 2009), 466.

33  Wälde (n. 27), 414–5. Article 6(3) of the Italy–Argentina BIT provides a temporary and limited exception to the free transfer guarantee in the event of exceptional balance-of-payment difficulties. See also Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Argentina for the Promotion and Protection of Investments (London, 11 December 1990), Art. 6(3) (the UK–Argentina BIT).

34  Abaclat Decision on Jurisdiction (n. 1), para. 312.

35  Abaclat Decision on Jurisdiction (n. 1), para. 79.

36  Waibel (n. 30), 746–7.

37  Abaclat Decision on Jurisdiction (n. 1), para. 312.

38  Waibel (n. 30), 758, fn. 262; see also A. Gelpern and B. Setser, ‘Domestic and External Debt: The Doomed Quest for Equal Treatment’ (2004) 35 Georgetown J Int’l L 795.

39  The customary international law doctrine of necessity provides a defence for actions taken to protect an essential interest against grave and imminent threats. The state must show that its response to the threat was the only means available to it and that it did not contribute to the situation of necessity: W. Burke-White and A. von Staden, ‘Non-Precluded Measures Provisions, the State of Necessity, and State Liability for Investor Harms in Exceptional Circumstances’, in M. Mourra (ed.) Latin American Investment Treaty Arbitration: The Controversies and Conflicts (The Hague: Kluwer Law International, 2008), 105, 141–2.

40  Decision on Liability, ICSID Case No. ARB/02/1 (3 October 2006).

41  Treaty between United States of America and the Argentine Republic Concerning the Reciprocal Encouragement and Protection of Investment (Washington DC, 14 November 1991) (US–Argentina BIT), Art. XI. Although ‘far from ubiquitous’, non-precluded measures clauses regularly appear IIAs concluded by some countries, including the United States, Germany and, more recently, Canada: Burke-White and von Staden (n. 39), 108–9.

42  LG&E Decision on Liability (n. 40), paras 258, 260.

43  LG&E Decision on Liability (n. 40), para. 266.

45  Newcombe and Paradell (n. 32), 70.

46  Newcombe and Paradell (n. 32), 72.

47  Italy–Argentina BIT, Art. 8. The treaty allows the investor to commence arbitration if the dispute has been submitted to a local tribunal and continues for 18 months: Art. 8(3).

48  ICSID Convention, Arts 54–55.

49  Cross (n. 13), 362, fn. 144 (citing sources); Michael Waibel, Sovereign Defaults before International Courts and Tribunals (New York: Cambridge University Press, 2011), 211.

50  E. Baldwin, M. Kantor, and M. Nolan, ‘Limits to Enforcement of ICSID Awards’ (2006) 23(1) J Int’l Arb 1, 21.

51  See paragraph 12.09 and n. 27.

52  Abaclat Decision on Jurisdiction (n. 1), para. 82.

53  Italy’s highest court has held that, although the issuance of bonds is a private act, Argentina’s unilateral extension of the payment term on its debt was a sovereign act and therefore subject to immunity: Borri v. Argentine Republic, Request for a Ruling on Jurisdiction, No. 6532, 27 May 2005; cf. Republic of Argentina v. Weltover, 504 US 607 (1992) (finding that a unilateral rescheduling of debt by Argentina was a commercial act). China still adheres to the absolute theory of sovereign immunity, including immunity from suit: Democratic Republic of the Congo & ors v. FG Hemisphere Associates LLC, Judgment, [2011] HKCU 1049, 8 June 2011, para. 224 (Hong Kong Court of Final Appeal).

54  NML Capital, Ltd v. Republic of Argentina, 652 F.3d 172, 177 n 6 (2d Cir. 2011).

55  The Second Circuit ultimately held that the Central Bank funds were ‘held for its own account’, and therefore immune from attachment under Foreign Sovereign Immunities Act § 1611(b)(1): NML Capital (n. 54).

56  NML Capital, Ltd v. Republic of Argentina, 680 F.3d 254 (2d Cir. 2012).

57  BBC News, ‘Argentina Ship in Ghana Seized over Loans Default’, 4 October 2012, available online at <http://www.bbc.co.uk/news/world-africa-19827562>.

58  The ARA Libertad Case (Argentina v. Ghana), Order, ITLOS Case No. 20 (15 December 2012).

59  699 F.3d 246 (2d Cir. 2012).

60  The Economist, ‘To Err Is Human’, 22 July 2004, available online at <http://www.economist.com/node/2947040>.

61  Abaclat Decision on Jurisdiction (n. 1), paras 65, 85.

62  Abaclat Decision on Jurisdiction (n. 1), para. 86.

63  Abaclat Decision on Jurisdiction (n. 1), para. 458.

64  Abaclat Decision on Jurisdiction (n. 1), paras 97, 216.

65  Abaclat Decision on Jurisdiction (n. 1), para. 91.

66  Abaclat Decision on Jurisdiction (n. 1), para. 238.

67  ICSID Convention Art. 25(1); Abaclat Decision on Jurisdiction (n. 1), para. 341.

68  Abaclat Decision on Jurisdiction (n. 1), para. 365.

69  Abaclat Decision on Jurisdiction (n. 1), para. 352.

70  Abaclat Decision on Jurisdiction (n. 1), paras 361, 387.

71  Abaclat and ors (Case formerly known as Giovanna a Beccara and ors) v. Argentine Republic, Decision on Jurisdiction and Admissibility, Dissenting Opinion of Professor Georges Abi-Saab, ICSID Case No. ARB/07/5, para. 46 (28 October 2011).

72  Waibel (n. 49), 227–31; Christoph H. Schreuer, The ICSID Convention: A Commentary, 2nd edn (New York: Cambridge University Press, 2009), 128–34 (discussing so-called Salini factors).

73  Abaclat Dissenting Opinion (n. 71), para. 75 (emphasis in original) (quoting the Preamble to the Italy–Argentina BIT).

74  Abaclat Dissenting Opinion (n. 71), paras 78–87.

75  Abaclat Decision on Jurisdiction (n. 1), paras 470–1.

76  Abaclat Decision on Jurisdiction (n. 1), paras 489, 491.

77  Abaclat Decision on Jurisdiction (n. 1), paras 517–19.

78  Abaclat Decision on Jurisdiction (n. 1), paras 531, 537.

79  Abaclat Dissenting Opinion (n. 71), paras 126, 153.

80  Stolt-Nielsen, 130 S Ct 1758, 1776 (2010); Abaclat Dissenting Opinion (n. 71), paras 150–1.

81  Abaclat Dissenting Opinion (n. 71), paras 242–4.

82  Schreuer (n. 72), 921–3.

83  Ambiente Ufficio SpA and ors (Case formerly known as Giordano Alpi and ors) v. Argentine Republic, Decision on Jurisdiction and Admissibility, ICSID Case No. ARB/08/9 (8 February 2013).

84  For example, in contrast to Abaclat, the Ambiente Ufficio majority considered other factors beyond the definition of ‘investment’ in the Italy–Argentina BIT to determine whether the bonds qualified as an ‘investment’ for purposes of the ICSID Convention: Ambiente Ufficio Decision on Jurisdiction (n. 83), paras 438–9, 481.

85  Ambiente Ufficio Decision on Jurisdiction (n. 83), paras 482, 495, 510.

86  Ambiente Ufficio Decision on Jurisdiction (n. 83), paras 146, 163, 170.

87  Ambiente Ufficio Decision on Jurisdiction (n. 83), para. 146.

88  Ambiente Ufficio Decision on Jurisdiction (n. 83), para. 113.

89  Ambiente Ufficio Decision on Jurisdiction (n. 83), paras 120, 171.

90  Ambiente Ufficio Decision on Jurisdiction (n. 83), paras 10–12.

91  Similarly to Professor Abi-Saab, Dr Torres Bernárdez dissented from the majority’s conclusion that the bonds are protected investments and from its finding that Argentina consented to collective proceedings: Ambiente Ufficio SpA and ors (Case formerly known as Giordano Alpi and ors) v. Argentine Republic, Decision on Jurisdiction and Admissibility, Dissenting Opinion of Santiago Torres Bernárdez, ICSID Case No. ARB/08/9, paras 52–53, 502 (2 May 2013).

92  ICSID Case No. ARB/07/8 (claim registered 27 March 2007).

93  See S. Strong, ‘Mass Procedures in Abaclat v. Argentine Republic: Are They Consistent with the International Investment Regime?’ (2013) 3 YB Int’l Arb (forthcoming) (citing examples of other, smaller group claims adjudicated with ICSID).

94  Abaclat Decision on Jurisdiction (n. 1), para. 471.

95  Abaclat Decision on Jurisdiction (n. 1), para. 550.

96  Abaclat Dissenting Opinion (n. 71), para. 271.

97  See paragraph 12.20.

98  See B. Cremades, ‘Third-Party Litigation Funding: Investing in Arbitration’ (2011) 8(4) TDM, available online at <http://www.transnational-dispute-management.com/article.asp?key=1743>.

99  L. Peterson, ‘World Bank Arbitration Tribunal Upholds Jurisdiction over Billion Dollar Claim by Italian Victims of Argentine Debt Default’, IAReporter, 7 August 2011.

100  A party can request annulment of an ICSID award on several narrowly defined grounds, including that the tribunal ‘manifestly exceeded its powers’, or committed a ‘serious departure from a fundamental rule of procedure’: ICSID Convention, Art. 52(1). Argentina has twice successfully argued that an ICSID award against it should be annulled on grounds that the tribunals manifestly exceeded their powers by failing to apply the non-precluded measures clause of the US–Argentina BIT: Sempra Energy Int’l v. Argentine Republic, Annulment Decision, ICSID Case No. ARB/02/16 (29 June 2010); Enron Creditors Recovery Corp v. Argentine Republic, Annulment Decision, ICSID Case No. ARB/01/3 (30 July 2010).

101  See paragraph 12.28.

102  R. Barley, ‘Bond Swap Doesn’t End Greek Crisis’, Wall Street Journal, 10 March 2012, available online at <http://online.wsj.com/article/SB10001424052970203961204577271040570435760.html>; L. Thomas Jr, ‘Next Time, Greece May Need New Tactics’, New York Times, 9 March 2012, available online at <http://www.nytimes.com/2012/03/10/business/global/greece-debt-restructuring-deal-private-lenders.html?pagewanted=all&_r=0>.

103  J. Zettelmeyer and M. Gulati, ‘In the Slipstream of the Greek Debt Exchange’, Vox, 5 March 2012, available online at <http://www.voxeu.org/article/slipstream-greek-debt-exchange>. About 90 per cent of outstanding Greek debt was governed by local law and therefore affected by the legislation: D. Strik, ‘Proposed Greek Collective Action Clauses Law May Trigger its International Law Obligations’, Kluwer Arbitration Blog, 24 February 2012, available online at <http://kluwer.practicesource.com/blog/2012/proposed-greek-collective-action-clauses-law-may-trigger-its-international-law-obligations/>.

104  Zettelmeyer and Gulati (n. 103).

105  Thomas (n. 102).

106  J. Wilson and G. Weismann, ‘Germans Seek Lawsuits over Greek Debt Swap’, Financial Times, 12 March 2012.

107  DSW, ‘Klagemöglichkeiten in Sachen Greichenland-Anleihen’ (court actions for Greek bondholders), available online at <http://www.dsw-info.de/Griechenlandanleihen.1877.0.html>.

108  Article 207 TFEU.

109  J. Kleinheisterkamp, ‘Investment Protection and EU Law: The Intra- and Extra-EU Dimension of the Energy Charter Treaty’ (2012) 15(1) J Int’l Econ L 85, 85–6.

110  Kleinheisterkamp (n. 109), 96.

111  Award on Jurisdiction, Arbitrability and Suspension, PCA Case No. 2008-13, 26 October 2010. Since commencing its arbitration claim, the name of Eureko BV has changed to Achmea BV.

112  S. Balthasar, ‘Investment Arbitration under Intra-EU BITs: Recent Developments in Eureko v. Slovakia’, Kluwer Arbitration Blog, 28 August 2012, available online at <http://kluwerarbitrationblog.com/blog/2012/08/28/investment-arbitration-under-intra-eu-bits-recent-developments-in-eureko-v-slovakia/>.

113  Kleinheisterkamp (n. 109), 108–9.

114  UNCTAD, ‘Greece: Total Number of Bilateral Investment Treaties Concluded’ (June 2012), available online at <http://archive.unctad.org/Templates/Page.asp?intItemID=2344&lang=1>. In fact, Slovak financial institutions recently brought a debt claim to ICSID against Greece: Poštová banka a.s. and ISTROKAPITAL SE v. Hellenic Republic, ICSID Case No. ARB/13/8.

115  Cyprus, for example, lost 24 per cent of its gross domestic product (GDP) as a result of the effects of Greece’s debt restructuring on Cypriot creditors: G. Steinhauser, ‘Cyprus Foreign Minister: Cyprus Hit Unfairly Hard by Greek Debt Restructuring’, Wall Street Journal, 6 July 2012.

116  L. Peterson, ‘Investment Treaty Arbitration against Greece Looms after Foreign Bank Gives Notice of Dispute Due to “Discriminatory” Bail-Out’, IAReporter, 27 March 2013.

117  Treaty between the Federal Republic of Germany and the Kingdom of Greece for the Promotion and Mutual Protection of Capital Investments (Athens, 27 March 1961) (the Germany–Greece BIT).

118  Germany–Greece BIT, Arts 1(2), 2.

119  Germany–Greece BIT, Art. 4.

120  Germany–Greece BIT, Art. 3(2).

121  Germany–Greece BIT, Art. 3(1).

122  Germany–Greece BIT, Art. 11.

123  See I. Glinavos, Investors vs Greece: The Greek “Haircut” and Investment Arbitration Under BITs, available online at <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2021137>, 10.

124  See UNCTAD, ‘Country-Specific Lists of BITs’, available online at <http://archive.unctad.org/Templates/Page.asp?intItemID=2344&lang=1>.

125  Newcombe and Paradell (n. 32), 68.

126  K. Gallagher, The New Vulture Culture: Sovereign Debt Restructuring and Trade and Investment Treaties, IDEAs Working Paper Series No. 02/2011, available online at <http://www.ase.tufts.edu/gdae/publications/GallagherSovereignDebt.pdf>, 16–17.

127  Agreement Concerning the Protection and Reciprocal Encouragement of Investments between the Kingdom of Spain and the Czech and Slovak Federal Republic (Madrid, 12 December 1990) (the Spain–Czech BIT).

128  NAFTA Art. 1113(2).

129  See, e.g., Agreement between the Hellenic Republic and the Government of the Republic of India on the Promotion and Reciprocal Protection of Investments (Athens, 26 April 2007) (the India–Greece BIT), Art. 1(3)(b); Newcombe and Paradell (n. 32), 68.

130  Schreuer (n. 72), 292.

131  Partial Award (17 March 2006).

132  Saluka Investments Partial Award (n. 131), paras 240–1.

133  Schreuer (n. 72), 290–2 (citing decisions); Newcombe and Paradell (n. 32), 69 (same); cf. TSA Spectrum de Argentina, SA v. Argentine Republic, Award, ICSID Case No. ARB 05/5 (19 December 2008), para. 262 (piercing the corporate veil to determine ‘foreign control’ of an investor for purposes of ICSID Convention Art. 25(2)(b)).

134  Spain–Czech BIT Art. 1(2)(b).

135  A bondholder would not have standing unless it were an investor at the time that the treaty violation took place: Daimler Financial Services AG v. Argentine Republic, Award, ICSID Case No. ARB/05/1 (22 August 2012), para. 145.

136  Waibel (n. 30), 755–7; Wälde (n. 27), 419–20; Daniella Strik, ‘Investment Protection of Sovereign Debt and Its Implications on the Future of Investment Law in the EU’ (2012) 29(2) J Int’l Arb 183, 196.

137  Final Award, SCC Arbitration V (079/2005) (12 September 2010).

138  Rosinvestco Final Award (n. 137), para. 5.

139  Rosinvestco Final Award (n. 137), para. 323.

140  Rosinvestco Final Award (n. 137), para. 633.

141  Rosinvestco Final Award (n. 137), para. 676.

142  Rosinvestco Final Award (n. 137), para. 665.

143  Rosinvestco Final Award (n. 137), para. 669.

144  Rosinvestco Final Award (n. 137), para. 673.

146  North American Free Trade Agreement (NAFTA) (Washington DC, Ottawa, ON, and Mexico City, 17 December 1992, 32 ILM 289 (1993)), Art. 1139.

147  D. Price, ‘Chapter 11: Private Party vs Government, Investor–State Dispute Settlement: Frankenstein or Safety Valve?’ (2000) 26 Canada–US LJ 107, 109.

148  Agreement between the United Mexican States and the Republic of Austria on the Promotion and Protection of Investments (Paris, 18 February 1998) (the Mexico–Austria BIT), Art. 1(2); see also Table 12.1.

149  US Department of State, 2004 Model Bilateral Investment Treaty, Art. 1; US Department of State, 2012 US Model Bilateral Investment Treaty, Art. 1.

150  Canada Model 2004 Foreign Investment Protection Agreement, Art. 1.

151  See, e.g., Agreement between Canada and the Czech Republic for the Promotion and Protection of Investments (Prague, 6 May 2009) (the Canada–Czech BIT), Art. I(d); Agreement between the Government of Canada and the Government of Romania for the Promotion and Reciprocal Protection of Investments (Bucharest, 8 May 2009) (the Canada–Romania BIT), Art. I(g).

152  United States–Chile Free Trade Agreement (Miami, 6 June 2003) (the US–Chile FTA).

153  US–Chile FTA, Annex 10-B.

154  United States–Colombia Free Trade Agreement (Washington, 22 November 2006) (the US–Colombia FTA).

155  US–Colombia FTA, Annex 10-F. Any claim must be brought after 270 days have elapsed and may not be brought while restructuring negotiations are ongoing.

156  See Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Chile for the Promotion and Protection of Investments with Protocol (Santiago, 8 January 1996) (the UK–Chile BIT), Art. 4.

157  See, e.g., Daimler Award (n. 135), para. 268; cf. Daimler Financial Services AG v. Argentine Republic, Dissenting Opinion of Judge Charles N. Brower, ICSID Case No. ARB/05/1, paras 23–6 (15 August 2012).

158  H. Mann, K. von Moltke, L. Peterson, and A. Cosbey, IISD Model International Agreement on Investment for Sustainable Development (April 2005), available online at <http://www.iisd.org/investment/capacity/model.aspx>, Art. 2(C).

159  Wälde (n. 27), 421, fn. 100.

160  Waibel (n. 30), 757–8.

161  Louis T. Wells, ‘Property Rights for Foreign Capital: Sovereign Debt and Private Direct Investment in Times of Crisis’, in K. Sauvant (ed.) Yearbook on International Investment Law & Policy (New York: Oxford University Press, 2009–10), 486–8.

162  S. Hagan, ‘Designing a Legal Framework to Restructure Sovereign Debt’ (2004–05) 36 Georgetown J Int’l L 299, 300–1.

163  IMF, Proposed Features of a Sovereign Debt Restructuring Mechanism (12 February 2003), reprinted in Hagan (n. 162), 394–402.

164  Hagan (n. 162), 301.

165  League of Nations (n. 4); see also Borchard (n. 4), 37–9; Waibel (n. 49), 324–6.

166  League of Nations (n. 4), paras 1–2.

167  League of Nations (n. 4), Annex IV, para. (viii).

168  League of Nations (n. 4), Annex IV, para. (vi).

169  League of Nations (n. 4), para. 92.

170  See paragraph 12.19.

171  R. Wigglesworth and A. Beattie, ‘Bankruptcy Regime for Nations Urged’, Financial Times, 6 January 2013.