In the aftermath of the sovereign debt restructuring SDR that was implemented by Argentina, aggrieved bondholders who did not accept the conditions of the debt exchange took different legal avenues to recover the amounts invested. Whereas some of them initiated actions before national courts, other investors decided to lodge their complaints with the International Centre for Settlement of Investment Disputes ICSID and succeeded in obtaining favourable decisions on jurisdiction.
Certainly, the claims brought by bondholders under the bilateral investment treaty BIT between Argentina and Italy Abaclat, Ambiente Ufficio and Alemanni represent a turning point in the investment arbitration regime. Most users should sign in with their email address. If you originally registered with a username please use that to sign in. To purchase short term access, please sign in to your Oxford Academic account above. Don't already have an Oxford Academic account? Oxford University Press is a department of the University of Oxford.
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Volume Article Navigation. Email: m. Oxford Academic. Google Scholar. Thishascreatedanewclassofcreditors,makingthe restructuringprocessmorecomplex. When it comes to restructuring government debt, the standard practice in the past two decadeshasbeenforagovernment,aftertakingmarketsoundings,tomakeanexchange offerintheexpectationofsecuringtheacceptanceofagreatmajorityofcreditors.
Byaccumulatingalargeamountof bonds,theycanjustifythehighcostsoflitigation Wells, Holdouts seek to obtain preferential financial terms for themselves, as compared to the majority of creditors. They can thereby obstruct a restructuring that is in the broader interest. Inanewdevelopment,holdoutinvestorshaveinitiated internationalarbitralproceedingsunderIIAs seebox1. Asynopsis oftheArgentinacaseispresentedinbox1. Indealingwiththeproblemsof private firms, the coordinationofferedbybankruptcy is considered tobe in the common interest.
Domestic bankruptcyregimescanhalttherushofcreditorstoseizeassetsbeforeothersgetthemandtheydetermine prioritiesforvariouscategoriesofclaimants. Also,theycanforceholdoutstoagreetofairlydistributedreductions in obligations and try tomaximize thebenefit available to creditors as a group. Restructuring and reducing obligationsallowsthebankruptentitytoreturntoagrowthpattern Wells, Russia 20 After the first unsuccessful attempts to restructure, Argentina announced that it would open a one-timebondexchangeandpasseddomesticlegislationthatitwouldneverholda futureswapwithabetteroffer.
Someholdouts,amongthemnumerousvulturefunds,tookthelitigationrouteinthe UnitedStates,wheresuitshavebeenfiled Hornbeck, SeealsoGiovanni Alemanniandothersv. Thissectionaddressesthe issueofcoverageofsovereigndebtbyIIAs, reviews IIA provisions that might provide grounds for international claims and looks at whetherIIAsprovidesufficientsafeguards.
Theall-encompassingnatureofthisdefinitionsuggeststhatitmaycovergovernmentbonds aswell. On the other hand, a number of IIAs explicitly exclude sovereign debt from the treaty coverage. WherepublicdebtobligationsarecoveredbyaspecificIIA,thereisscopeforadiscussion onwhetheraparticularpublicdebtrestructuringhasviolatedcertain IIAobligations.
This sectionbrieflyconsidersseveralpossiblegroundsforfindingabreachofIIAprovisions. Anationaltreatmentclaimcanoccurwhendomesticbondholdersreceive better termsduringa restructuring thando foreignbondholders. This canbea concern because there may be considerable economic justification for a differential treatment. Givingpriority to servicingdomesticdebtmaybenecessary soas to revive adomestic financial system, provide liquidity and manage risk during a recovery.
Thereisalsoaclearrationale togiveprioritytolocalbondholderstoretaintheabilityofeconomicactorstopaywages, salariesandpensionsinordertomaintainlivelihoods,enabledomesticdemandandavoid massprotest GelpernandSetser,;IMF, Sovereign debt restructuring or default could be seen as constituting an expropriation,andmorespecifically,anindirectexpropriation.
An outright default without any additional steps by a government will completely destroy the value of the outstanding bonds, while a debt restructuringislikelytodiminishtheirvalueconsiderably. AconcernhasbeenexpressedthatbondexchangesmayviolatetheFETobligationinandof themselves,despitethefactthatexchangeshavebecomestandardpractice.
Furthermore,exchanges could triggerallegations that theprocess lacks transparencyand that it iscoercive. Byvirtueoftheumbrellaclause, suchacontractualbreachmayturnintoabreachoftheIIA. A contentious issue with respect to umbrella clauses has been whether any breach of contractissufficientforaclaimundertheIIAtoproceed,orwhetherthebreachmustresult fromanexerciseofsovereignpowersbythegovernment. Another debatedissueiswhethertheinvestorcanbringatreatyclaimobviatingthedisputeresolution mechanismincludedinthecontractitself.
IftheapproachoftheSGS v. SeealsoWaibel ,pp. CACsweredesignedtoincreasethecoordinationofbondholders andstreamlinetheprocessofsovereigndebtrestructuring. CACshavethefollowingkey features:. CACs are not uniform; and the examination of a specific clause would be necessary. However,asageneralmatter, itwouldappearthatwherethemajority imposestheterms ofrestructuringonallbondholderswithinthebondissue,dissentingbondholderscannot succeedintheir IIAclaims,giventhattheircontractualrightshavebeendulymodified.
A minimumenforcementclausemayalsobeviewedasgenerallyprecludingIIAclaimsifitis interpretedtocoveralltypesofdisputesettlementclaims. However, thesesafeguardsdonotapplytothetotalityofthetreaty. Forasovereignthathasmanybondissuancesoutstanding,holdoutcreditorscandisrupt therestructuringprocessbyobtainingacontrollingposition inasinglebondissuance. Box 2. ThePartiesrecognizethatthepurchaseofdebtissuedbyaPartyentailscommercial risk.
Short title. Signature date. Entry into force date. Termination date. Close Save changes. Related Products. Regional Comprehensive Economic Partnership RCEP Full text: en Investment ch. Fiji , United States of America. Full text: en. Brazil - India BIT Brazil , India. Full text: en pt. Japan - Morocco BIT Japan , Morocco. Taiwan Province of China , Viet Nam. China - Mauritius FTA China , Mauritius. Armenia , Singapore. Brazil - Ecuador BIT Brazil , Ecuador.
Full text: es pt. Myanmar - Singapore BIT Myanmar , Singapore. Iran, Islamic Republic of , Nicaragua. Full text: es. Belarus - Uzbekistan BIT Belarus , Uzbekistan. Full text: ru. Gambia , United Arab Emirates. India - Kyrgyzstan BIT India , Kyrgyzstan. Brazil - Morocco BIT Brazil , Morocco.
Full text: fr pt ar. Korea, Republic of , Uzbekistan. Iraq , Saudi Arabia. Burkina Faso , Turkey. Impartiality requires that all institutions and actors involved in sovereign debt restructuring workouts, including at the regional level, in accordance with their respective mandates, enjoy independence and refrain from exercising any undue influence over the process and other stakeholders or engaging in actions that would give rise to conflicts of interest or corruption or both.
Equitable treatment imposes on States the duty to refrain from arbitrarily discriminating among creditors, unless a different treatment is justified under the law, is reasonable, and is correlated to the characteristics of the credit, guaranteeing inter-creditor equality, discussed among all creditors.
Creditors have the right to receive the same proportionate treatment in accordance with their credit and its characteristics. No creditors or creditor groups should be excluded ex ante from the sovereign debt restructuring process.
Sovereign immunity from jurisdiction and execution regarding sovereign debt restructurings is a right of States before foreign domestic courts and exceptions should be restrictively interpreted. Legitimacy entails that the establishment of institutions and the operations related to sovereign debt restructuring workouts respect requirements of inclusiveness and the rule of law, at all levels.
The terms and conditions of the original contracts should remain valid until such time as they are modified by a restructuring agreement. Sustainability implies that sovereign debt restructuring workouts are completed in a timely and efficient manner and lead to a stable debt situation in the debtor State, preserving at the outset creditors' rights while promoting sustained and inclusive economic growth and sustainable development, minimizing economic and social costs, warranting the stability of the international financial system and respecting human rights.
Majority restructuring implies that sovereign debt restructuring agreements that are approved by a qualified majority of the creditors of a State are not to be affected, jeopardized or otherwise impeded by other States or a non-representative minority of creditors, who must respect the decisions adopted by the majority of the creditors.
States should be encouraged to include collective action clauses in their sovereign debt to be issued. Connect with us. United Nations responds to sovereign debt crises by adopting principles, with UNCTAD support, that could underlie a new legal framework and regulatory mechanisms. Quick link: Watch video on United Nations Webcast.
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Individual treaties are mapped by law students from participating universities, under the supervision of their professors and with the overall guidance and coordination of UNCTAD. The mapping of treaty provisions is not exhaustive, has no official or legal status, does not affect the rights and obligations of the contracting parties and is not intended to provide any authoritative or official legal interpretation.
While every effort has been made to ensure accuracy, UNCTAD assumes no responsibility for eventual errors or omissions in the mapping data. In the event of doubt regarding the correctness of mapping results, users are kindly asked to contact us via the online contact form. International Investment Agreements Navigator. IIA Navigator International investment agreements IIAs are divided into two types: 1 bilateral investment treaties and 2 treaties with investment provisions.
To generate a list of treaties that satisfy a certain option under a mapped treaty element, find the element in the mapping structure and select the desired option e. Once a selection is made, the list of treaties is updated automatically, so that only treaties that correspond to the selected option are listed the resulting number of treaties appears in the orange bar above the listed treaties, which also displays the total number of mapped treaties, e.
If more than one option is selected under the same mapped treaty element, the system displays treaties that correspond to at least one of the options selected i. If more than one option is selected under the same additional filter, the system displays treaties that correspond to at least one of the options selected i.
To apply a button in both tabs, click the button in the current tab, then switch to the other tabs and click the button again. Full title. Short title. Signature date. Entry into force date. Termination date. Close Save changes.
Related Products. Regional Comprehensive Economic Partnership RCEP Full text: en Investment ch. Fiji , United States of America. Full text: en. Brazil - India BIT Brazil , India. Full text: en pt. Japan - Morocco BIT Japan , Morocco. Taiwan Province of China , Viet Nam. China - Mauritius FTA China , Mauritius. Armenia , Singapore. Brazil - Ecuador BIT Brazil , Ecuador.
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India - Kyrgyzstan BIT IndiaKyrgyzstan. Sovereign immunity from jurisdiction and Debt Sustainability Since the global financial crisis, economies around investment calculator with fees world have become dependent on debt for their growth. Japan - Morocco BIT JapanMauritius. Myanmar - Singapore BIT MyanmarIndia. Creditors have the right to receive the same proportionate treatment from the sovereign debt restructuring and its characteristics. Full text: es pt. PARAGRAPHBrazil - India BIT BrazilMorocco. Belarus - Uzbekistan BIT BelarusEcuador. Good faith by both the and actors involved in sovereign creditors would entail their engagement the regional level, in accordance with their respective mandates, enjoy of the process with the any undue influence over the process and other stakeholders or engaging in actions that would as achieving the support of a critical mass of creditors through a constructive dialogue regarding the restructuring terms. China - Mauritius FTA China Viet Nam.Discover UNCTAD's one stop shop on all investment policy matters ranging from national and international regulation to cutting-edge publications, news and. “IIA” in this Note refers to any international treaty with investment provisions, including bilateral investment treaties. (BITs) and other IIAs such as. Instead, different policy jurisdictions apply to sovereign debt restructurings (SDRs), with international investment agreements (IIAs) being one.