SOVEREIGN DEFAULT AND PORTFOLIO INVESTORS’REMEDIES: THE GREEK DEFAULT

University of Oslo

Faculty of Law

Candidate number: 8011
Submission deadline: 15.12.2012
Supervisor: Ivar Alvik
Word count: 17942

13.05.2012

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I would like to thank the University of Oslo and especially the Faculty of International Public
Law for their support and for assisting me to complete my thesis. A big thank you also goes tomy supervisor, Ivar Alvik, for his guidance and comments. His contribution has been
invaluable. In addition, I wish to thank my loving family for their constant support andassistance, my sister for constantly motivating me and last but certainly not least John making
it all worthwhile.

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LIST OF ABBREVIATIONSAJCLAmerican Journal of Comparative Law

AJIL

American Journal of International Law

BITBilateral Investment Treaty

BYBIL

British Yearbook of International Law

CACCollective Action Clauses

CDS

Credit Default Swap

ECHR, Ser. A

European Court of Human Rights, Series A (Judgments andDecisions)

ICJ

International Court of Justice

ICLQInternational and Comparative Law Quarterly

ILC

International Law Commission

IMF

International Monetary Fund

PCA

Permanent Court of Arbitration

UNCITRAL

United Nations Commissions on International Trade LawvviCONTENTS

CHAPTER 1 .................................................................................................................................1
Introduction ..................................................................................................................................1
1.1 Topic, issue and research questions ....................................................................................1
1.2 Legal Sources and Research method .................................................................................. 2
1.3 Delimitation and Structure .................................................................................................. 2
CHAPTER 2 ................................................................................................................................. 3
Foreign Investments and the current situation .............................................................................3
2. The way towards the haircut ................................................................................................. 3
2.1. The Financial Crisis in Europe ..........................................................................................3
2.2 The Greek Financial Crisis ................................................................................................. 5
2.2.1. Economic Situation in Greece.....................................................................................5
2.2.2. Greek Government Bonds ...........................................................................................8
2.2.1.1 The first haircut ........................................................................................................92.2.1.2. The second haircut.................................................................................................10
2.3. Summary .......................................................................................................................... 11
CHAPTER 3 ...............................................................................................................................13
Protection under Investment Treaties .........................................................................................13
3.1 Claiming protection under Investment Treaties ............................................................... 13
3.2 Procedural Issues .............................................................................................................. 14
3.2.1 Foreign bondholders as “Investors” and GGBs as “Investments” ............................. 14
3.2.2 Applicable Forum ...................................................................................................... 15
3.3 Was the Greek Haircut a breach of substantive treaty standards? .................................... 15
3.3.1 The Argentine Default ...............................................................................................16
3.3.2. Claim for indirect expropriation ...............................................................................18
3.3.3. Umbrella Clauses ...................................................................................................... 21
3.3.4 Claim for breach of fair and equitable treatment ....................................................... 22
3.3.5 Most Favoured-Nation (MFN) ................................................................................... 23vii

3.4 Greece’s Defence .............................................................................................................. 24
3.4.1 Necessity .................................................................................................................... 24
3.5 Summary ........................................................................................................................... 25
CHAPTER 4 ............................................................................................................................... 27
Protection under EU Law ........................................................................................................... 27
4.1. General Framework ......................................................................................................... 27
4.2. Proportionality ................................................................................................................. 28
4.3 Procedural Issues .............................................................................................................. 30
4.4. Summary .......................................................................................................................... 31
CHAPTER 5 ............................................................................................................................... 34
Claims for Credit Default Swaps (CDS) .................................................................................... 34
5.1 CDS in the context of the Greek Financial crisis ............................................................. 34
5.2 Conditions for Compensation ...........................................................................................34
5.3 Document Risk ................................................................................................................. 35
5.4 Conclusion ........................................................................................................................ 38
CHAPTER 6 ............................................................................................................................... 40
Special Enforcement Issues ........................................................................................................ 40
6.1. Immunity from Enforcement ........................................................................................... 40
CHAPTER 7 ............................................................................................................................... 44
Conclusion .................................................................................................................................. 44
Appendix 1 ................................................................................................................................. 46
Appendix 2 ................................................................................................................................. 48
Appendix 3 ................................................................................................................................. 50
Appendix 4 ................................................................................................................................. 52
BIBLIOGRAPHY ...................................................................................................................... 58

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CHAPTER 1
Introduction
1.1 Topic, issue and research questions
Over the last fifty years the international community has faced numerous events ofsovereign default. Russia, Ukraine, Ecuador, Uruguay and Argentina are just a few of themany available examples. As those examples have shown, in cases of sovereign default,
foreign investors are confronted with the regulatory vacuum that exists in such cases and areoften marginalised by the defaulting States.
Currently, the global financial crisis, the economic depression as is often called, has
yet again proven to the international plane that the global finance institutions may collapse at
any time taking the economies of many states along with them. This scenario was validated in
the case of Iceland that defaulted in 2008 and is going to be (has been?) re-validated in the caseof Greece. Indeed, the latter was harshly hit by the financial crisis and now the country is at
the verge of sovereign default, with a 50% haircut on its sovereign debt having beenannounced on October, 27th 2011 and having being materialised on March, 9th 2012.
My thesis will refer to the implications of such haircut on investors and shall explore if
there are any remedies available to them to reconcile or diminish such implications. Prior toaddressing these issues, I shall study the legal framework vis a vis foreign investments andmore particularly portfolio investments, as the term will be defined below. Indeed, portfolio
investments are most relevant in Greece’s case and this paper will limit itself to this type ofinvestments.
Portfolio investments are investment instruments, such as stocks and/or bonds that areusually less permanent and can be easily traded. The portfolio investor is, in most cases,
interested in investing where he can get the maximum return for a given level of risk. Portfolio
investments are faster to move in search of higher returns and/or lower risk, and have a shortertime horizon, making them, as such, more volatile 1. Such volatility allows investors toliquidate or withdraw their investments in a relevantly quick pace in the event of a crisis. On
account of the above volatility, portfolio investors are expected to take upon themselves the1

Kimberly Evans Foreign Portfolio And Direct Investment Complementarily, Differences and Integration; Global
Forum on International Investment Attracting Foreign Direct Investment For Development Shanghai, 5-6
December 2002, OECD p.4

risks of making such investments 2 and it is still not clear if portfolio investments are protectedby customary international investments law and/or investments treaties. These questions will
be analysed in detail in this paper.
In addition, I shall explore EU law and study whether the latter offers any remedies tobondholders in such situations
To sum up, my thesis will mainly focus with the recourse that bond-holders(investors) of Greek Government Bonds (GGBs) have in light of the aforementioned haircut.
1.2 Legal Sources and Research method
In order to carefully examine investors’ rights vis a vis Greece’s default, it is necessary
to examine a series of sources, i.e. both primary sources that include the Maastricht
Convention, the Bilateral Investment Treaties that Greece has concluded, the Greek Law
applicable for investments and bonds and secondary sources that refer to literature written on
the topic of sovereign default and international investment law. It must be stated that, as the
Greek financial crisis is an on-going phenomenon with daily radical developments, there is nota lot of bibliography on the matter and many of the recent bibliography is, in light of the above
developments already outdated. It is for this reason that a comparison with the Argentine
default is particularly useful, as it allows one to draw conclusions for the possible
developments in the case of Greece.
1.3 Delimitation and Structure
My thesis is divided into three units. Firstly I will examine the factual background of
the Greek financial crisis and the Investors’ exposure to the latter. Thereafter I will study thelegal framework for international investments and research whether portfolio investments, as
the term is defined below, are included in the definition of foreign investments as those aredefined in the Bilateral and Multilateral Investments Treaties. I shall thereafter examine theremedies available under the aforementioned treaties as well as under European Union’s Law
and Credit Default Swaps. In order to better understand bondholders’ remedies, I contrast the
Greek Default and its implications with the Argentine Default in 2001. Lastly, I refer to special
enforcement issues to have a complete view as to the actual recourse available to bondholders.

2

M. Sornarajah The International Law on Foreign Investment, Cambridge University Press, 3rd Edition, 2010, p.

8

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CHAPTER 2
Foreign Investments and the current situation
2. The way towards the haircut
2.1. The Financial Crisis in Europe
The financial crisis “hit” the global community in the summer of 2007 and it was
undoubtedly an unprecedented phenomenon both in terms of proportion as well as
implications. Most analysts failed to realise the seriousness of the situation and categorised thecrisis as a mere liquidity shortage that would limit itself in the US and would not greatly affectthe “strong” and “healthy” European economies that were based on strong fundamentals, suchas rapid export growth and sound financial positions of households and businesses 3.
These perceptions dramatically changed in September 2008, linked with the rescue ofFannie Mae and Freddy Mac, the “shocking” Lehman Brothers bankruptcy and worries for the
insurance company AIG taking down major US and EU financial institutions in its way4.
As a result, the Member States began to realise that they could not handle the crisis
individually and that a common response was required. Firstly, the European G8 members 5, attheir summit in Paris on 4 October 2008, undertook to act jointly and take all necessary
measures in order to secure their banking and financial systems. Not too long after that, at the
Economic and Financial Affairs Council’s (ECOFIN 6) meeting of October 7, 2008 all Member
States came together to plan common principles to guide their respective reactions to thecrisis 7. These principles were turned into a concerted action plan on October 10, 2008 by theEurogroup 8, which was then endorsed by the European Council on October 15, 2008. In
particular, at the Eurogroup summit, the eurozone countries, along with the United Kingdom,
urged all European governments to adopt a common set of principles to combat the crisis 9. The

3

Economic Crisis in Europe: Causes, Consequences and Responses, Economy in Europe 7/2009, DirectorateGeneral for Economic and Financial Affairs of the European Commission, BU24, B-1049 Brussels, p.4
4
Economic Crisis in Europe, ibid p.8
5France, Germany, Italy and the United Kingdom
6
EU organ composed of the Economics and Finance Ministers of the 27 EU Member States monitoring, inter alia,
the budgetary policy and public finances of the Member States.
7
Conclusions of the ECOFIN Council held in Luxembourg on October 7, 2008 (Doc. 13784/08)
8
Meeting of those EU countries that share the Euro as currency
9“Declaration on a concerted European action plan of the eurozone countries”, October 10, 2008,
available at www.ue2008.fr; European Council of October 15 and 16, 2008, Presidency Conclusions(doc.14368/08).

3

measures suggested included, inter alia, the following practices, mostly in relation tostrengthening the banks 10:a) Recapitalization: Governments undertook to provide funds to banking institutions
that faced liquidity problems and further to re-structure the management andmonitoring mechanisms;b) State Ownership: Governments indicated that they would acquire part of the sharecapital of those financing institutions seeking recapitalization;c) Government Debt Guarantees andd) Improved Regulatory System
In November, 2008 the European Commission formulated a recovery plan (the “Plan”)
that was based in two interdependent main elements. The first element entailed short-term
measures to boost demand, save jobs and help restore confidence. The second element referredto "smart investments" to yield higher growth and sustainable prosperity in the longer-term.
The Plan called for a timely, targeted and temporary fiscal stimulus of around €200 billion or
1,5% of the 2008 EU Growth Domestic Product (GDP), stemming from both national budgets(around €170 billion, 1,2% of GDP) and EU and European Investment Bank budgets (around€30 billion, 0,3% of GDP) 11 in order to enhance the purchasing power into the economy, toprotect jobs and address the long-term job prospects of those losing their jobs. The Plan was
finally adopted on December 11-12th, 2008 and in conjunction with some unused EU resources
and an additional 15 billion investments a year for two years by the European Investment
Bank, a sum equivalent to 1,8% of the 2008 EU GDP was raised. This sum would act as a
fiscal stimulus over a period of 2 years (2009-2010) with 1,1% of the EU GDP occurring in2009 and remaining 0,7% in 2010.
Having, as mentioned, underestimated the financial crisis, EU’s response to same wasdelayed. Furthermore, when EU finally responded, the Plan taken was rather “small-scale” incomparison to the extent of the crisis 12. That, in conjunction with the very high direct fiscal
costs that the measures of the Plan entailed, along with the fact that the economic activity wason unprecedented low levels led to a rapid rise in government deficits and debt in all the Euro
Zone Countries. In fact, given that fiscal policies remained unchanged, the rise in government
debt-to-GDP ratios continued, even as the recovery proceeds and the short-term fiscal stimulus
measures were phased out.
This led many EU states in the verge of bankruptcy with their deficits reaching up to
160% of their GDP. In 2009, the government deficit and government debt of both the eurozone(EU16) and the EU increased compared with 2008, while their GDP fell. In the eurozone thegovernment deficit to GDP ratio increased from 2,0% in 2008 to 6,3% in 2009, and in the
EU27 from 2,3% to 6,8%. In the eurozone the government debt to GDP ratio increased from
69,4% at the end of 2008 to 78,7% at the end of 2009, and in the EU27 from 61,6% to10James K. Jackson, The European Crisis: Impact on and Responses by the European Union, CRS Report forCongress, June 24,200911
IP/08/1771, Brussels, 26 November 2008
12
Edward Luce and Chrystia Freeland, Financial Times published: March 8 2009 22:03
http://www.ft.com/cms/s/0/5d8b5e18-0c14-11de-b87d-0000779fd2ac.html#ixzz1YsnQRuoH

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73,6% 13. Currently, Greece, Ireland and Portugal have requested the assistance of the EU/
International Monetary Fund (“IMF”) “bailout” mechanism.
2.2 The Greek Financial Crisis
2.2.1. Economic Situation in Greece
The Greek government has a long history of problems with its public debt. Indeed,
Greece has for many years been living of foreign loans, borrowing on a continuous basis tocover the country's needs. In addition, for many years, its Governments have been badly
managing the country’s resources and have been borrowing money with very high interests.
Since its accession in the European Monetary Union (EMU/Eurozone) in 2001 the country had
consistently experienced higher inflation than the EMU average, resulting in substantial
deviation from the Maastricht Criteria, in pronounced competitiveness losses and in record
current account deficits 14. Nevertheless, Greece had successfully managed to “hide” its debt
from the EU authorities. In fact, as it was later discovered, Goldman Sachs had assisted thethen Greek Government led by Mr. Konstantinos Simitis, to “tackle” its debt in order to enter
into the EMU. Indeed, up until 2008, the increase of the Greek debt by approximately EUR 22
billion was comparable in size to the increases in debt levels in other countries that took part in
the Plan. Nevertheless, the Greek debt continued to increase as Greece was sagging into
recession, leading to a rise of an additional EUR 34 billion in 2009. This was the “final blow”
to the Greek economy.
By the end of 2009, Greek economy faced the second highest deficit in percentage of
GDP in the EU with an astonishing -13,6% closely following Ireland whose relevant
percentage was at -14,3% 15. These existing and rising debt levels led to rising borrowing costs,
resulting in a severe economic crisis. Undoubtedly, the situation was made worse by certain
institutions and other speculators that attempted to and did make profits out of the then current
situation. The case of the Greek government bonds is indicative. In particular, in late 2009
GGBs faced continuous rating downgrades by the three major credit rating agencies, namely
Standard and Poor, Moodys and Fitch. The status of the Greece’s rating faced an
unprecedented downgrade to “junk status”, being the lowest in the world:

13

Provision of deficit and debt data for 2009 - first notification Eurostat News release, 55/2010 - 22 April 2010,
http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-22042010-BP/EN/2-22042010-BP-EN.PDF
14
Michael G. Arghyrou, The accession of Greece to the emu: initial Estimates and lessons for the new EU
Countries, Economics Section, Cardiff Business School
15
Provision of deficit and debt data for 2009 - first notification Eurostat News release, 55/2010 - 22 April 2010,
http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-22042010-BP/EN/2-22042010-BP-EN.PDF

5

Source Greek Public Debt Management Agency
It is worth mentioning that before the crisis, 10-year GGB's yields were 10 to 40 basis points
above German 10-year bonds while within the crisis, the spread increased to 400 basis points
in January 2010 16. The graph below further demonstrates the variation of GGB’s spread vis a
vis the German bonds Spreads.
GGB’s Spreads, 1993-2011
Spreads on 10-year GGB’s relative to 10-year German bonds (%)

Source: Global Financial Data, http://www.globalfinancialdata.com/index.html
Greece’s total debt as of end-April 2010 was approximately €319 billion and as a result
Greece, on 23 April 2010, turned to both the EU and the IMF for financial help. EU delayed to
16“Fiscal Woes to Dog Greek Bonds Even if Aid Offered,” Reuters, March 22, 2010. 10 basis points = 0.1
percentage point.

6

commit as not only there was unwillingness by certain Member States to help but also theMaastricht Treaty did not provide for any crisis management mechanism and thereafter it did
not provide for the possibility of “bailing out” a Member State with a high external debt. Someargue, of course that Article 122 of the Treaty could have been invoked by the European
Council to assist a member state that is “seriously threatened with severe difficulties caused bynatural disasters or exceptional occurrences beyond its control”, but at this point no Member
State was willing to pretend that Greece’s high deficit was an anything but mismanagement.
Finally, the EU and IMF put together a bailout package. Indeed, on 2 May 2010, theEurogroup agreed to provide to Greece bilateral loans pooled by the European Commission fora total amount of EUR 80 billion to be disbursed over the period May 2010-June 2013. The
financial assistance provided by EMU Member States was part of a joint package, with the
IMF financing additional EUR 30 billion under a stand-by arrangement 17. In addition to thatand in an attempt to prevent the spread of the financial crisis in other Member States, EU
leaders created, in May 2010, a new European mechanism/fund, the European Financial
Stability Fund (“EFSF”), for providing financial assistance to EMU member states with severe
financial problems. ESFS consisted of two temporary, three-year lending facilities that could
make loans totalling €500 billion 18. EU leaders also suggested that the IMF could provide
additional support.
Since then the Greek economy has been -almost exclusively- supported by the bail-out
mechanism that continues to this date, mostly on account of the fear that a possible Greek
default could contaminate the banking and financial system of other Member States. As time
passed by, however, the situation in Greece remained unaltered and despite the measures takenby the Greek government, the Greek deficit remained sky high. This has led to the recent
decisions vis a vis the haircut of the Greek debt.
In particular, in mid 2011, Greece’s debt reached a level (150% of GNP) that was
unsustainable. Indeed, at that stage even if Greece succeeded fully in cutting its public sector
deficit and instead started having public sector surpluses, its then current debt level could not
be fully financed from the surplus, even at a relatively low interest rate of 5%. This impliedthat the yearly interest could not be fully paid from the surplus and would result in increases of
the accumulated debt. As such, the then current policy, whereby Greece would keep taking
austerity measures in consideration for being granted loans to satisfy its current needs and pay
off its debts, could no longer continue. Therefore, the “banned” up to that point word “haircut”
begun to be heard more loudly, as it became more profound that the solution was for Greece torestructure its debt, preferably through a voluntary exchange of old debt with new.
A “haircut” is a partial default on a Country’s debt, a renegotiation between a debtorsovereign state and its creditors, whereby the creditors agree to accept less than what they areentitled on the fear that they may not collect any of their outstanding debts. A “haircut” mayoften involve a reduction of interest rates and/or principal and an extension of the repayment
period. In particular, in relation to the reduction of principal and interest rates, history of latest

17

The Economic Adjustment Programme for Greece Third Review -European Commission Directorate-Generalfor Economic and Financial Affairs, Winter 201118
Rebecca M. Nelson, Paul Belkin, Derek E. Mix Greece’s Debt Crisis: Overview, Policy Responses, andImplications Congressional Research Service7-5700, p.11

7

haircuts indicates on balance a post-default recovery rate of between 50% and 70% 19. Greece
was no exception to the rule. Indeed, although it was initially announced that there would be
one 21% haircut, soon thereafter a 50% haircut followed.
Prior, however, to analysing the meaning and implications of a haircut we must firstexamine the nature of GGBs, their terms of issuance and their legal treatment.
2.2.2. Greek Government Bonds
Sovereign Bonds are debt investments whereby an investor loans a certain amount ofmoney, for a certain amount of time, with a certain interest rate, to a state. As such, bonds
constitute commercial transactions between states and investors. The governing law of GGBs
was until recently, almost exclusively Greek law and, in particular, Decision
2/4627/0023/25.01.2001 of the Ministry of Finance, with only 10% of GGBs being governedby other national laws, mostly English Law. On 23.02.2012 Greece enacted the Greek
bondholders’ law (Law No. 4050/2012) that regulated the bond exchange of GGBs issued prior
to 31st December 2011 with news bonds.
The implications of GGBs being governed by Greek Law are the following:
1) Greek Law did not formerly provide for Collective Action Clauses (CAC), thus the
majority of bond holders could not bind the minority of bond holders in the case of a
default incident. Indeed, such clauses allow the majority of bondholders (a certain
percentage needs to be reached) to bind other bondholders with their decisions and not
to allow individual investor(s) to act solely by accelerating the bond or initiating
litigation in the event of default etc. Their worth lies in reducing the “rogue creditors”
ability to hold out by making it more difficult to enforce the contract against theinterests of the majority20. The previous non-existence of CAC in Greek Law governed
GGBs was modified by Art. 1(4) of the Law 4050/2012 that retrospectively applied on
all Greek Law governed GGBs that were issued prior to 31.12.2011 and provided that
if the decision for the bond exchange was supported by more than 2/3 of the total
number of Greek Law governed GGBs’ holders, such decision would be binding on all.
Same is the case for bonds governed under English Law. Indeed, GGBs issued underEnglish law, prior to 2004, contained CAC that appear to permit holders of 66 percent
of an issue to modify payment terms in a manner that would bind all other holders, but
after 2004, Greece altered this clause in its English law bonds, requiring a majority ofat least 75% 21.
2) GGBs did not provide for any lien or other guarantee for the satisfaction of thecreditors in case of default. In addition, they did not entail negative pledge clauses
protecting the bondholders who have taken out an unsecured loan. Negative pledge
clauses provide that a State that has awarded unsecured loans cannot subsequently take
19

Russian restructuring haircuts were in the range of 45%-63%; Ukraine non-resident 30%-56%; Pakistan 31%;
Ecuador 27%; Argentina 42%-73%; Uruguay external debt 13% and domestic 23%.
20
Sönke Häseler Collective Action Clauses in International Sovereign Bond Contracts –Whence the Opposition?
European Association of Law And Economics Working Paper No. 007-2009, p.5
21
Lee C. Buchheit & Mitu Gulati, How to restructure Greek debt, http://ssrn.com/abstract=1603304

8

out another loan(s) with a different lender, securing the subsequent loan(s) on thespecified assets as same would mean that the original lender would be disadvantaged,
because the subsequent lender would be call firstly to satisfy his claim by the assets inan event of default. Same is not true for English Law governed GGBs that entailed
negative pledge clauses.
3) In as far as the definition of an event of default is concerned, most GGBs entail thefollowing circumstances as being tantamount to an event of default:• Failure to pay interest (usually a grace period is granted).
• Failure to pay principal or other covenant obligation (usually a grace period
is granted and notification of default is required)• A government order or presidential decree is issued preventing Greece fromperforming its obligations under bonds• General Moratorium is declared on non-payment of principal.
In relation to acceleration clauses, same are not included in Greek Law governed bonds
while they may be found in English Law governed bonds.
4) Lastly and perhaps most importantly, as most GGBs were governed by Greek Law,bond holders were subject to the Greek Government that could modify them at will.
Such fear was to a certain extend materialised with the introduction of Law 4050/2012
that, as mentioned, retrospectively imposed some terms to Greek Law governed GGBs.
In this respect, it is worth noticing that Law 4050/2012 provided, inter alia, that GGBs
that will participate in the bond exchange will no longer be governed by Greek Law but
by English law.
On the basis of the facts above, Greece firstly negotiated a 21% haircut on its issued
GGBs and subsequently a second 53% haircut on same.

2.2.1.1 The first haircut
Despite the initial bailout package and the many revenue raising measures adopted in
Greece, the Greek debt was simply too big too big to be satisfied. By the end of June 2011
Greece’s total debt was approximately EUR 353,693 billion out of which approximately EUR
283,00 billion was in the form of bonds while the remaining EUR 70,693 billion corresponded
to debt on account of loans 22. In this respect it is important to note that up to the point that
Greece entered to the bailout mechanism, the largest share of Greek public debt, about 75% of
the total stock, had been held by foreign banks, mostly German and French, but mutual funds,
pension funds, hedge funds and other categories of investors also owned GGBs. Due to the
EU/IMF bailout package of EUR 110 billion and the direct bond purchase program by theEuropean Central Bank, however, the allocation of Greek debt has changed significantly, as
now EU/IMF and ECB currently hold a significant proportion of Greek Government bonds(Appendix No.1), but European Banks continued to be major holders of European bonds while
22

Data derived from the Greek Ministry of Finance’s Debt report published in June 2011, available at
http://www.minfin.gr/portal/el/resource/contentObject/contentTypes/genericContentResourceObject,fileResource
Object,arrayOfFileResourceTypeObject/topicNames/publicDebtBulletin/resourceRepresentationTemplate/content
ObjectListAlternativeTemplate#fragment-0

9few GGBs have fallen into the hands of individuals (non-institutional) investors, but thisnumber is relatively low. The top holders of GGBs up to December 2011 are presented inAppendix 2.
As such, the risk of contagion to other EU countries and the implications of a possible
unregulated Greek insolvency, led to the Agreement of July, 21st 2011, when the second Greek
bailout package of up to 109 billion was concluded between the heads of State or Governmentsof the Eurozone and the EU Institutions. The agreement was presented as the final solution to
overcome the Greek financial crisis and consequently Europe’s financial crisis and it provided
for the lengthening of the maturity of future EFSF’s loans to Greece to the maximum extent
possible (from the current 7,5 years to a minimum of 15 years and up to 30 years with a grace
period of 10 years) and at the same time for the substantial extension of the maturities of theexisting Greek facility23.
In addition to that however, GGBs bondholders were also called upon to accept partial
repayment of their owed sums and to calculate a 21% Net Present Value (NPV) loss on all
products based on an assumed discount rate of 9% 24. The net contribution of the private sector
was estimated at 37 billion euro. The Banks agreed to the haircut voluntarily, stating howeverthat they would not be willing to accept further reduction.
This haircut was however too small to assist in accommodating Greece’s debt and/or
solving Greece’s credit problem. As such, not a lot time passed before the Agreement of
21.07.2011 begun to be questioned and revised 25.
2.2.1.2. The second haircut
Currently, Greece is at a turning point. As all previous measures failed Eurozone
leaders have finally agreed on a structured Greek default whereby bonds would lose 50% of
their value and the short and medium-term debt would be converted into a long-term version.
The decision was taken on October 27th, 2011 and it entailed the following:
The Agreement called for a wider Private Sector Involvement (PSI) participation inestablishing the sustainability of the Greek debt. In this regard it invited Greece, private
investors and all other parties concerned to develop a voluntary bond exchange with a minimal
discount of 50% (plus 29% to the already agreed 21% haircut) on notional Greek debt held byprivate investors 26. As an incentive to “allure” private investors and especially banks,Eurozone Member States would contribute to PSI a package of up to EUR 30 billion, while
additional EUR 100 billion would be granted by the official sector until 2014 for therecapitalization of the Banks.
The exchange required wide PSI (approx. 85-90%) or a write off in the order of EUR
100 billion. This PSI, together with an ambitious reform programme, is expected to assist
Greece reach a debt level of 120% by 2020. The terms of the PSI had been negotiated by the
Greek coalition government that finally released its official proposal on February 25th, 201223

http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/123978.pdf
Institute of international Finance (IFF), Thursday, July 21, 2011,25
Statement by Antonio Borges, Head of the IMF European Departments made on October 5, 201126
Euro Summit Statement of Ministers, 27th October 20112410

asking investors to accept a haircut of approximately 53,5% 27. In order to achieve such goal,
the Greek Government resorted to the use of CAC that, as mentioned, require that all
bondholders follow the decisions taken by the majority (more than 66,7% of the bond holders).
In particular, on March, 9th 2012, the participation of bondholders in the bond exchange
reached 152 billion worth of Greek Law governed GGBs out of the approximately 177
billion 28, a percentage (≈85.9%) that allowed Greece to trigger the aforementioned CAC andoblige all Greek Law GGBs holders to consent to the terms of the bond exchange. In addition,
foreign law governed GGBs holders also participated to the bond exchange in a percentage of
69%. As such, more than 95% of the issued GGBs participated in the bond exchange (€196.7
worth of GGBs out of €205.5 billion). The remaining 4.3% of GGBs (approximately €6.4
billion) was given until the 20th of April to accept the Greek Government offer to exchange
their GGBs and finally another €522,33 worth of GGBs were exchanged, making theparticipation percentage 96,9%.

2.3. Summary
After two years of pessimistic and ominous predictions vis a vis Greece’s unregulated
insolvency and exit from the Eurozone, Greece, with the assistance of the EU, proceeded with
re-negotiating its debt and “haircutting” same twice. The second haircut was the biggest bondexchange in global history and its immediate aftermath was that bondholders took a cut ofapproximately 75% on the real value of their investment 29.
In the following chapters, we shall investigate the available remedies offered tobondholders to reconcile their losses on account of such haircut. We shall first examine theprotection offered by Investment Treaties and thereafter examine the EU framework and CDS.

27

Abigail Moses, Greece Collective Action Clauses risk triggering default swaps, Bloomberg Business,
February, 25th 2012, available at: http://www.businessweek.com/news/2012-02-25/greece-collective-actionclauses-risk-triggering-default-swaps.html
28Hellenic Republic, Ministry of Finance Press Release, 09 March 2012, available at
http://av.r.ftdata.co.uk/files/2012/03/9-MARCH-2012.pdf
29
Greece ends bond swap, participation at 96.9 pct, Associated Press Wed, Apr 25, 2012 9:48 AM EDT, available
at: http://finance.yahoo.com/news/greece-ends-bond-swap-participation-134832139.html

11

12

CHAPTER 3
Protection under Investment Treaties
3.1 Claiming protection under Investment Treaties
A lot of the issues in relation to the promotion and the protection of foreign investments
were left to multilateral or, usually, bilateral investments treaties (“BITs”). BITs are legallybinding, international agreements between the state of the investor and the host state, whereby
the latter guarantees a certain level of protection and a general standard of favourable treatment
to investments/investors from the state of the investor in order to attract foreign investments.
As such, most BITs entail guarantees and other provisions that regulate the terms andextent of the aforementioned standard of treatment that will be awarded to foreign Investors.
Those guarantees are both general, referring to the general standard of treatment that theinvestor will receive within the host state, and specific, particularly awarding protection
against a specific type of danger that is/might be applicable in the host state. From a legal
perspective the treatment of the host state towards the investor and/or his investment isevaluated on the basis of a legal principle according to which the host state guarantees a
specific standard of treatment 30. The three most common standards of treatment awarded underinternational investment treaties and investment codes are i) the most favoured nation
treatment ii) fair and equitable treatment and iii) treatment according to International Law
Rules 31. These standards that will be examined later on, on the basis of their application to thespecific circumstances are the points of reference in order to examine a Host State's treatment
towards an Investor.
From the above it becomes obvious that in order for an Investor to claim protection
under a BIT the following criteria need to be fulfilled:
1) He must qualify as a foreign investor under the BIT
2) His investment must qualify as an investment under the BIT
3) A breach of the standard of protection awarded by the BIT must have occurred
The first two criteria are mainly procedural issues while the third one is a substantive issue.
In the following sections, we shall examine if the above criteria are satisfied in thecontext of the Greek haircut and if so what are the remedies that may be available to GGBs
bondholders under a BIT. In this point, it important to note that, although the various BITs
differ from one another, the trend towards harmonisation of BITs is very strong. Especially, if
one takes into consideration that developed states, that usually act as the investors’ states, havethe power and do impose their terms on host states, one can understand that there are clear
30

Beveridge Fiona, The treatment and taxation of foreign investment under international law, Juris Publishing,
2000
31
Panagiotis Gklavinis, International Economic Law, Sakkoulas Publications, 2009, p. 611

13patterns that are evident in almost all BITs. Greece currently has signed and ratified 45 BITs
with the countries mentioned in Appendix 3, whose provisions can be enforced via binding
arbitrational procedures between the investor and Greece in a forum located outside its
jurisdiction. On the basis of the above trend for harmonisation, there is no need for this paper
to examine all 45 BITs signed by Greece but it will limit itself to the general principles foundon all BITs.

3.2 Procedural Issues
In this section, specific legal issues relating to the jurisdiction and procedures of investor-Statedispute settlement and their implications for the system are considered.
3.2.1 Foreign bondholders as “Investors” and GGBs as “Investments”
Firstly, it needs to be examined who is qualified to bring a claim under a BIT, i.e. who
qualifies as a foreign investor. In as far as this criterion is concerned quite a lot of ink has been
shed in order to determine who qualifies as a “foreign” Investor. This thesis will not elaborate
this analysis, and will limit itself to state that for natural persons their nationality is the decisive
factor in terms of determining the “foreign” element, while for legal persons both their place ofincorporation and their place of effective management and control are decisive.
Secondly, the definition and scope of the term “investment” needs to be defined. In
relation to this second criterion, most BITs have a broad definition of protected investments,and often include language such as “every kind of asset,” or “every kind of investment in the
territory 32.” Such broad definition of protected investments usually includes investments inreal estate, stocks and bonds, claims to money or any performance having economic value, or
intellectual property. It is questionable, however, if portfolio investments are included in suchdefinition. Indeed, as mentioned above portfolio investors assume commercial risks and are not
to be specifically protected by the host state.
To include portfolio investors in the definition of investors under BITs would allow
investors with a small percentage (not management and control) in a company, whose onlyinterest in a company’s shares is as an investment rather than holding a stake for management
purposes, to claim on the basis of a BIT if the host state failed to protect them. Tribunals had
until recently not efficiently answered to whether portfolio investments could be included in
the definition of investments under BITs 33. That, however, changed with the Tribunal’s award
32

Indicatively, the Greek-German BIT covers all capital investments that include “any kind of asset” and are by
way of indication and not of limitation defined as:1) Interests on movable and immovable property and all other liens such as mortgages and hypothecations
and other similar rights
2) Shares and various interests in companies
3) Fiscal Claims or offers of an economic value
4) Intellectual or Industrial Property Rights, Technical Methods, Trademarks and goodwill.
5) Right stemming from allotment/concession
33
Mahnaz Malik, Recent Developments in the Definition of Investment in International Investment Agreements
Second Annual Forum of Developing Country Investment Negotiators 3-4 November 2008 Marrakech, Morocco.

14

in CMS v. Argentina whereby the old criterion of the exercise of effective management andcontrol was set aside and the language of the US-Argentina BIT was placed in forefront. As thelatter did not entail an exhaustive definition of what constituted an investment, both portfolio
and FDI were deemed to be included in the definition of investment. This decision is indicativeof the trend to widely interpret the definition of investments under BITs so that they include
portfolio investments and not to connect the essence of investment with the exercise ofeffective management and control 34. Indeed, “many ICSID and other arbitral decisions… haveprogressively given a broader meaning to the concept of investment 35” while in the Abaclat etal. v. the Argentine Republic 36 the Tribunal specifically found that portfolio investments were
included within the scope of protection of the BIT.
Based on the above, GGBs may be entailed in the definition of investments under the
BITs signed by the Greek Government and non-Greek bondholders qualify as foreign investors
that may bring a claim under a BIT in case a breach of their standard of protection is breached.
3.2.2 Applicable ForumContrary to the global BIT practice, most BITs signed by Greece do not contain a reference
to ICSID but provide for investor-State provisions that are purely ad hoc clauses 37.
Indicatively, the Germany-Greece BIT specifically provides for the creation of an ad hocarbitrary body with 3 arbitrators, 2 of which will be designated by each contracting party,
while the third will be chosen by the 2 pre-chosen arbitrators. The aforementioned BIT further
provides that if it does not become possible for the Parties to choose the Arbitrators, same will
be decided by the President of the International Court of Justice (ICJ) or the vice President if
the former is unavailable. In such cases, the rules of procedure and the steps to be followed areprescribed in the BIT text and the investors must act accordingly. The substantive law on thebasis of which the Arbitrators will rule is the BIT text, other Agreements that might exist
between Greece and the investor’s state and the general principles of international law.

3.3 Was the Greek Haircut a breach of substantive treaty standards?
To answer the above question, it would be worth examining how this issue wasresolved in the case of Argentina. Indeed, since the Greek crisis started to unfold many were
the analysts that pointed out that the Argentine default has many parallels with the Greek
financial crisis. The facts of the Argentine default are briefly described below.

34

Noah Rubins, The Notion of Investment in International Investment Arbitration, Arbitrating Foreign Investment
Disputes, Procedural and Substantive Legal Issues, edited by Nobert Horn, Kluwer Law International, Volume 19,
2004, p. 318
35
Joy Mining Machinery Limited v Arab Republic of Egypt, ICSID Case No ARB/03/11 (2004)
36
Abaclat et al. v. the Argentine Republic, ICSID Case No.ARB/07/5 available at
http://italaw.com/documents/AbaclatDecisiononJurisdiction.pdf
37
Rudolf Dolzer, Margrete Stevens, Bilateral Investments Treaties, International Center for Settlement of
Investment Disputes, Kluwer Academic Publishers Group, p. 129

15

3.3.1 The Argentine Default
Argentina is an example of a country that although in the early 90s was in robust
development; such development slowed down abruptly and it was followed by recession, an
increase of the Debt/GDP ratio and finally led to the events of 2001. In particular, inNovember 2001, the Argentine Government was forced to proceed with a debt restructuring
via a “voluntary” debt exchange. The aforementioned exchange entailed two stages, one(“Phase 1”) that would target domestic residents and one (“Phase 2”) that aimed at nonresidents. The strategy of “Phase 1” was to offer local bond holders tax loans “guaranteed” byrevenues collected through the financial transaction, in exchange for their bonds. In exchange
for the granting of the guarantee, interest payments would be reduced and maturities extended.
Creditors were given 1-3 options, depending on the instrument tendered 38.
Phase “I” resulted in the exchange of US$42 billion of debt instruments, or about 65%of the total eligible amount. Phase “II" never really materialized. Shortly thereafter, however,the Argentine Government, faced with a severe banking crisis, proceeded with additional
measures closing the banks and announcing various banking and foreign exchange restrictions
upon their re-opening. Finally, President Duhalde took office and proceeded with the following
course of action 39:
1) Firstly, on January 3, 2002, he confirmed the almost US$100 billion sovereign default
announced by President Saá – the second largest, following the Greek haircut,
sovereign debt default in recent history - suspending debt service payments to external
creditors,
2) Secondly, he declared an official end to the convertibility regime, which was replaced
by a dual exchange rate system.
Dehalde further proceed to devalue the peso and turn all USD guaranteed loans to Peso
Guaranteed Loans. This was however just the “tip of the iceberg” for Investors. Indeed, theyears that followed were unprecedented in terms of the loss that Investors sustained. In
particular, between the years of 2002-2005, the Argentine government refused to negotiate any
terms for restructuring of its debt with its bondholders. The main position of the Argentine
Government was presented in 2003 in the September's summit in Dubai, where theArgentinean President, Mr. Kirchner asked creditors to write off 75% of Argentina's debt so as
to ensure the remaining sum. This proposition was of course not met with enthusiasm by
Investors.
In fact, to recover their losses, the European Creditors Alliance, an alliance ofEuropean institutional and retail investors, who together held almost half the $50 billion ofdefaulted private bonds in foreign hands, was created to overcome some of the potential
difficulties arising from having such a diverse creditor base 40. This creditor’s alliance aimed topressure the Argentine government in order to speed up the restructuring process. Despite the38

Federico Sturzenegger and Jeromin Zettelmeyer, Haircuts: Estimating Investor Losses in Sovereign Debt
Restructurings,1998–2005 IMF Working Paper, WP/05/137, p.40
39
Jwala Rambarran, Argentina’s Sovereign debt Deafult and the IMF, Global Financial Governance in a Tailspin,
p.7
40
Albert Ko Argentina: The Default Option, An Alternative Solution to Restructuring Sovereign Debt
International Finance Seminar16

good intentions and the counter offers that the European Creditors Alliance made, very little
progress was made in this regard. Indeed, President Kirchner and economy minister Lavagna
had repeatedly said that they won’t “yield to the Investor’s pressure” and characterised their
proposal unmovable. “They can pressure me all they want, but I will not change my position,”
Kirchner said after his meeting with U.S. President George W. Bush on January 12, 2004,
during the two-day Summit of the Americas in Monterrey, Mexico. Despite appeals by the
IMF for Argentine authorities to become more flexible and be open to alternatives and counterproposals made by the creditor groups, Kirchner failed to take those appeals into considerationand continued with his unwilling position, condemning any negotiation to failure.
In 2005, the government issued a take-it or- leave-it unilateral offer on terms highly
unfavourable to the creditors. In particular, on January 14th, 2005, the Argentine Government
opened the bond exchange, offering to "swap" old bonds with new bonds. The new bonds were
presented in Dubai and were the following three:1) a par bond with no face value reduction but
with a maturity of 35 years, 2) a discount bond with a high reduction and 3) a “quasi par” bondin between, to be issued in a range of currencies 41. The offer opened on January 12, 2005, andclosed on February 25. Bondholders and the IMF criticised Argentina for its proposal as thelater was clearly a process that stretched the accepted guidelines of sovereign debt
negotiations. Nonetheless, participation was 76,15% of all holdings and out of the $81,8 billion
face value of debt, $62,2 was exchanged for $35,2 billion of new bonds. As such Argentina
successfully imposed its way out of debt, managing to reduce same by 19,6 billions,compelling investors to bear this reduction. Not all of the bond holders accepted the offer
however. Indeed, nearly one-quarter of its creditors holding $19,4 billion in Argentine bonds
declined the offer and turned to the Courts to satisfy their claims. Those creditors included
U.S. lenders holding $2,1 billion in Argentine debt, the Paris Club holding $6,2 billion and the
IMF holding $9,8 billion 42.
In November 2009, the Argentine Congress authorised a reopening of the bondexchange so that investors that had declined the offer in 2005 could participate.
Based on the above facts many were the bond holders that turned against the Argentine
Government based on breach of their respective BITs. Only under the Italy-Argentina BIT and
only in 2006 there were more than 180,000 bondholders that filed a claim for approximately$4.3 billion 43. The bondholders supported that the Argentine restructuring amounted to
expropriation and violated fair and equitable treatment standards under the BIT 44. These twoarguments will be examined in light of the Greek haircut by reference to the rulings of the
Arbitrations in the Argentine case.

41

Jwala Rambarran, op. cit, p.9
J. F. Hornbeck, Argentina’s Defaulted Sovereign Debt: Dealing with the “Holdouts” Congressional ResearchService, 7-5700 January 21, 2010, p.4
43
Kevin P. Gallagher, Mission Creep: International Investment Agreements and Sovereign Debt Restructuring,
January 12th 2012, available at: http://www.iisd.org/itn/2012/01/12/mission-creep-international-investmentagreements-and-sovereign-debt-restructuring-3/
44Michael Waibel, Two Worlds of Necessity in ICSID Arbitration: CMS and LG&amp; E. Leiden Journal ofInternational Law, 20, 2007 pp 640
42

17

3.3.2. Claim for indirect expropriation
BITs always provide special protection against expropriation, codifying a “lexspecialis” against expropriation. 45 Indirect expropriation has also been interpreted to beentailed in the protection provided by BITs on the basis of the “tantamount clause 46” as same
will be explained below.
In so far as to what constitutes an indirect expropriation, it is worth mentioning that
there is no specific definition. Nevertheless, international jurisprudence has set certain criteriathat are conclusive to the existence of indirect expropriation. In particular, G. C. Christie inanalysing two decisions of the Permanent Court of International Justice, namely Certain
German Interests in Polish Upper Silesia, and the arbitral award in the Norwegian Shipowners
Claims case concluded 47 (i) ‘that a State may expropriate property, where it interferes with it,even though the State expressly disclaims any such intention, and (ii) ‘that even though aState may not purport to interfere with rights to property, it may, by its actions, render thoserights so useless that it will be deemed to have expropriated them.
Thus, based on the above analysis the following elements may be deemed decisive interms of determining if a direct expropriation exists:(a) the form of the government measure and the intent of the government are notdeterminative vis a vis the existence of indirect expropriation and(b) the consequences of the measures and the loss suffered by investors on account of suchmeasures are very decisive.
Further criteria have also been adopted by OECD case law; in particular those criteria are as
follows 48:
i. The degree of interference with the property right,
ii. The character of governmental measures, i.e. the purpose and the context of thegovernmental measure, andiii. The interference of the measure with reasonable and investment-backed expectations.
In order therefore to conclude if the Greek haircut may constitute an indirect expropriationin the concept explained above, one must examine if the aforementioned criteria are met in its
case; it must however be stated that a case of indirect expropriation will not be easy to prove.
Indeed, state measures, are prima facie a lawful exercise of powers of governments andalthough they may affect foreign interests considerably they may not amount to expropriation.
Thus, foreign assets and their use may be subjected to taxation, trade restrictions involving
licenses and quotas, or measures of devaluation 49.
More particularly, the Third American Law Institute’s Restatement of Foreign
Relations Law of the United States, which constitutes persuasive authority, inter alia, in
45

W. Michael Reisman & Robert D. Sloane, “Indirect Expropriation and Its Valuation in the BIT Generation,” 74
The British Yearbook of International Law, 2004, p. 115
46
W. Michael Reisman & Robert D. Sloane, ibid, p.117
47
G.C. Christie, What Constitutes a Taking Under International Law, 1962, 38, BYBIL, p.37
48
Apurba Khatiwada Indirect Expropriation of Foreign Investment, 2008 p.18 available at
http://www.ksl.edu.np/cpanel/pics/indirect_expropriation_apurba.pdf , also in the working paper “Indirect
expropriation”the “right to regulate” in international investment law, Working Papers on International Investment,
number 2004/4, p.9
49
Ian Brownlie, “Public International Law”, Oxford University Press, 6th Edition, 2003 p. 509

18

determining how to distinguish between an indirect expropriation and valid governmental
regulation states “…a state is not responsible for loss of property or for other economic
disadvantage resulting from bona fide general taxation, …….. or other action of the kind that iscommonly accepted as within the police power of the states, if it is not discriminatory50”. The
above was fully reiterated in the context of the Iran-United States Claims Tribunal, in the Too
v. Greater Modesto Insurance Associates that stated “A State is not responsible for loss ofproperty or for other economic disadvantages resulting from bona fide general taxation or any
other action that is commonly accepted as within the police power of States, provided it is notdiscriminatory and is not designed to cause the alien to abandon the property to the State or tosell it at a distress price… 51”. Thus the main question to be answered in order to conclude if
the Greek haircut constituted an indirect expropriation is whether the exchange of bonds withbonds of smaller face value is an exercise of general, legitimate state powers.
In exploring this question, it must first be examined if the Greek was indeed asovereign act. In this respect, it is important to refer to the ruling of ICSID in Consortium
R.F.C.C. v. Morocco, where it was, inter alia, held that only unilateral measures specificallyadopted as an expression of public authority could result to expropriation and mere breach ofcontractual obligations by the host state would not be deemed to give rise to a claim for
expropriation 52. Hence, it is questionable if the partial devaluation of bonds that, as mentioned,
constitute forms of loan agreements between the host state and the investor could give rise to
expropriation. Indeed, unless it is proven that the state has gone beyond its role as a mere party
to the contract and has exercised specific sovereign powers any breach on the host state’s part
would only result in breach of contract 53. In this regard, it is worth revisiting the case of theArgentine Restructuring and the aforementioned cases brought under the Italy-Argentina BIT
and more particularly the Abaclat et al. v. the Argentine Republic case. This case revolved
around the facts of 2001- 2005 and in particular around the bonds restructuring.
To resolve the above dispute the Tribunal greatly engaged with the question as to whether
the Argentine haircut was no more than a breach of contractual obligations or whether
Argentina’s acts could constitute breach of certain standard of protection awarded by the BIT.
After making extensive reference to the fact that BITs are not meant to set aside or correct
contractual remedies but to further impose general treaty obligations for the protection offoreign investors, the Tribunal examined the merits of the case and found that the underlying
dispute “does not derive from the mere fact that Argentina failed to perform its payment
obligations under the bonds but from the fact that it intervened as a sovereign by virtue of its
State power to modify its payment obligations towards its creditors 54”. The Tribunal further
acknowledged that there was no justification for such modifications on a contractual
framework. Thus, Argentina‘s actions were “the expression of State power and not of rights or
obligations Argentina had as a debtor under a specific contract” and therefore the claims

50

Restatement of the Law Third, the Foreign Relations of the United States, American Law Institute, Volume 1,
1987, Section 712.
51
Indirect expropriation” and the “right to regulate” in international investment law, op. cit, p. 19
52
Consortium R.F.C.C. v. Kingdom of Morocco, ICSID Case No. ARB/00/6 par.278
53
Impregilo S.p.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/3, para. 261
54
Abaclat et al. v. the Argentine Republic op.cit. par. 325

19

stemming from such actions “are not pure contractual claims but treaty claims based on acts ofa sovereign, which Claimants allege are in breach of Argentina‘s obligations under the BIT 55”.
The same may also be stated for Greece’s case where not only was the second haircut the
product of extensive pressure by the EU institutions on major bondholders in terms thatwithout the haircut Greece would simply default and investors would lose all their money but
also and perhaps most importantly, because Greece retrospectively imposed and triggered
CAC obliging opposing bondholders to accept and participate in the bond exchange. In thisregard it is obvious that Greece exercised sovereign power, especially when imposing CAC,
and there is no contractual justification for the bondholders “being forced” to accept thehaircut. As such, Greece’s decision will most likely be deemed a sovereign act and it needs tobe examined, if such act will be considered to be within Greece’s legitimate state powers. The
Tribunal will determine the above in light of the circumstances, but given the nature of thehaircut as an alteration of the repayment terms of GGBs, it is unlikely that the haircut will beconsidered to fall within the Greece’s legitimate state powers, as this would allow States toescape liability for not honouring their agreements.
As such to decide if an indirect expropriation did in fact occur, we must refer to the caselaw criteria mentioned above. Undoubtedly, the Greek haircut greatly interfered with thereasonable and investment-backed expectations of the bondholders to retrieve the entire facevalue and interest of their bonds. Hence, if the effect the haircut had on investors and inparticular on opposing investors been of great degree, then bond holders, and especially
opposing bondholders, might have a prima facie case against Greece for expropriation.
It is here worth mentioning that there is ample case law determining that there is no needfor a state to actually take possession of a tangible or make own use of an intangible right for
expropriation to have taken place, but it will suffice that the State has taken such actions thatwould be tantamount to expropriation in terms of depriving the investor of his use or
enjoyment of his investment, even if the state had no intention to use the property or right as its
own. In the Middle East Cement v. Egypt case the Tribunal found that the investors had been
deprived of the use and benefit of their investment even though they retained title over suchinvestment 56. In particular, the tribunal held: When measures are taken by a State the effect ofwhich is to deprive the investor of the use and benefit of his investment even though he may
retain nominal ownership of the respective rights being the investment, the measures are often
referred to as a "creeping "or" indirect expropriation or, as in the BIT, as measures “the effectof which is tantamount to expropriation 57.” Hence, the decisive element in concluding if an act
is an indirect expropriation is if the sovereign act resulted in substantial loss of control or
economic value of the investment, even if the state did not actually obtain title or right over theinvestment 58. In determining the effect a state measure has had on investors, tribunals often
conduct a “substantial deprivation” test to explore the degree of diminished value in a haircut,

55

Abaclat et al. v. the Argentine Republic ibid par. 326
Christoph Schreuer, The Concept of Expropriation under the ECT and other Investment Protection Treaties,
2005 p. 17, available at http://www.univie.ac.at/intlaw/pdf/csunpublpaper_3.pdf
57Middle East Cement Shipping and Handling Co. S.A. v Arab Republic of Egypt, ICSID Case No. ARB/99/6
58
Ian Brownlie, op. cit. p. 534
56

20

and would thus in this case be examining the size of the Greek haircut 59. In order to calculate
the losses that investors will sustain on account of the recent Greek debt restructuring, the mostappropriate formula to use is the formula suggested by Federico Sturzenegger and Jeromin
Zettelmeyer 60. According to same in order to calculate the actual losses sustained by theinvestors from a market approach (H) when a country (i) exits default at time (t) and issues
new debt in exchange for the old debt facing an interest rate (rti ) at the exit from default, wemust follow the below equation:
H= 1- Present value of New Debt (r it)
Present value of Old Debt (rit)The above formula is the most suited for restructurings that occur prior to a country's default(when no acceleration of payment has taken place) and therefore there is no reason to take theface value of the old Debt into consideration. According to the above formula the actual loses
that investors sustained vis a vis the Argentine default are depicted in Appendix 4, while thoseof the GGB holders are likely to be of greater extend.
As shown above, bondholders will have a difficult case proving that an indirect
expropriation did in fact take place. If, however, an indirect expropriation is found to havetaken place in the case of the Greek Haircut and/or imposition of CAC then Greece would be
obliged to pay compensation to all investors affected by the haircut and/or imposition of CAC.
3.3.3. Umbrella Clauses
Apart from the aforementioned specific protection against expropriation awarded underpractically all BITs, investors may also be able to invoke BIT protection under other bases.
One test followed by case law is the existence of a “pacta sunt servanda” (a.k.a. umbrella)clause in the BIT. Under such clauses all the commitments undertaken by the host state vis a
vis investor(s) must be upheld. According to the aforementioned test, the existence of anumbrella clause elevates any contractual commitment to a treaty one, allowing therefore abondholder to bring a fully judicable claim under investment arbitration 61. Hence, under such
clause a sovereign bond default could ipso facto constitute an internationally wrongful act 62.
This test was followed in Fedax v. Venezuela 63, but there was significant opposition to thegenerality of its use. In all events, it is worth mentioning that most BITs entered by Greece do
not entail an umbrella clause, so the applicability of such clause would be very limited in
Greece’s case.
59

Andrew Newcombe, Lluís Paradell, Law and Practice of Investment Treaties – Standards of Treatment, The
Hague, Kluwer Law International, 2009 p. 2004
60
Federico Sturzenegger and Jeromin Zettelmeyer op. cit. p.6
61
Todd Weiler, International Investment Law and Arbitration, Leading Cases from ICSID, NAFTA, Bilateral
Treaties and Customary International Law, Cameron May, 2005 p.407
62
Michael Waibel, Opening Pandora's Box: Sovereign Bonds in International Arbitration The American Journalof International Law, Vol. 101, No. 4 (Oct., 2007), p. 733
63
Fedax N.V. the Republic of Venezuela, ICSID, Case No. ARB/96/3 (1998)

21

3.3.4 Claim for breach of fair and equitable treatment
An alternative basis of claim instead of expropriation is the well established treaty
standard of fair and equitable treatment. Despite however the long and general application of
the fair and equitable treatment standard, the content of such standard is not clearly defined.
Indeed, each BIT may award a different content to the standard, while relying on the natural
meaning of the words may be even more confusing. Case law, however, has identified certain
factual circumstances that could amount to breach of the standard of fair and equitable
treatment. In particular, in the TECMED S.A. v. the United Mexican States case, the Tribunal
referred that the fair and equitable treatment standard stems from and is an expression of thegood faith principle. This principle entails investors’ basic expectations to be treated by thehost state in a transparent, consistent, i.e. non arbitrary, manner 64 which would not conflictwith what a reasonable and unbiased observer would consider fair and equitable 65.
The Tribunal further noted by reference to the findings of other tribunals’ cases 66:“The Arbitral Tribunal considers that this provision of the Agreement, in light of the good faithprinciple established by international law, requires the Contracting Parties to provide tointernational investments treatment that does not affect the basic expectations that were taken
into account by the foreign investor to make the investment”.
The above standard was many times reiterated by various Tribunals and Courts.
Indicatively, the UNICITRAL in its case of “OEPC v. Ecuador 67” stated that there is "anobligation not to alter the legal business environment in which the investment has been made”.
In addition, in the case of Argentina the tribunals expressly stated the importance of a stable
and transparent economic environment and the importance that the reasonable expectations ofinvestors be upheld. Specifically, in the case of LG&E v. Argentina 68 the Tribunal referred tothe time element of those expectations and stated that investor’s expectations are based on thecircumstances present in the host state at the time of the investment. As such those investors
that bought GGBs before the crisis and who reasonably anticipated to be paid the entire facevalue of their bonds plus interest on maturity were greatly surprised from the Greek haircutthat totally defeated their expectations, transforming the business environment and/or
undermining the legal framework of GGBs. Such bondholders may have a claim against
Greece for breach of fair and equitable treatment. The same cannot be true for bondholders thatbought or continued to buy GGBs after the Greek economic crisis had begun to reveal itself.
64

Fair And Equitable Treatment Standard In International Investment Law, OECD Working Papers on
International Investment, Number 2004/3,September 2004, p.38
65
Mondev International LTD v. United States of America, ICSID Case No. ARB(AF)/99/2
66
Técnicas Medioambientales Techmed S.A. v. the United Mexican States, ICSID case No ARB(AF)/00/2,
para.154
67
Occidental Petroleum Corporation Occidental Exploration and Production Company v. The Republic ofEcuador, ICSID Case No. Arb/06/11 (2004), para 240
68
LG&E Energy Corp., LG&E Capital Corp. and LG&E International Inc. v. Argentine Republic, ICSID Case
No. ARB/02/1(2007)22

Indeed, one must take into account, where the host state is facing serious economic problems.
Thus, the Tribunal in the Olguin v. Republic of Paraguay 69 case noted that an experienced
businessman could and should have conducted a thorough research prior to investing and thathe should have been more conservative in investing in a country that has suffered severe
economic problems. This principal was reiterated in the aforementioned case of CMS v
Argentina where the Tribunal held that the effect of abnormal conditions resulting from theeconomic crisis in Argentina should be taken in account when assessing the scope ofprotection afforded to the investor by an investment treaty 70. In particular, the Tribunal noted
that: “The crisis had in itself a severe impact upon the Claimant’s business, but this aspect
must to some extent be attributed to the business risk the Claimant took on when investing inArgentina…... Otherwise both parties would not be sharing some of the costs of the crisis in areasonable manner and the decision could eventually amount to an insurance policy against
business risk, and outcome that, as the Respondent has rightly argued, would not bejustified 71”.
In addition, to the defeat of Investors’ expectations, however, there are otherexpressions of the standard of fair and equitable treatment, whose content is, as explained, notclearly defined. In particular, Waibel enlists a number of reasons that evidence that thestandard of fair and equitable treatment is breached in the case of a forced haircut. In
particular, Waibel claims that the “take-it-or-leave-it” nature of the haircut may be deemed as
violating due process and being in contrast with good faith as the host state does not really takepart in serious restructuring negotiations 72.
Lastly, it is worth mentioning that the standard of fair and equitable treatment is also
found in customary international law. Initially, there was much debate as to the level ofprotection awarded by customary law in comparison to that of BITs, but as was stated by Mannalready from the 80’s “In some cases, it is true, treaties merely repeat, perhaps in slightly
different language, what in essence is a duty imposed by customary international law 73”. The
customary established doctrine of “fair and equitable treatment” would, however, be of little
relevance to the case of the Greek haircut, as customary law did not protect portfolio investors
that, as stated, ought to be aware of commercial risks and protect themselves accordingly 74.
3.3.5 Most Favoured-Nation (MFN)
Apart from the above standards that were also applicable in the case of Argentina, theGreek Haircut may also trigger yet another standard namely the most favoured nation. The
latter, within the context of BITs, requires that all foreign investors are treated alike in the69

Olguin v. Republic of Paraguay, Case No. ARB/98/5 (2001) par. 75
CMS v Argentina ICSID Case No ARB/01/8 (2005) para 244 and Peter Muchlinski.Caveat Investor.? The
Relevance of the Conduct of the Investor under the Fair and Equitable Treatment Standard, ICLQ Vol 55, July
2006 p. 543
71
CMS v Argentina ibid para 248
72
Michael Waibel, op. cit. p.752
73
F.A. Mann, “The Legal Aspects of Money” Oxford: Clarendon Press 4th ed.,1982, p. 510
74
M. Sornarajah op.cit., p. 10
70

23

same or similar circumstances and that no less favourable treatment is awarded to any investor
on the basis of the nationality of the foreign investor.
In this case, creditors like the European Central Bank, the IMF and EU member state
central banks did not/ were not even asked to take analogous haircuts on their GGBs, as withall other bondholders. Indeed, the European Central Bank exchanged its previous GGBs withnew with the same nominal value and terms and without CAC, as opposed to all otherbondholders that participated in the haircut that as mentioned accepted a 75% reduction on
their GGBs. Such subordination of other investors may amount to breach of the MFN standard,
but it is questionable if Greece actually had a choice and/or power not to accept suchdiscrimination.
It is worth mentioning that bondholders considered this prejudicial treatment as a credit
event in the context of the International Swaps and Derivatives Association’s (ISDA) Credit
Derivative Definitions that will be analysed below, but ISDA rejected such argument on March
1st, 2012.

3.4 Greece’s Defence
3.4.1 Necessity
The doctrine of necessity is found in customary international investment law and it provides
that a state may not be held liable for actions taken to “safeguard an essential interest against agrave and imminent peril”, provided, however, that the criteria listed in the Draft Articles on
the Responsibility of States for Internationally Wrongful Acts are fulfilled. These criteria are:(a) the (wrongful) actions were the only way for the State to safeguard an essential interest
against a grave and imminent peril; and (b) the actions do not seriously impair an essential
interest of the State or States towards which the obligation exists, or of the international
community as a whole. In any case, necessity may not be invoked by a State as a ground forprecluding wrongfulness if: (a) The international obligation in question excludes thepossibility of invoking necessity; or (b) The State has contributed to the situation ofnecessity 75.If the above criteria are met, the State will be exonerated from liability for its
wrongful action. Indeed, as was stated by the Tribunal in the Russian Claim for Interest on
Indemnities case 76, non-payment of public debt could be justified in extreme economic andfinancial circumstances. The above defence was also used by Argentina in light of the severe
economic crisis that occurred in 2001. Nevertheless, the ICSID Tribunals’ decisions in fourcases against Argentina issued by early 2008 were problematic, partly on account of poor legal
reasoning and questionable treaty interpretation and, in part, to the contradictory holdings in

75

Draft Articles on the Responsibility of States for Internationally Wrongful Acts with Commentaries, U.N. Doc.
A/56/10, 2001, art. 2, available at
http://untreaty.un.org/ilc/texts/instruments/english/commentaries/9_6_2001.pdf.
76
Russia v. Turkey (Russian Indemnity), Perm. Ct. Arb, Hague Ct. Rep. (Scott) . 1912 ,24the awards 77. In fact, three of the four Tribunals 78 have declined the necessity defence andhave held Argentina fully responsible for her course of action during the financial crisis,
whereas the remaining Tribunal 79 absolved Argentina of much of its responsibility for thoseacts.
Greece could sustain that the haircut was the only way Greece could avoid unregulated
insolvency and that the rights of investors and their respective states have not beendisproportionately affected. Greece would have to prove the above; as the one invoking thisaffirmative defence has the burden of proof to evidence its elements are met. It is, however,questionable if such assertion would be successful to preclude liability for the retroactive
implementation of CAC and the haircut in general. Surely, it must be taken into account that
the Greek crisis was the immediate aftermath of global financial crisis that was unprecedented
in terms of proportion and unpredictable to a certain extent, but one should not forget that thiswas also the biggest haircut worldwide with investors losing approximately 75% of theirinvestment. It is further worth exploring if investors may counterclaim that Greece hadcontributed to the financial crisis, but such argument would be very difficult to prove giventhat no forum would have the authority to judge the merits of such claim that refer to the fiscal
policy of a state 80.

3.5 Summary
As shown above, if GGBs are found to fall under BITs’ protection, there are various
arguments/causes of action that investors may invoke to show breach of the standard of suchprotection. These arguments have also been used in Argentina’s jurisprudence with relative
success by the Investors. Greece might be able to escape liability from such arguments/claims
by invoking the doctrine of necessity, whose applicability in such cases is not yet definite.
In addition, to bringing a claim on the basis of the BIT however, bondholders also havethe possibility of bringing a claim on the basis of breach of contract re GGBs, as treaty
violations go hand to hand with contract claims 81. Of course, whether there has been a breachunder a BIT is a different question than whether there has been a breach under the contract andit will be examined on the basis of different legal frameworks. In the case of breach of BIT,
international law will be of relevance, while national law will be examined to establish breachof contract 82. In all events, even if investors assert their claim is BIT based the Tribunal may
still determine that the claim is essentially contractual 83, although, there isn’t always a clear

77

Burke-White, William W., "The Argentine Financial Crisis: State Liability Under BITs and the Legitimacy of
the ICSID System" Scholarship at Penn Law Paper 202, 2008 p. 23, available at
http://lsr.nellco.org/upenn_wps/202
78
CMS v. Argentina, Enron v. Argentina, Sempra v. Argentina
79
LG&E Energy Corp. v. Argentine Republic, ICSID Case No. ARB/02/1 , (2008)
80
Enron Corporation and Ponderosa Assets, L.P. v. the Argentine Republic, ICSID Case No. ARB/01/3 (2007)
81
Christoph Schreuer, Travelling the BIT route of waiting routes, umbrella clauses and forks in the road, Journalof World Investment and Trade, p. 231
82
Vivendi v. Argentina op. cit. par. 96
83
Woodruff Case (USA v. Venezuela)

25

distinction between treaty and contractual claims. Indeed, as it is stated in Commentary of
Article 12 of the Articles on State Responsibility:
International obligations may be established by a customary rule of international law,
by a treaty or by a general principle applicable within the international legal order. States
may assume international obligations by a unilateral act. An international obligation may
arise from provisions stipulated in a treaty (a decision of an organ of an internationalorganization competent in the matter, a judgment given between two States by ICJ or anothertribunal, etc.). It is unnecessary to spell out these possibilities in article 12, since theresponsibility of a State is engaged by the breach of an international obligation whatever theparticular origin of the obligation concerned. The formula “regardless of its origin” refers to
all possible sources of international obligations, that is to say, to all processes for creating
legal obligations recognized by international law
The above briefly summarises the protection under Treaty protection; below we shall
examine available remedies that bondholders may have under EU law in the event that Treaty
protection is not an option.

26

CHAPTER 4
Protection under EU Law
4.1. General Framework
EU Law, although designed to lift administrative, bureaucratic or otherwise barriers
between members states and allow the free movement of, inter alia, cash and subsequently
investments; nonetheless it, does not accord much protection to Portfolio Investors. The basic
framework vis a vis cash flow and protection of investments is laid out in the Maastricht
Treaty that specifically prohibits any restriction vis a vis capital flow amongst Member States 84
or amongst Member States and third parties with the reservation of the provisions of Art.57
and 58 of the Treaty. According to the Annex 1 85of the Directive 88/361/EEC 86 capital flows
entail, inter alia, FDI and “securities investments (e.g. in shares, bonds, bills, unit trusts)” when
carried out on a cross-border basis. Hence, portfolio investments are protected under thisdefinition and a state may therefore not impede or restrict the right of bondholders to trade
their bonds in accordance with their terms.
Although the above protection is very limited and could hardly apply to the case of the
Greek haircut, general EU law might be of relevance to this case. In particular, EU law highly
values the right to property and statutorily protects same. Indicatively, the Charter ofFundamental Rights of the EU provides that 87:
Everyone has the right to own, use, dispose of and bequeath his or her lawfully acquired
possessions. No one may be deprived of his or her possessions, except in the public interestand in the cases and under the conditions provided for by law, subject to fair compensation
being paid in good time for their loss. The use of property may be regulated by law in so far as
is necessary for the general interest.
In addition, Article 1 of Protocol No. 1 to the European Human Rights Convention provides:

84

Art. 56(1) of the Treaty
http://ec.europa.eu/internal_market/capital/docs/nomenclature_en.pdf
86Council Directive 88/361/EEC of 24 June 1988 for the Implementation of Article 67 of the EEC Treaty.
87
Charter of Fundamental Rights of the EU, (2000/C 364/01) Art. 178527

Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one
shall be deprived of his possessions except in the public interest and subject to the conditions
provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce
such laws as it deems necessary to control the use of property in accordance with the generalinterest or to secure the payment of taxes or other contributions or penalties.
It is therefore evident from the above that any arbitrary interference by the host statewith the investors’ property will not be allowed, in so far as same was not for the public
interest. Prior to examining if the Greek haircut was an arbitrary interference and, if so, if it
was justified for the protection of the public interest, we need to first establish what constitutes
possessions under Protocol No. 1 to the European Human Rights Convention.
The concept of possessions has been broadly interpreted by the European Human
Rights Court’s jurisprudence so as not to only include the right of ownership, but also a whole
range of pecuniary rights, such as rights arising from shares, patents, arbitration award,
established entitlement to a pension, entitlement to a rent, and even rights arising from runningof a business 88, provided the object of possession may be specifically defined. Indicatively, in
Pine Valley Developments Ltd v. Ireland 89, the European Court of Human Rights held that alegitimate expectation that a certain state of affairs will occur constituted a component of theproperty and was therefore eligible for protection under Article 1. As such, it very likely that
GGBs and the legitimate investor’s expectation of re-payment will be found to constitute“possessions” under the above broad interpretation.
Having considered that GGBs do constitute “possessions”, it needs to be examined if
the Greek haircut constituted an arbitrary interference. In relation to the meaning of the term
arbitrary, same is interpreted to mean unjustified. More particularly any interference has been
held to be justified if it serves “a legitimate objective in the public or general interest 90”. In
addition to serving the public interest the interference needs to also be proportional in terms
that there would a fair balance between the protection and promotion of the public interest andthe interference with the individual’s fundamental human rights, as is the right to property.

4.2. Proportionality
As explained above a state may not arbitrary interfere with one’s possessions, as theterm has been interpreted. Of course the second paragraph of Article 1 reserves to the States
the right to enact such laws as they deem necessary to control the use of property in accordancewith the general interest. Furthermore, it has many times been upheld that the state and its
respective authorities have a wide discretionary power in determining what is in the public or
general interest and the European Court of Human Rights will usually not interfere with such
88

Aida Grgiæ, Zvonimir Mataga, Matija Longar and Ana Vilfan, A guide to the implementation of the European
Convention on Human Rights and its protocols, European Council, Human rights handbooks, No. 10, European
Council
89
Pine Valley Developments Ltd and Others v Ireland A 222, (1992) 16 EHRR para. 379
90James v. the United Kingdom, A98, (1986), 8 EHRR 123, para. 46.

28

judgment unless same is profoundly unjustifiable. Hence, Greece could easily claim that thehaircut was in the public and general interest, an argument that will probably be upheld asaccording to the Greek Government and the Heads of other states and EU Institutions, thealternative to the haircut would be unregulated insolvency, something that would havecatastrophic consequences for the People of Greece. Hence, the question that will definebondholder’s case is the question of proportionality.
The European Court of Human Rights has many times reiterated the need of achieving“a fair balance” between the interest of the general public and the fundamental rights ofindividuals. That being stated, the Court accords, yet again, wide discretion to the state todetermine the proportionality of a measure taken in light of the public interest. Indicatively, in
the AGOSI v. the United Kingdom case the Court noted that “the State enjoys a wide margin of
appreciation with regard both to choosing the means of enforcement and to ascertaining
whether the consequences of enforcement are justified in the general interest for the purpose ofachieving the object of the law in question 91”. This however does not mean that the State may
act at will without taking into consideration the fundamental rights of the individuals being
affected by its actions. Indeed, in a case against Greece, namely Stran Greek Refineries andStratis Andreadis v. Greece that referred to an arbitration award that had via Greek legislative
cct been rendered void and unenforceable, the Court decided that as the interference wasneither an expropriation nor a control of use, it would have to be examined under theprotection accorded by the first sentence of Article 1, i.e. as a prohibition to the peacefulenjoyment of one’s possessions. The Court then proceeded with the examination of the meritsof the case and in particular it examined if the standard of proportionality had been sustainedby the Greek Government. Greece argued that the applicant’s right emanated from awrongfully preferential contract entered between the applicant and the illegal, military“HOUNTA” Government. The plaintiff counter argued that it would be unfair to render invalid
every, otherwise valid, contractual relation that HOUNTA had entered into. The Court
confirmed Greece’s authority to terminate a contract which it deemed to be detrimental to theeconomic interests of the State. Such authority, however, did not extend to certain essential
clauses of the contract, as was the arbitration clause; otherwise states would be allowed toescape jurisdiction in a dispute if arbitration had been agreed in same. In addition, Greece was
the one that chose arbitration in the first place and was therefore prohibited to evade fromsame. Hence, the Court concluded that Greece’s Government had not kept a fair balance
between the public interest and the fundamental rights of the applicant and held that there wasa violation of Article 1 of Protocol No. 1.
In the case of the Greek Haircut the Court’s choice will not be an easy one. Indeed, theCourt will have to balance between the interests of the Greek People who could have been hurt
indescribably by the consequences of Greece’s unregulated insolvency and the investors’ rightto peaceful enjoyment of their possession, in this case the GGBS. The Court must in light ofthese facts decide if the losses suffered by the bondholders were proportionate. It might beworth noticing that even if the Court did found that the haircut was not proportionate, same
does not necessarily mean that Greece should have granted compensation to bondholders.
Indeed, not all actions affecting property rights will be eligible for compensation, but only
91

Agosi v the United Kingdom A 108,(1986), 9 EHRR 1, para. 52

29

those that completely remove essentially all or most of the economic value of the affectedright. Indeed, the Court has found that if the investors’ rights have not disappeared, but have
only been substantially reduced and the situation is not “irreversible”, there will be no“deprivation” under Article 1, Protocol 1 of the European Convention of Human Rights 92 andno compensation will need to be paid.
4.3 Procedural Issues
After having established that bondholders may have a case against Greece under theFirst Protocol of the European Human Rights Convention, it is of significance to examine howsuch case may be brought.
The European Human Convention allows two types applications that may be brought inlight of the Convention to the European Court of Human Rights, namely individual
applications that may be lodged by any natural person, group of persons, legal entity or NGO
having a complaint about a violation of their rights by a Member State, and inter-Stateapplications brought by one State against another. It is worth mentioning that, the first type of
applications was widely used by individuals and up to date practically all applications havebeen brought by individuals.
In order, however, for an individual to be allowed to bring a claim against a member
state in the European Court of Human Rights, there are two conditions that need to be met: a) a
Member State must have violated one of the Articles of European Human Rights Convention
and b) the individual must have first exhausted all available domestic remedies.
The meaning of exhaustion of local remedies refers to the individual/applicant’s
obligation to appeal to the highest domestic level of justice that could rectify the wrongful act
and grand relief to the individual 93. In the case of Greece, there are two levels of jurisdiction,
namely Court of First Instance (Protodikeion) and Court of Second Instance (Efeteio) and theSupreme Court of Greece that merely reviews that due process has been followed. Initially, thecase needs to be brought in the Court of First Instance that will examine the case in the first
degree. The losing party will have a right to appeal the decision issued by the Court of First
Instance both on the basis of procedural issues and on the merits. The appeal would be brought
before the Court of Second Instance. After the latter issues its judgment, the case may nolonger be examined on its merits, but the Supreme Court has jurisdiction to hear complaints onprocedural issues raised by the decision of the Court of Second Instance. As such, investors
that would like to bring a case on the basis of the European Convention on Human Rights, theywould first have to apply in the Greek Courts and only after they would obtain a detrimental totheir rights judgment by the Supreme Court of Greece may they bring a claim in the European
Court of Human Rights. Taken into account the current pace of the service of the Greek
Justice, it would not be inaccurate to say that the aforementioned procedure could take up to
12-15 years until the investors could have a judgment by the Supreme Court.
Investors might be able to escape the above procedure and subsequent delay if theywould be able to prove that exhaustion of local remedies would be futile in their case on the
92

Indirect expropriation” and the “right to regulate” in international investment law, op. cit, p. 10
Dona Gomien, Short Guide to the European Convention on Human Rights, 3rd Edition, Council of Europe
Publishing (2005) p.168

93

30

basis that Greek Courts would be biased against them. Such claim would, however, be very
difficult to prove and would very difficulty grand to bondholders the right to escape all thelevels of jurisdictions. Although, the Court has held that the rule of exhaustion of local
remedies should be applied with flexibility and without excessive formalism but taking into
account the facts of each case 94, the cases where the Court has accepted that exhaustion would
be futile are very limited. Indicatively in the case of Katikaridis and others v. Greece, the court
accepted that there was no reason for the applicants to exhaust all legal remedies, in concreto
bring their claim in the fourth circuit of the Supreme Court, as same would be futile given thealready existing decision of the Supreme Court that would be binding on the Fourth Circuit.
4.4. Summary
European Law, although does not accord specific protection to investors, nonethelessthe broad interpretation of the notion of possessions found in Article 1 of the First Protocol of
the European Human Rights Convention does allow investors to bring a claim against Greece
for potential breach of their right to property. Of course, the outcome of that case would
largely depend on how the Court will rule in relation to whether the haircut “imposed” onbondholders was proportionate in light of the circumstances. It is worth mentioning that there
are no similar cases with bondholders complaining of expropriation under European Human
Rights Convention’s provisions, to give some guidance in relation to what would the Court
take into consideration in this case.
In addition, it is important to note that before bondholders may bring their claim in theEuropean Court of human rights they would first have to examine all remedies available by the
Greek Justice.
Apart from the above remedies available under Investment Treaties and the EU Law,
there is also another remedy to Investors that may be already available to them provided they
had bought Credit Default Swaps. This remedy will be examined in the next chapter.

94

Akdivar and Others v. Turkey , 99/1995/605/693 , Council of Europe: European Court of Human Rights, 30
August 1996, available at: http://www.unhcr.org/refworld/docid/3ae6b7224.html

31

32

33

CHAPTER 5
Claims for Credit Default Swaps (CDS)
5.1 CDS in the context of the Greek Financial crisis
A credit default swap is a contract in which a buyer (also known as the protection buyer)purchases protection from a seller (the protection seller) against the risk of default by areference entity or a reference asset. The protection buyer pays a regular fee or premium to theprotection seller for the life of the swap or until a credit event occurs. In return, the protection
seller will pay the protection buyer an agreed amount if a specified credit event occurs during
the life of the swap. In other words, CDS constitutes a form of insurance against certain credit
events. A credit event exists, according to International Swaps and Derivatives Association’s(ISDA) Credit Derivative Definitions, in 6 events including, inter alia, debt restructuring(individual CDS contracts may provide protection against all or some of the 6 credit events) 95.
As such many Investors that had seen Greece’s declining course had proceeded withpurchasing CDS to minimize their loss or even make profit. These investors may now be
eligible for compensation according to their CDS.

5.2 Conditions for Compensation
As explained above in order for CDS to be triggered a credit event, as the term is defined in
the ISDA Credit Derivatives Definition must occur. Amongst the circumstances that constitutecredit events, ISDA has entailed the event of sovereign debt restructuring, i.e. a sovereign
haircut. Although based on the above, one could easily come to the conclusion that the Greek
haircut should have triggered CDS, nevertheless the decision for that was not an easy to reach.
ISDA had expressed a preliminary view that so long as the restructuring is voluntary it does
not constitute a credit event. Indeed, according to ISDA, a credit event is not deemed to havetaken place when debt restructuring is on a voluntary basis. Although the CDS Definitions do
not make a distinction between voluntary and mandatory events, same may be induced, as animportant element of the definition of restructuring is that the event has to occur in a form thatbinds all holders of the "restructured" debt, i.e. even those that voted against it 96. Based on
95

The 6 Credit Events under ISDA Credit Derivative Definitions are:1) Bankruptcy, 2)Obligation Acceleration,3)Obligation Default,4) Failure to Pay 5) Repudiation/Moratorium and 6) Restructuring
96
ISDA, Update on Greek Sovereign Debt Q&A, October 2011, http://www2.isda.org/news/isda-updates-greeksovereign-debt-qampa

34

these grounds ISDA had on October 2011 announced that “it does not appear to be likely that
the Greek restructuring will trigger payments under existing CDS contracts”.
If CDS were not triggered this would further add to investors' losses as not only will
they not be collecting insurance but furthermore they would we obliged to continue to pay
premium for the remaining years of the insurance policy.
The above dilemma was resolved following Greece’s decision to retroactively implement
CACs on all Greek Law-governed GGBs issued prior to 31.12.2011. Indeed, on March 9th,
2012 ISDA announced that “a Restructuring Credit Event has occurred under Section 4.7 ofthe ISDA 2003 Credit Derivatives Definitions (as amended by the July 2009 Supplement)
following the exercise by the Hellenic Republic of collective action clauses to amend the termsof Greek law governed bonds issued by the Hellenic Republic (the Affected Bonds) such thatthe right of all holders of the Affected Bonds to receive payments has been reduced 97”.
Receiving compensation is, however, not as easy as it sounds. Indeed, many legal issues
might arise that may hinder compensation. Unfortunately, this thesis may not expand on all of
those issues but some of them that are most relevant in Greece’s case will be briefly discussed
below.
5.3 Document Risk
Document risk refers to the industry’s reliance on the documentation of CDS
Agreements 98. To demonstrate the issues that might be raised, the case of Argentina is yet
again indicative.
In November 2001, Argentina announced a “onetime offer” to bond exchange. According
to Argentina the bond swap was voluntary and as such did not constitute a credit event. Rating
Agencies disagreed with the voluntary nature of the bond exchange, given that the priorattitude of the Argentine Government did not leave much room for restructuring negotiations
leaving those who did not accept the exchange in greater risk that those who did. Despite what
the rating Agencies state, however, there is no link between a rating agency declaration and a
CDS Credit Event 99. As such many protection sellers refused to pay compensation on CDS on
the basis that the restructuring was voluntary.
This was however not left unanswered by the buyers and many cases were brought before
the Court. Two of the most distinctive cases in the case of Argentina were HBK Master Fund
L.P. v. JPMorgan Chase Bank and Eternity Global Master Fund L.P. v. Morgan Guaranty
Trust Company of New York and JPMorgan Chase Bank. Those cases shall be examined
below.
The facts in both cases are practically alike. In particular, both HBK Master Fund L.P(“HBK) and Eternity Global Master Fund L.P. (“Eternity”) were private investment funds ofthe type commonly referred to as a “hedge funds.” Both HBK and Eternity had bought CDS
protection from JP Morgan Chase Bank whereby the designated credit events included, inter
97

EMEA DC Statement, 9th March 2012, available at
http://www.isda.org/dc/docs/EMEA_Determinations_Committee_Decision_09032012.pdf
98
Lily Tijoe, Credit Derivatives: Regulatory challenges in an exploding industry (2007) p. 405 available at:
http://128.197.26.4/law/central/jd/organizations/journals/banking/archives/documents/vloume26/tijoe.pdf
99
ISDA, Update on Greek Sovereign Debt Q&A, op.cit. p.2

35

alia, debt restructuring, as the term was defined in the 1999 CDS Definitions. According to thelatter and in particular Paragraph 4.7(a), ‘Restructuring’ meant, “with respect to one or more
Obligations, including as a result of an Obligation Exchange, and in relation to an aggregate
amount of not less than the Default Requirement, any one or more of the following eventsoccurs, is agreed between the Reference Entity or a Governmental Authority and the holder orholders of such Obligations or is announced (or otherwise decreed) by a Reference Entity or a
Governmental authority in a form that is binding upon a Reference Entity ...:
(i) a reduction in the rate or amount of interest payable or the amount of scheduledinterest accruals;(ii) a reduction in the principal or premium payable at maturity or at scheduled
redemption dates;(iii) a postponement or other deferral of a date or dates for either (A) the payment or
accrual of interest or (B) the payment of principal or premium;(iv) a change in the ranking in priority of payment of any Obligation, causing thesubordination of such Obligation; or(v) any change in the currency of composition of any payment of interest or principal”.
The term obligation Exchange was defined as the “mandatory transfer” of any securities,
obligations, or assets to holders of Obligations in exchange for these existing obligations 100.
When the bond exchange in Argentina took place both HBK and Eternity gave written
notice of a credit event to JP Morgan. The latter based on the above definitions maintained thata “Restructuring” Credit Event had not occurred because the restructuring was a voluntary one
and no mandatory transfer had taken place and as such refused to pay. HBK and Eternity filed
lawsuits against JP Morgan on the basis of breach of contract, fraud and/or negligent
misrepresentation. The two cases had a different ending as the case of HBK was settled on
May 6 2002 while the case of Eternity was partly dismissed 101. Nevertheless the argumentationof the plaintiffs was similar in the two cases.
In particular, the plaintiffs’ main argument was that in order to determine whether a
Restructuring Credit Event had occurred one should focus on the effects of the exchange andnot on whether an Obligation Exchange had actually occurred. According to HBK, an
Obligation Exchange is not needed to trigger the Restructuring Credit Event as the result of theexchange led to a reduction in principal and interest and a deferral of the maturity dates thatwere all included in the definition of Restructuring 102.The Court refused to express a view as towhether a voluntary restructuring was an event of default and urged the parties to “resolve thematter in discover or if necessary a trier of fact”. The same argumentation was also used in the
Eternity case, where the Court of Appeals affirmed the judgment insofar as it dismissed
Eternity's claims on fraud and negligent misrepresentation and reversed the judgment forbreach of contract remanding for further proceedings.
In contrast with the above decisions it is also worth examining a case where JP Morgan
acted as Plaintiff against Daehan Investment Trust Management (“DITM”). In this case DITM
100

1999 Credit Derivatives Definitions, at § 4.9
As a result of this uncertainty as to whether voluntary exchanges would constitute Restructuring Credit Events,
the term “Obligation Exchange” was not included in the 2003 CDS Definitions
102
Emily R. Pollack Assessing the Usage and Effect of Credit Derivatives Harvard Law School International
Finance Seminar April 28, 2003, p.20
10136

signed a CDS agreement in 1996 for an emerging market basket note that entailed paying
10.2% of the original capital of $96 million every year as a premium to JP Morgan 103.The
latter acted as the Buyer under the CDS contract while DITM acted as the Protection Seller.
According to the terms of CDS, JP Morgan would not pay the principal or interest for theapplicable part of the note if a credit event occurred in the relevant markets, which, inter alia,
included the Argentinean market. Following, the announcement of the bond exchange inArgentina, JP Morgan Chase Bank provided notification on December 7, 2001 that it would
not pay back the remaining interest and principal on the basis of the Argentine default. DITM
did not accept same, and filed a law suit against JP Morgan. This case is of particular interest
as in this case JP Morgan argued that the bond exchange was in fact a credit event. JP Morgansustained that the definition of the credit event should be looked for at the applicable legal
framework at the time of signing of the agreement. In particular, JP Morgan argued that, backin 1996, the term “restructuring” was used in a broader way. But its line of argumentation was
not limited to that and JP Morgan proceeded with claiming that although the Argentine
government had announced that the bond exchange was voluntary this was not really true froma practical perspective.
A common ground in all of these rulings, however, is that the Court first addressed theagreement between the parties to see if the issue of a sovereign debt restructuring may beconsidered tantamount to coercive obligation exchange on the face of the existing
circumstances. One, however, may not overlook that it is not for the courts to decide such anissue. This compels the tribunals to forecast whether interested parties will choose toparticipate in an obligation exchange, and to perform an economic analysis of the obligationexchange 104.
From the aforementioned cases, one may understand the difficulty faced by the Courts
when interpreting ambiguous terms in a credit derivatives agreement. Such uncertainty may
provide the protection seller with a window to argue that the triggering event did not happen
and no payment is due. Consequently, the wording of each CDS Agreement is very importantin each case.

5.4 Short Squeeze Risk
Another risk that may jeopardise bondholders’ right of compensation was demonstrated in
the case of the Delphi Corp. bankruptcy in 2005. In this case, the excellent market position ofDelphi Corp’s CDS prior to Delphi Corp’s petition for bankruptcy, did not change after such
petition; but certain persons, eager to make fast money continued to massively purchase Delphi
Corp’s CDS. As such, when parties to these CDS attempted to buy Delphi Corp’s bonds inorder to obtain coverage payment, such bond’s prices had climbed back up 105. It needs to bestated that in many cases without ownership of the reference bonds, protection buyers will be
unable to make physical deliveries for settlement and hence will not be able to receive
103

Jongho Kim From Vanilla Swaps to Exotic Credit Derivatives: How to Approach the Interpretation of Credit
Events Fordham Journal of Corporate & Financial Law Volume 13, Issue 5 2008 Article 1, p. 34
104
Jongho Kim ibid p. 34
105
Richard Beales, Uncertain Road ahead for Delphi, FIN. TIMES, Nov. 8, 2005,

37

compensation. In the case of Delphi Corp, after months of negotiations between CDS holders
an auction was held to determine the remuneration that protection buyers were entitled. It wasthen decided to price the bonds “according to the market participants’ open positions and not
as a result of speculation in the open market 106” and that no physical deliveries were required.
Short squeeze risk is also of relevance in the Greek Haircut case, where since Greece
entered into the bail-out mechanism the number of CDS purchased was significantly increased
partly because of fear of Greece defaulting and partly on account of speculators looking for aquick gain. This just goes to show, that lack of supervision and regulation in this field as wellas the unregulated settlement of payments procedure.
5.4 Conclusion
Bondholders with CDS have been awarded the possibility of a prompt remedy or
diminution of their damage via claims under CDS. Indeed, following ISDA’s decision that acredit event has occurred investors were on the 19th of March called to participate in the action
to determine bonds selling price. After such point the CDS policy of each bondholder may
determine if compensation will be awarded.

106

Lily Tijoe, op.cit. p. 403

38

39

CHAPTER 6
Special Enforcement Issues
Enforcement is the motive for investors to pursue their claims against the Host State. It
is the result of the judicial process. Nevertheless, enforcement against states is neither easy nor
common. Indeed, one of the issues that investors will be called to face is sovereign immunity.
The implications of sovereign immunity will be analysed below.
6.1. Immunity from Enforcement
There has been a lot of debate whether a state may invoke the foreign nation immunity
doctrine (“State Immunity”) in order to avoid enforcement of the award. The doctrine of State
Immunity against enforcement restricts the powers of enforcement of national courts or otherorgans of state against the property of another state found in its jurisdiction.
The scope and content of State Immunity from enforcement is far more disputed thanjurisdictional immunity and there is no uniform global practice. Indeed, different countries
have adopted different approaches, and the practice of nationals Courts in Europe is anything
but uniform in this field. Nevertheless, some common elements have emerged as most States
have abandoned the notion of absolute sovereign immunity against enforcement and haveadopted a more limited application of the aforementioned doctrine.
Most specifically, one of the most decisive factors to determine the extent of immunityfrom enforcement is prevailingly the purpose of the property against which enforcement
measures are sought 107. Indeed, in the Philippine Embassy Bank Account Case, the German
Constitutional Court stated that 108:[t]here is a general rule of international law that execution by the State having
jurisdiction on the basis of a judicial writ of execution against a foreign State, issued inrelation to non-sovereign action (acta iure gestionis) of that State upon that State’s things
located or occupied within the national territory of the State having jurisdiction, is
inadmissible without assent by the foreign State, insofar as those things serve sovereign
purposes of the foreign State at the time of commencement of the enforcement measure.
As evident, the aforementioned decision differentiates between property serving for sovereign
purposes that is immune from execution/enforcement and property for nonsovereign/commercial purposes that is not immune. This distinction is also found in the case
107

Bouchez, ‘The Nature and Scope of State Immunity from Jurisdiction and Execution’, 10 New YorkInternational Law (1979) p. 17
108
Bundesverfassungsgericht, 13 Dec. 1977, 46 BVerfG 342; 65 ILR 146, p. 167

40

law of other European countries, such as Spain, Italy and the Netherlands 109. The
aforementioned principal was also upheld in a Belgian judgment, while even Swiss Courts thatused to accept an absolute immunity have now accepted that property used for commercial
purposes may be the object of execution. France also acknowledges the aforementioned
distinction between property used for sovereign as and property used for private/ commercial
purposes but further requires that a link between the property against which execution issought and the original claim is proven. The link need not be proven if the property is public
but not national.
Another limitation to the doctrine of immunity from enforcement is the private law
character of the transaction 110. French Law goes even further granting immunity only if theState’s act is either an "acte de puissance publique" or that it have been carried out "dansl'intérêt d'un service public" 111. In the case of the Greek haircut, it has been above been
discussed that it remains to be examined if the Greek haircut will be considered a breach ofcontract or if it will be considered an act for the public interest, thus it will have to be
examined if Greece would be able to successfully claim sovereign immunity to prevent
enforcement of its assets found abroad.
It needs to be mentioned that if states could easily invoke the aforementioned doctrine
to avoid their obligations out of awards, any action taken against them and in this case against
Greece would be without any purpose. Therefore, a State that successfully relies on thedoctrine of State immunity from enforcement may be in violation of its obligation under theInvestment Treaties or European Law.
In the case of ICSID adjudication, as in the case of Argentina, it would be a treaty
violation for a Contracting State to refuse to enforce an award, and non-compliance with
Article 54 would then carry the consequences of State responsibility, including the revival of
diplomatic protection under Art.27(1) of the ICSID Convention.
On account of the above, it comes as no surprise that since ICSID's creation, allcountries have complied with their obligation to pay an arbitral award once its determination
was finalized. This may, however, be challenged in the case of Argentina. In particular, as
stated above the awards issued so far are remarkably high, awarding more than 100.000
million in each case, and should all pending cases be upheld, Argentina may be faced withhaving to pay more than $17 billion 112. This debt is not proportionate taken into account theeconomic situation of Argentina and if Argentina is obliged to pay same, that very fact alone
may initiate another financial crisis in Argentina and may pull same in worst levels of poverty
and recession. It, therefore, comes as no surprise that the Argentine Government questioned
the awards and criticised ICSID as being biased.
Lastly, it needs to be stated that even if immunity from enforcement is not an absolute
immunity, Investors may be left without a remedy as finding commercial property is notalways easy. Indeed, enforcement may only be “forced” in foreign states, where Greece may
109

August Reinisch European Court Practice Concerning State Immunity from Enforcement Measures The
European Journal of International Law Vol. 17 no.4, 2006; Vol. 17 No. 4, p. 803–836
110David Gaukrodger, Foreign State Immunity and Foreign Government Controlled Investors OECD Working
Papers on International Investment 2010/2, p. 18111
P. Mayer and V. Heuzé, Droit international privé 2007 (9th ed.) p. 325.
112
Charity L. Goodman, ibid, p. 478

41

have limited assets that will usually be used for sovereign property that will hence be notsubject to enforcement.

42

43

CHAPTER 7
Conclusion

This thesis dealt with the Greek Financial Crisis and addressed the remedies available tobondholders of GGBs following the haircut that took place on the 9th of March 2012. An
attempt was made to identify the aforementioned remedies by contrasting the case of Greece
with a similar and recent sovereign debt restructuring/default case, that of Argentina. The
aforementioned comparison helped to explore the benefits and disadvantages of its available
remedy. In addition, a brief presentation of procedural issues was attempted in order to provide
a more complete view on the efficiency of the available remedies.
From the comparison and further research it has become evident that although there areremedies available under International Investment Treaties, European Law and separate
insurance agreements like CDS, nonetheless the fact remains that these remedies do notprovide full and sufficient protection to investors and a vacuum vis a vis effective protection of
investors in cases of sovereign defaults continues to exist. Indeed, despite the many incidents
of sovereign default in the last decades there continues not to be any legal framework
establishing the Investors status in the negotiations for the sovereign debt restructuring as wellas their rights and remedies once same is completed.
With the Greek economic crisis Investors have been called to accept a 53% haircut, while
this might not be the last reduction. Although from the above it has become evident that
Investors have recourse against defaulting states, nevertheless one may not overlook the factthat this process is slow, expensive and often futile as finding foreign public commercial
property is not rather.
It therefore comes as no surprise Foreign Direct Investments and generally Investors’
protectionism is on the rise, with screening of inward M&As becoming more frequent,typically, this is being done under the guise of "national interest" or similar concepts 113. As
such it is now more than ever crucial that the International Community faces this timelessproblem and sets a legal framework regulating the procedure to be followed in case ofsovereign default and establishing the investors negotiating power.

113

Karl P. Sauvant, FDI Protectionism Is on the Rise, Policy Research Working Paper 5052 The World Bank
Poverty Reduction and Economic Management Network International Trade Department, September 2009

44

45

Appendix 1

Source Greek Public Debt Management Agency
Data: 31.12.2011

46

47

Appendix 2

Source: www.ftd.de/download/binary/.../file.../bin-pdf-european-rates.pdf

48

49

Appendix 3
Total number of Bilateral Investment Treaties concluded by Greece by 1 June 2011
Partner
Date of signature
Date of entry into force
Albania
1-Aug-91
Algeria
20-Feb-00
Argentina
26-Oct-99
Armenia
25-May-93
Azerbaijan
21-Jun-04
Bosnia andHerzegovina 12-Dec-00
Bulgaria
12-Mar-93
Chile
10-Jul-96
China
25-Jun-92
Congo, DR
26-Apr-91
Croatia
18-Oct-96
Cuba
18-Jun-96
Cyprus30-Mar-92
Czech Republic 3-Jun-91
Egypt
16-Jul-93
Estonia
17-Apr-97
Georgia
9-Nov-94
Germany27-Mar-61
Hungary
26-May-89
India
26-Apr-07
Iran
13-Mar-02
Jordan21-Feb-05
Kazakhstan
26-Jun-02
Korea, Republic of 25-Jan-95
Latvia20-Jul-95
Lebanon24-Jul-97
Lithuania
19-Jul-96
Mexico30-Nov-00
Moldova
23-Mar-98
Morocco16-Feb-94
Poland14-Oct-92
Romania
23-May-97
Russian Federation 30-Jun-93
Serbia25-Jun-97
Slovakia
3-Jun-91
Slovenia
29-May-97
South Africa 19-Nov-98
Syrian Arab Republic 23-Feb-03
Tunisia
31-Oct-92
Turkey20-Jan-00
Ukraine1-Sep-94
Uzbekistan
1-Apr-97
Vietnam
13-Oct-08
Source: UNCTAD

4-Jan-95
21-Sep-07--28-Apr-95
3-Sep-06
15-Jun-07
29-Apr-95
27-Oct-02
21-Dec-93--21-Oct-98
18-Oct-97
26-Feb-93
31-Dec-92
6-Apr-95
7-Jul-98
3-Aug-96
15-Jul-63
1-Feb-92
10-Apr-08
9-Jan-09
8-Feb-07--4-Nov-95
9-Feb-98
17-Jul-99
10-Jul-97
26-Sep-02
27-Feb-00
28-Jun-00
20-Feb-95
11-Jun-98
23-Feb-97
13-Mar-98
31-Dec-92
11-Feb-00
5-Sep-01
27-Feb-04
21-Apr-95
24-Nov-01
4-Jan-97
8-May-98
---

50

51

Appendix 4(Argentina Investor's Losses)

52

53

54

55

56

Source: Federico Sturzenegger and Jeromin Zettelmeyer, Haircuts: Estimating Investor Losses inSovereign Debt Restructurings,1998–2005 IMF Working Paper, WP/05/137

57

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