Investors vs. Greece : The Greek 'Haircut' and Investor Arbitration Under BIT's

According to the Financial Times (James Wilson & Gerrit Wiesmann 12.3.2012) German investors were seeking lawsuits over the Greek debt swap, immediately after it was set in motion in March 2012. According to reports, a German law firm was preparing lawsuits against banks and the Greek state on behalf of holders of Greek bonds who have been forced to take part in Greece's €206bn debt swap. The Hamburg law firm claimed that there were some 200 expressions of interest in joining a class-action suit. This development follows the decision by Greece to trigger Collective Action Clauses (CAC) that were added to bonds issued under Greek law. The clauses force all bondholders to go along with the decision by the majority of the debt's owners – including banks, insurers and pension funds – to agree to the swap. The possibility of legal action over imposed 'haircuts' to sovereign debt is seen by many as an alternative strategy for seeking compensation instead of relying on payments from Credit Default Swaps. A legal precedent is offered by Argentina which defaulted on its sovereign debt in December 2001, prompting over 180,000 Italian bondholders to file a class action, known as Abaclat v Argentina, claiming a violation of their rights under a bilateral investment treaty. This paper discusses options in the courts and international investment arbitration for investors who have suffered losses on the Greek restructuring of March 2012. The paper considers the precedents available under bilateral investment treaties (especially the Germany-Greece BIT of 1961), European Law (including the ECHR) and the Greek courts. The paper concludes by offering an assessment of the chances of success of claims under each of the above headings. [Please note that this is an early draft of this paper - contact the author for updates and permission to quote]