Tribunalizing Sovereign Debt: Argentina's Experience with Investor–State Dispute Settlement

Abstract

The global sovereign debt market, lacking a formal bankruptcy regime or binding regulatory oversight, is fundamentally shaped by the specter of conflicts between debtors that refuse to pay and holdout creditors that refuse to settle. Never was this more evident than in Argentina’s most recent sovereign debt crisis, which spurred daring, innovative, and often controversial legal strategies. This Article focuses on one of the legacies of Argentina’s sovereign debt crisis: the use of investor–state arbitration under international investment law to enforce sovereign bond contracts. Following Argentina’s financial collapse in 2001, private creditors brought dozens of cases against Argentina before the International Center for the Settlement of Investment Disputes (ICSID). Among these ICSID cases was Abaclat and Others v. The Argentine Republic, which marked the first time that an arbitral tribunal ruled that it had jurisdiction to rule on a sovereign debt default and restructuring under international investment law. With the proliferation of investor–state dispute settlement (ISDS) mechanisms in bilateral investment treaties (BITs) and other international investment agreements, this remedy will likely grow in importance. In light of Abaclat and subsequent ICSID cases, this Article analyzes Argentina’s experience with sovereign debt claims under BITs in the broader context of sovereign debt disputes and ongoing measures undertaken by sovereigns in response to tribunalization. Looking forward, this Article assesses the systemic implications of ISDS for the exercise of sovereign authority in sovereign debt finance.

Keywords: sovereign debt, investor-state dispute settlement, bilateral investment treaties, international investment law, debt restructuring, Argentina