Political Risk Latin America Blog @PolRiskLatam

Argentina: ghosts of 2001 default linger

Posted in News and Articles, Political Risk by politicalrisklatam on August 11, 2011

by Jude Webber for Financial Times – Beyond Brics, August 11th, 2011.

Argentina believes it has closed the chapter on its $100bn sovereign default in 2001 after two debt swaps, in 2005 and 2010, which have restructured more than 92 per cent of the defaulted bonds.

It says the two take-it-or-leave-it offers prove its good faith in the matter, and has vowed not to negotiate or settle with the remaining “holdouts” – especially so-called “vulture” funds which are among those to have been pursuing it through US courts.

But a new avenue of litigation has been opened with a 283-page decision last week by the World Bank’s arbitration tribunal, ICSID, which has not yet been made public, that it is competent to hear a claim for more than $1bn brought by some 60,000 jilted Italian bondholders.

At a time of financial market panic and default fears in Greece, when the fine print of bond jurisdictions is under the spotlight in case bond holders need to sue to get their money back, the ICSID decision could reverberate widely.

Represented by global law firm White & Case, the Italian bondholders say Argentina is accountable under a bilateral investment protection treaty. The World Bank’s International Centre for the Settlement of Investment Disputes ruled on August 4 that it was competent to hear the case. (continue reading… )