Mission Creep The Emerging Role of International Investment Agreements in Sovereign Debt Restructuring

Thrasher Rachel D. () and Gallagher Kevin P.
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Thrasher Rachel D.: Boston University – Pardee School of Global Studies, 121 Bay State Road, Boston, MA 02215, USA
Gallagher Kevin P.: Boston University – Pardee School of Global Studies, 121 Bay State Road, Boston, MA 02215, USA

Journal of Globalization and Development, 2015, vol. 6, issue 2, 257-285

Abstract: The global community still lacks a regime for sovereign debt restructuring (SDR). However, the recent financial crisis has spawned numerous efforts to fill this glaring gap in global economic governance. At the same time however, there is increasing concern that international investment agreements (IIAs) have already begun to expand their reach into the realm of SDR. Indeed, private investors have attempted to use IIAs to recoup the full value of their bonds in order to circumvent debt restructurings in Argentina and Greece. In this paper we examine the extent to which IIAs are becoming tools for creditors to circumvent debt restructurings and whether new IIAs such as the Trans-Pacific Partnership and the Trans-Atlantic Trade and Investment Partnership will further advance the ability of creditors to do so. We find that contemporary IIAs are increasingly interpreting sovereign bonds as being under their jurisdiction. Thus, debt restructurings may be increasingly subject to claims filed by holdout creditors wishing to recoup the full value of their bonds through private tribunals under IIAs. That said, we also find that some treaties have begun to provide exceptions for certain types of debt restructurings. While such safeguards are a step in the right direction, they will need to become broader in scope and more widespread in application in order to not interfere with the orderly workout of debt problems in the world economy.

Keywords: international investment agreements; international investment arbitration; sovereign debt restructuring (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1515/jgd-2015-0018

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Journal of Globalization and Development is currently edited by Joseph E. Stiglitz, Kevin Gallagher, Jeronim Capaldo, Arjun Jayadev, José Antonio Ocampo and Dani Rodrik

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