Greek Debt Restructuring and Investment Treaty Arbitration: Jurisdictional Stumbling Blocks for Bondholders

Abstract

The recent award of an International Center for the Settlement of Investment Disputes (ICSID) tribunal in Poštová banka a.s. and ISTROKAPITAL SE v. Hellenic Republic came as an unpleasant surprise for holders of Greek sovereign debt, who suffered losses because of the sovereign debt restructuring (SDR) that took place in February 2012, since it seems to be at odds with past case law on the matter. The tribunal found that it did not have jurisdiction to hear the dispute, inter alia, because the acquisition of Greek sovereign bonds by Poštová banka did not constitute an ‘investment’ under Article 1(1) of the Greece-Slovakia Bilateral Investment Treaty (BIT). At any rate, according to the tribunal, transactions over sovereign bonds on the secondary markets do not fall within the definition of ‘investment’ under Article 25 of the ICSID Convention. In this article, the author questions the narrow interpretation of the definition of ‘investment’, as set forth in Article 1(1) of the Greece-Slovakia BIT, adopted by the tribunal. In declining jurisdiction, the tribunal looked through the provisions of Greek law so as to ascertain whether the claimants had rights protected under the BIT. The author advocates a different interpretation of the relevant provisions of Greek law in accordance with legal doctrine in Greece concerning the rights of investors over dematerialized government debt. The author also supports a wide meaning of the term ‘investment’ under Article 25 of the ICSID Convention, so that sovereign bonds are included in the definition.