Haircut Undone? The Greek Drama and Prospects for Investment Arbitration

Abstract

As a result of the Sovereign Debt Crisis that engulfed Europe in 2010, investors are much more likely to pursue dispute resolution options when faced with losses. This paper seeks to examine the position of investors who suffered losses in the Greek haircut of 2012 in the context of investment treaty arbitration. The paper focuses on evaluating arguments that investments in Greek sovereign bonds have been expropriated by the introduction of retrofit CACs (Collective Action Clauses) and that compensation is payable as a result of the protections offered by BITs (Bilateral Investment Treaties). The paper begins by presenting a summary of the background to the Greek Haircut, investigates whether sovereign bonds come within the definition of protected investment in BITs, assesses the degree to which CACs act as a jurisdictional bar to investor-state claims and attempts an evaluation of whether claims could be successful. The analysis includes an investigation of the meaning of expropriation under BIT provisions and uses as illustrations recent cases brought against Greece on the basis of BITs signed with Slovakia and Cyprus currently lodged with ICSID. The paper concludes by considering whether the Greek haircut was exproprietary and reflects on the possible outcome of ICSID arbitrations.