Arbitration As A Means Of Resolving Sovereign Debt Disputes – Vol. 17 No. 3

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Author: Karen Halverson Cross*

Published: March 2008

Categories of Disputes
Commercial Disputes
Banking and Finance Disputes
Investment Disputes



At the end of 2001, while in the midst of a profound economic crisis, the government of Argentina declared a moratorium on service of its outstanding debt. As the country emerged from the crisis four years later, the Argentine government offered to exchange the defaulted debt for new debt instruments paying approximately 35 cents on the dollar. In March 2005, the government announced that 76 percent of its creditors had accepted the exchange offer, effectively restructuring over U.S. $100 billion in bond debt. Although the high degree of participation in the restructuring was hailed as a victory for Argentina, the amount of outstanding debt held by those creditors who rejected the offer – U.S. $25 billion – is huge.

The creditors that rejected Argentina’s exchange offer – the so-called “hold out” creditors – have tried unsuccessfully to enforce Argentina’s obligations under the defaulted debt instruments. Although judgments have been obtained in some cases, creditors have encountered great difficulty finding attachable assets of the Argentine government with which to enforce the judgments. As Anna Gelpern described the situation in 2005, litigation by hold-out creditors against Argentina “ha[s] yet to yield a penny.”

In September 2006, a group of 195,000 Italian holders of Argentine defaulted debt submitted a request for arbitration to the International Centre for Settlement…

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*Professor of Law, The John Marshall Law School, Chicago. An early version of this article was presented at a symposium on Odious Debt organized by the North Carolina Journal of International Law and Commercial Regulation. I wish to thank the participants of the symposium for their helpful comments. Special thanks go to Mitu Gulati, Lee Buchheit, William Park and Andrew Yianni for reviewing and commenting on previous drafts, to Andrzej Niekrasz, Alisha Taylor, Garrett Nye, Abigail Sue and reference librarian Anne Abramson for invaluable research assistance, and finally to David Austin for an excellent translation of the Italy – Argentina BIT.