Bilateral investment treaties for foreigners holding Greek debt

Author: | Published: 30 Oct 2012

The bailouts and restructurings affecting a number of eurozone states have, in some cases, had a significantly adverse impact on the value of debt held by foreign investors.

For example, in March 2012 Greece exchanged €206 billion of Greek sovereign bonds for a package of debt instruments with a face value of less than 50% of the face value of the original bonds. This was the largest such exercise to date. Investors representing the bulk of privately held sovereign bonds accepted the exchange. The Greek government passed legislation that imposed the exchange on the minority of holders of Greek-law-governed bonds who had rejected the proposals and not tendered their bonds.

For foreign bondholders, bilateral investment treaties (BITs) may provide a means to recover losses. BITs provide foreign investors a number of substantive legal protections and, in most modern treaties, access to binding international arbitration. This allows investors to invoke these...