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

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  • Thrasher Rachel D.

    ()

  • Gallagher Kevin P.

    (Boston University – Pardee School of Global Studies, 121 Bay State Road, Boston, MA 02215, USA)

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.

Suggested Citation

  • Thrasher Rachel D. & Gallagher Kevin P., 2015. "Mission Creep The Emerging Role of International Investment Agreements in Sovereign Debt Restructuring," Journal of Globalization and Development, De Gruyter, vol. 6(2), pages 257-285, December.
  • Handle: RePEc:bpj:globdv:v:6:y:2015:i:2:p:257-285:n:3
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    References listed on IDEAS

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    1. Mario Damill, 2005. "The Argentinean Debt: History, Default and Restructuring," Economia, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 6(3), pages 29-90.
    2. Kenneth Rogoff & Jeromin Zettelmeyer, 2002. "Bankruptcy Procedures for Sovereigns: A History of Ideas, 1976-2001," IMF Staff Papers, Palgrave Macmillan, vol. 49(3), pages 1-8.
    3. Kevin P. Gallagher, 2012. "Financial Crises and International Investment Agreements: The Case of Sovereign Debt Restructuring," Global Policy, London School of Economics and Political Science, vol. 3(3), pages 362-374, September.
    4. Eric Helleiner, 2008. "The Mystery of the Missing Sovereign Debt Restructuring Mechanism," Contributions to Political Economy, Oxford University Press, vol. 27(1), pages 91-113.
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