BUENOS AIRES (Reuters) – Italian bondholders owning defaulted Argentine debt can try to recoup more than $1 billion in losses at the World Bank’s investment dispute tribunal after the court agreed to hear their case, the bondholders’ law firm said on Wednesday.
The case involves thousands of creditors whose Argentine bonds became worthless when the crisis-wracked country defaulted on some $100 billion in sovereign debt in 2002.
After rejecting a harsh 2005 government debt swap, they sued at the World Bank’s International Center for Settlement of Investment Disputes (ICSID), arguing the Argentina-Italy bilateral investment treaty had been breached.
On Aug. 4 the tribunal ruled it has jurisdiction in the arbitration case, which is seen as the first of its kind due to the number of claimants involved.
«This is a victory for tens of thousands of individual Italian bondholders and demonstrates that Argentina must confront its violations of fundamental investment protections,» Carolyn Lamm, a lawyer at White & Case LLP, said in a statement.
Argentine officials did not immediately respond to requests for comment.
Lamm told Reuters by telephone that the country cannot appeal this decision but could seek an annulment if the ICSID eventually orders compensation for the bondholders.
«Argentina challenges many awards, it’s part of what they usually do,» Lamm said, in reference to previous rulings in favor of companies that operated in Argentina.
The bondholders’ request for arbitration was first registered in February 2007, and the case’s slow pace of progress proved frustrating to many.
About 180,000 small investors holding $4.5 billion in defaulted debt originally sought recourse at the ICSID. But two-thirds of them decided to drop their legal case and accept Argentina’s June 2010 debt swap offer, Lamm said.
ASSET SEIZURES
Most «holdout» creditors who rejected Argentina’s restructuring deals have sued the country in a New York federal court to recover the full value of their defaulted bonds.
These holdouts have been granted multibillion-dollar court judgments. U.S. sovereign immunity rules make it nearly impossible for them to collect because foreign countries’ assets are largely protected from seizure.
The Italian bondholders — represented by a group called Task Force Argentina — also have a lawsuit on hold in New York, which they could reactivate if they do not get a favorable ruling from the ICSID tribunal.
Nicola Stock, head of the task force, said previously that if the bondholders won their ICSID case, they would have an easier time seizing Argentine assets abroad since the tribunal has more than 140 member countries that can enforce its decisions.
Argentina has restructured about 92 percent of its defaulted bonds through debt swaps carried out in 2005 and 2010.
The name of the case is Abaclat and others (Case formerly known as Giovanna a Beccara and Others) vs Argentine Republic (ICSID Case No. ARB/07/5). (Reporting by Hilary Burke; Editing by Andrew Hay and Carol Bishopric)
Source: Reuters