BUENOS AIRES (Dow Jones)–The World Bank’s arbitration tribunal has agreed to review a complaint filed by tens of thousands of Italian holders of defaulted Argentine bonds, according to the law firm representing the bondholders.
On Aug. 4, the International Center for Settlement of Investment Disputes, or Icsid, decided that it has jurisdiction in the dispute with Argentina over more than $1 billion in claims against the country, White & Case said in a press release.
A spokesman for the Procuracion del Tesoro de la Nacion, the presidency’s chief legal office, declined to comment.
The proceeding marks the first of its kind against Argentina at the Icsid, with previous cases focusing on contract disputes between companies and the government.
The bond dispute stems from Argentina’s default on about $100 billion of sovereign debt in 2001.
In 2005, the government offered about 33 cents on the dollar, and last year wrapped up another swap on similar terms.
About 93% of the bonds were tendered in the swaps, but some $4.5 billion of defaulted bonds are thought to be in the hands of holdouts who have pursued Argentina’s government in international courts seeking repayment.
However, the arbitration demanded by the Italian bondholders is the first at the Icsid, which is designed to hear disputes arising under bilateral trade treaties.
Almost 30 cases against Argentina are currently before the Icsid. Virtually all stem from Argentina’s 2001-2002 economic crisis when the country defaulted on its public debt and devalued the peso, which had been pegged at one-to-one against the U.S. dollar.
The Argentine government issued an emergency decree in January 2002 that converted all contracts from dollars into devalued pesos. Among those affected were foreign-owned utilities, which also saw their newly devalued rates frozen.
The move prompted scores of breach-of-contract claims against Argentina at the Icsid, by far the highest number ever against a single country.
More than $900 million in damages have been awarded against Argentina, but so far none of the companies have been able to collect on the judgements.
The government says that the companies must ask domestic courts to enforce the judgements, a move the companies say is not required and which they view as costly and risky.
-By Shane Romig, Dow Jones Newswires; 54-11-4103-6738; shane.romig@dowjones.com
Source: online.wsj.com