Mediating Sovereign Debt Disputes (European Yearbook of International Economic Law, 35)

This book provides a fresh perspective on resolving sovereign debt disputes within the investor-state mediation framework. In response to the limitations of traditional approaches to adjudicating public debt issues and the resulting gaps in international law concerning sovereign defaults, creditors have increasingly turned to investor-state treaty arbitrations to recover unpaid debts. However, this shift has raised numerous criticisms and concerns. Accordingly, this book explores the uncharted territory of utilizing mediation as a means to settle sovereign debt claims. It sheds light on the distinctive characteristics of mediation as a process, setting it apart from judicial litigation and private arbitration, and emphasizing the unique outcomes it can generate. The central argument of this book is that mediation should be seriously considered as a viable option for resolving sovereign debt disputes. Not only does it offer a more cost-effective and expeditious approach, but it also has the potential to facilitate economic recovery and sustain continued investment. Acknowledgments 6 Contents 7 Abbreviations 10 Chapter 1: Introduction 11 References 15 Articles 15 Books and Book Chapters 15 Official Reports 16 Sources 16 Chapter 2: Historical and Legal Framework 17 2.1 Declining Sovereign Immunity and Restructuring Sovereign Debt 18 2.1.1 Initial Post-FSIA Cases and the Erosion of Sovereign Immunity 19 2.1.2 CIBC v. Banco Centra do Brazil and the Entry of Vulture Funds 20 2.1.3 Elliott v. Peru: Asset Seizures and the New Pari Passu Strategy 21 2.1.4 Challenges to Sovereign Debt Restructuring 22 2.2 Sovereign Debt Organization: Case Studies of Argentina and Greece 24 2.2.1 History of Argentina ́s High Levels of Debt 24 2.2.2 Greece: Near-Default and Debt Restructuring 26 2.2.3 Comparing the Argentine and Greek Debt Restructuring Negotiations 29 2.3 Investment Arbitration of Sovereign Debt Disputes 32 2.3.1 International Investment Agreements 32 2.3.2 Sovereign Bonds Under Article 25 of the ICSID 33 2.3.2.1 Fedax v. Venezuela 34 2.3.2.2 The Argentine Cases 35 2.3.2.2.1 Abaclat and Others v. Argentine Republic 35 2.3.2.2.1.1 Abaclat: Mass claims 36 2.3.2.2.1.2 Abaclat: Investment 36 2.3.2.2.1.3 Abaclat: Territorial Nexus 37 2.3.2.2.1.4 The Abaclat Dissenting Opinion 38 2.3.2.2.1.5 Abaclat: Case Settlement 39 2.3.2.2.2 Ambiente Ufficio and Others v. Argentine Republic 39 2.3.2.2.2.1 Ambiente: Multiple Claimants 40 2.3.2.2.2.2 Ambiente: Investment 41 2.3.2.2.2.3 Ambiente: Territorial Nexus 42 2.3.2.2.2.4 Ambiente Dissenting Opinion 43 2.3.2.2.2.5 Discontinuance of the Ambiente Proceedings 44 2.3.2.2.3 Giovanni Alemanni and others v. Argentine Republic 44 2.3.2.2.3.1 Alemanni: Collective Action 45 2.3.2.2.3.2 Alemanni: Investment 45 2.3.2.2.3.3 Alemanni: Territorial Nexus 46 2.3.2.2.3.4 Alemanni Concurring Opinion 46 2.3.2.2.3.5 Alemanni: Discontinuance of the Proceeding 47 2.3.2.2.4 Argentine Cases: Conclusion 47 2.3.2.3 Postov banka and Istrokapital v. Greece 48 2.3.2.3.1 Postov banka: Dismissal of Istrokapital ́s Claims 48 2.3.2.3.2 Postov banka: Investment 49 2.3.2.3.3 Implications of the Postov banka Decision 50 2.4 Sovereign Debt Investment Arbitration: Unknown Outcomes 51 2.4.1 Sovereign Debt Investment Arbitration: Unknown Compensation for Bondholders 52 2.4.2 Sovereign Debt Investment Arbitration: Unknown Level of Enforcement Success 53 2.4.2.1 Enforcement: Obligation to Comply with ICSID Awards 54 2.4.2.2 Alternative Enforcement Recourse for Award Creditors: Diplomatic Protection 56 2.4.3 Argentina ́s Prior Cases of Delayed Compliance with ICSID Awards 57 2.4.3.1 CMS Gas Transmission Company v. Republic of Argentina 57 2.4.3.2 Azurix Corp. v. Argentine Republic 59 2.4.3.3 Enron Corporation Ponderosa Assets, L.P. v. Argentine Republic 60 2.4.3.4 Vivendi Universal S.A. v. Argentina 62 2.4.3.5 Sempra Energy International v. Argentina 63 2.4.3.6 Did Argentina Fail to Comply with ICSID Awards? 65 2.4.3.7 Summarizing Argentina ́s Prior Cases of Delaying Enforcement of ICSID Awards 66 2.5 Cost of Sovereign Debt Investment Arbitrations 66 2.6 Conclusion 67 Sources 68 International Conventions and Rules 68 Domestic Rules and Legislation 68 References 69 Articles 69 Books and Book Chapters 71 Cases 73 Official Reports 74 Websites and News Articles 74 Chapter 3: Mediation 77 3.1 Debate Surrounding the Definition of Mediation 78 3.2 Distinction Between Mediation and Conciliation 79 3.3 Mediation Proceedings 83 3.3.1 Initiation of the Mediation Process 84 3.3.2 Pre-Mediation Submissions and Pre-Mediation Conference 86 3.3.3 Mediation Session 87 3.3.3.1 Mediator ́s Opening Statement 88 3.3.3.2 Parties ́ Opening Statements 88 3.3.3.3 Identifying Issues, Interests and Impediments 89 3.3.3.3.1 Formulating the Agenda 89 3.3.3.3.2 Working Through Any Impediments to Settlement 90 3.3.3.3.3 Generating Options for Settlement 90 3.3.3.3.4 Assessing and Selecting Options for Settlement 91 3.3.3.3.5 Conclusion of the Mediation Session(s) 91 3.3.3.4 Post-Mediation Session 92 3.4 Mediator ́s Techniques 92 3.4.1 Guiding the Parties from an Adversarial Approach to Joint Problem-Solving Process 92 3.4.2 Promoting and Improving Communication Between the Parties 93 3.4.3 Questioning Techniques 93 3.4.4 Listening Techniques 94 3.4.5 Managing Emotions 95 3.4.6 Framing and Reframing Statements and Issues 96 3.4.7 Brainstorming 97 3.4.8 Decision-Making Methods 97 3.4.9 Managing Power-Imbalances 98 3.4.10 Overcoming Impasse 99 3.4.11 Closing the Final Gap 101 3.5 Different Styles of Mediation 102 3.5.1 Categorizing the Different Mediation Styles 103 3.5.2 Expert Advisory Mediation 105 3.5.3 Settlement Mediation 106 3.5.4 Facilitative Mediation 107 3.5.5 Wise Counsel Mediation 108 3.5.6 Tradition-Based Mediation 109 3.5.7 Transformative Mediation 110 3.6 Blended Mediation Practices 111 3.7 Legal Framework for Mediation 111 3.7.1 Triggering Laws 112 3.7.2 Procedural Laws 113 3.7.3 Standard-Setting Laws 114 3.7.4 Beneficial Laws 115 3.7.5 ``Interface ́ ́ Laws 116 3.7.6 Default vs. Mandatory Laws 117 3.7.7 Scope of Mediation Law: General, Sector-specific and integrated 117 3.7.7.1 General Mediation Law 117 3.7.7.2 Sector-Specific Mediation Law 118 3.7.7.3 Integrated Mediation Law 119 3.8 Singapore Convention on Mediation 119 3.8.1 Purpose of the Singapore Convention 119 3.8.2 Scope of the Singapore Convention 120 3.8.3 Singapore Convention Enforcement Mechanisms 121 3.8.3.1 Enforcement Exceptions Under the Convention 121 3.8.3.2 ``Seat ́ ́ of Mediation Under the Convention 123 3.8.4 Application of the Singapore Convention to Investment Disputes 124 3.9 Conclusion 125 Sources 126 International Conventions and Rules 126 Domestic Rules and Legislation 126 References 127 Articles 127 Books and Book Chapters 129 Official Reports 130 Websites and News Articles 131 Chapter 4: Mediating Sovereign Debt Disputes 132 4.1 Advantages of Mediating Sovereign Debt Disputes 132 4.2 Disadvantages of Mediating Sovereign Debt Disputes 135 4.3 Practical Considerations of Mediating Sovereign Debt Disputes 138 4.3.1 Commencing Sovereign Debt Mediation Proceedings 139 4.3.2 Choice of Procedural Rules in Sovereign Debt Mediation Proceedings 140 4.3.3 Selecting the Mediator in Sovereign Debt Mediation Proceedings 141 4.4 Overcoming Resistance to Mediating Investment Disputes 142 4.4.1 Comparing the Origins and Growth of Investment Arbitration and Mediation 142 4.4.2 Particular Benefits of Mediation Overlooked in Investment Disputes 144 4.4.3 Political Resistance to Investment Mediation 146 4.4.4 Promoting Investor-State Mediation 147 4.4.4.1 Domestic Governments ́ Coercive Measures to Stimulate Use of Mediation 147 4.4.4.2 Coercive Measures to Promote Investor-State Mediation 148 4.4.4.3 Coercive Measures in Investment Treaties 149 4.4.4.4 Coercive Measures in Dispute Resolution Practice 150 4.4.4.5 Reinforcing ISDS Efficiency Requirements 151 4.4.4.6 Problems with Coercive Measures to Promote Investor-State Mediation 153 4.5 Conclusion 156 Sources 157 International Conventions and Rules 157 Domestic Rules and Legislation 158 References 158 Articles 158 Books and Book Chapters 159 Cases 161 Official Reports 161 Websites and News Articles 162 Chapter 5: Conclusion 163 Sources 166 International Conventions and Rules 166 Domestic Rules and Legislation 167 Bibliography 169 Articles 169 Books and Book Chapters 176 Cases 182 Official Reports 183 Websites and News Articles 185