Home International Economic Law Archive for category "Financial Crisis"


Published on November 4, 2015        Author: 

I invited our Book Review Editor, Professor Isabel Feichtner, to write a Guest Editorial, which was published on the blog in July. As the reader will immediately note it would have been foolish, given the circumstances addressed in that Editorial, to wait for the next issue of EJIL and so I proposed that it be posted immediately on EJIL: Talk! where it was widely read and justly applauded. Given its importance, going well beyond the so-called Greek Crisis, we republish it in the current issue of the Journal as an official EJIL Editorial – which of course, as is the case with all Editorials in this Journal, represents the views of the author, not of EJIL as such.

It is our hope that this Editorial will stimulate a broader discussion on our role as international lawyers in today’s world of politics. To this end, let me make an open call for contributions, to the Journal and to EJIL: Talk!, on the role of international law scholarship in making sense of questions of how the refugee crisis, austerity politics, megaregionals, security politics, and so on interrelate, and how we as international lawyers can usefully intervene.

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Filed under: Editorials, EJIL, Financial Crisis

The Greek Sovereign Debt Crisis, the Right to be Free from Economic Coercion, and the Greek Election

Published on September 16, 2015        Author: 

People gathered at the ‘NO’ rally ahead of the Greek Referendum in early July.

The Greek sovereign debt crisis has occasioned much discussion on a number of issues that are of interest to international lawyers, in particular after the 25th of January 2015, when the left-wing SYRIZA party (Greek acronym of the full name, literally the ‘Coalition of the Radical Left’), having won the election by some considerable margin, formed a government whose strategy was to challenge Greece’s creditors over the much despised (in Greece, that is) Greek bailout programme. These issues include: the question of the odiousness of Greek debt (and whether it can be repudiated; interestingly the UN GA passed a Resolution on 11 September 2015 regarding the ‘basic principles on sovereign debt restructuring processes’, during the vote for which the caretaker government of Greece opted to abstain), the issue of German reparations and of the compulsory war loan of 1942, as well as the issue of economic coercion into a new bailout agreement (commented on here) which Greece accepted in July and August 2015 (and which led to the splintering of the governing party and to fresh elections scheduled for September).

In this post, just ahead of the snap election that has been called for 20 September 2015, I will briefly discuss the bailout programme between 2010 and 2014 and explain the arguments on the basis of which it was challenged by the SYRIZA-led government (section I). Then I will describe the negotiation which led to the new agreement, which has been seen (in many circles at least) as an attempt at regime change in Greece (section II). Finally, I will argue that this episode does not constitute unlawful economic coercion, as there is no right of a State to be free from economic coercion in international law (section III). That subject I treat in much more detail in a paper written for the project led by Dan Joyner and Marco Roscini on the ‘Fundamental Rights of States’. The paper is now available on SSRN and will appear, along with other relevant papers, in a special issue of the Cambridge Journal of International and Comparative Law.  Read the rest of this entry…

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Comments Off on Republic of Argentina v. NML Capital Ltd.: The Global Reach of Creditor Execution on Sovereign Assets and The Case for an International Treaty on Sovereign Restructuring
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Iceland not responsible for the liabilities of its deposit insurance scheme

Published on January 28, 2013        Author: 

In a landmark decision, the EFTA Court on 28 January 2013 dismissed all claims brought by the EFTA Surveillance Authority against Iceland in the Icesave case. The Authority had alleged that Iceland had breached its obligations under Directive 94/14/EC on deposit guarantee by failing to compensate Icesave depositors and had violated the prohibition on non-discrimination in the Directive and Article 4 of the EEA Agreement by prioritising payments to domestic savers. The court, referring to the collapse of the Icelandic banking system as an “enormous event” (para. 161), found that Iceland was not responsible for the liabilities of the Icelandic deposit insurance scheme that was overwhelmed with claims following the collapse of Iceland’s three major banks.

Icesave refers to two branches of the Icelandic bank Landsbanki that accepted deposits offering comparatively high interest rates in the UK and the Netherlands. Deposits in these branches were primarily the responsibility of the Icelandic Depositors’ and Investors’ Guarantee Fund (TIF). Following the wholesale collapse of Iceland’s banking system in October 2008, savers in the UK and the Netherlands lost access to their deposits on 6 October 2008. The Icelandic Parliament adopted emergency legislation on the same day to split Landsbanki into a good and a bad bank. By virtue of the same legislation, it gave priority to depositors as compared to other creditors (for further background on the Icesave dispute, including the unsuccessful negotiations between Iceland and the UK/Netherlands, see my ASIL Insight Iceland’s Financial Crisis – Quo Vadis International Law).

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ITLOS order Ghana to release Argentine navy ship

Published on December 17, 2012        Author: 

On 15 December, the International Tribunal for the Law of the Sea (ITLOS) ordered Ghana to release the Argentine military training vessel ARA Fragata Libertad (see oral proceedings). NML Capital, an investment company focused on distressed debt based in the Cayman Islands and owned by Elliot Associates, a US hedge fund, had earlier obtained an order from the Ghana Superior Court of Judicature (Commercial Division) to attach the Libertad moored in the port of Trema to satisfy a judgment by a US District Court for payment on defaulted Argentine bonds. The Libertad was on an official goodwill mission in Ghana’s internal waters at the time of the attachment. Read the rest of this entry…

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Argentina’s Sovereign Debt Default Cases: Some Recent Developments in a Continuing Saga

Published on November 9, 2012        Author: 

More than ten years have passed since Argentina defaulted on its external debt obligations in December 2001. However, the repercussions of the Argentine financial crisis continue to contribute to the development of international law. This brief note provides a short overview of the most recent decisions of different domestic courts arising out of this Argentinian saga: NML Ltd et al. v the Republic Argentina before the US Court of Appeals decided on 26th October 2012 (see reporting here, here, here and here), and the decision of the Ghanaian Commercial Court of 2nd October 2012 (see Opinio Juris, BBC, Al Jazeera,  and elsewhere: here, and here), while reference will be made to the NML v Argentina case, before the UK Supreme Court which was decided on 6th July 2011 (see reporting here and here).

These three cases pronounced on inter-related, but distinct, legal issues (enforcement of foreign awards, state immunity, and non-discriminatory treatment of bondholders) arising out of the Argentine decision to default on its external debt. In combination, they have far-reaching legal implications. It is noteworthy that different courts from around the globe repeatedly ruled in favour of bondholders and against Argentina. Although Argentina in and out of court has invoked political arguments, such as the implications of the court’s approach to the Eurozone crisis resolution efforts (in NML v Argentina before the US Court of Appeals) and the nature of the claimants as ‘vulture funds’ (see here reacting to the Ghanaian Commercial Court ruling; see also Lord Phillips and Lord Collins in NML v Argentina  [2011] UKSC 31, paragraphs 1 and 104-107 respectively), domestic courts consistently prioritise a more legal or stricto sensu approach and promote the Rule of Law in international economic and financial relations.

Background and US Proceedings

After the default in 2001, Argentina made exchange offers to holders of bonds, which were governed by the Fiscal Agency Agreement (FAA). Read the rest of this entry…

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The German Constitutional Court and the Euro-Crisis: The Emperor‘s New Clothes?

Published on September 20, 2012        Author: 

 Daniel Thym is Professor of Public, European and International Law at the University of Konstanz

Domestic German debates about the euro-crisis have had an unreal character so far. In the face of an economic crisis with global repercussions, the German public has been fascinated by the role of the Constitutional Court whom they admire. A vast majority of Germans trust that the country’s highest justices will steer the euro-debate through troubled waters with legal arguments. This confidence in the ability of Germany’s top constitutionalists, including several public law professors, was always bound to lead to disappointment.

It is true that the German Constitutional Court cannot be held responsible for the excessive media hype (or indeed opinion polls) about its role. However, it has to shoulder some responsibility. In recent years, the Court’s Second Senate had nourished the expectation that its interpretation of the principle of democracy was a lodestar for rescue operations. The debate reminded me of the fairy tale ‘The Emperor‘s New Clothes’. Those who aspire to ever more prestigious garments as a sign of power and wisdom risk being found to be naked at the end of the day. This applies to the German judicial ‘sovereign’ in the same vein as to the entourage who longed to gain from the prestige of their glorious ruler.

The Court’s latest judgment on the European Stability Mechanism (ESM) (also discussed by Michael Waibel here) and related instruments is an excellent demonstration why the desire for the pomp and circumstance of imperial times, remains an illusion (at least in Germany). The lesson is evident: the time has come to recalibrate the (legal) debate on euro rescue operations in Germany and beyond. Read the rest of this entry…

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Karlsruhe gives green light for German ESM ratification

Published on September 12, 2012        Author: 

On September 12, 2012, the German Constitutional Court dismissed several constitutional complaints that sought an injunction to prevent German ratification of the European Stability Mechanism (ESM) – a central pillar of the Eurozone’s crisis response – and the Fiscal Treaty in the preliminary phase of the proceedings (extracts in English). A full ruling is expected in a few months. German ratification is required for the ESM treaty to enter into force, and critical in financial terms for the ESM’s credibility. The Court’s preliminary ruling means that the last hurdle for the ESM to enter into force has now been cleared. German ratification should follow in the next few weeks.

The court conditioned German ratification on two reservations to the ESM treaty: first, the German capital subscription needs to be limited to 190 billion Euros, as provided by the ESM Treaty (though the ESM’s capital may be increased beyond this ceiling pursuant to the procedure forseen in Article 10 of the ESM Treaty); and second, notwithstanding the confidentiality of the ESM’s deliberations, the German Parliament needs to be fully informed about operations of the ESM.  The Bundesverfassungsgericht seized its one chance to foreclose two possible, but unlikely interpretations of the ESM Treaty that would conflict with the German Constitution before interpretative authority passes to the Court of Justice under the ESM Treaty.

The Court’s insistence on two reservations is only a small  “but”. The Court took issue with two aspects that are marginal to the firepower and effectiveness of the ESM. The decision has virtually no effect on how the ESM will operate, and in particular on the capital that the ESM will have its disposal. It could lengthen the German ratification process by a few weeks, but the Court’s decision has removed substantial  unertainty about the Eurozone crisis response. Most other Eurozone member countries, including France and Spain, have already ratified the treaty. According to Article 48 of the ESM Treaty, the Treaty enters into force once countries representing 90 percent of capital subscriptions have ratified. The German share in of the total capital subscriptions of 700 billion Euros is just over 27 percent.

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