MJIEL Vol 14 Issue 3 2017 - Article 5
Sovereign Debt Restructuring:
Is There a Place for International Investment Arbitration?
Marina Fyrigou-Koulouri
ABSTRACT: Sovereign borrowing and sovereign defaults are not just a contemporary issue. Throughout history, states have used loans as a means of financing and often the borrowers ended up defaulting and the borrowing being restructured. Debt defaults and restructuring have always been an important subject in international relations and law. Their treatment evolved as the international legal world evolved too, from instituting a cause of a justum bellum to being negotiated in the developed international instruments. However, an international sovereign debt regime has still not been established. The novel development in the realm of sovereign debt, though, comes after Argentina’s 2001 default supporting the application of international investment arbitration in sovereign debt restructuring. This paper begins by discussing the concept of investor-state arbitration around sovereign debt default and particularly sovereign debt restructuring. Then, with an overview of the general structure of sovereign borrowing and its restructuring, it presents the interconnectedness of this environment and the systemic risk of international finance. Finally, it argues that it is essential to overcome any controversies about whether sovereign debt should be considered an ‘investment’ under the international investment regime or if sovereign restructurings could be reviewed by arbitral tribunals, and seriously focus on the need of an international sovereign debt restructuring mechanism.

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