The world’s first mass claim in investor
arbitration has sparked a debate about its
role in sovereign debt disputes.
Before Greece, there was Argentina. In late 2001, in the throes of economic disaster, Argentina ended a brief interlude as a model capitalist by defaulting
on $81 billion in bonds. Since then, the holders of Argentine bonds
who would not accept a restructuring deal have been trying to get
their money back in court—and elsewhere.
Last summer, in Abaclat v. Argentina, an arbitration stemming
from the Argentine default, a World Bank arbitration panel shocked
the legal establishment by recognizing the world’s first mass claim
in investor-state arbitration. Or, as some are calling it, the world’s
first investor-state class action arbitration.
Commentators rushed to proclaim a new avenue for bondholder
recovery, while also calling the decision a major threat to world
financial stability. They contend that creditors won’t agree to
restructure debt if they believe they can recover more money by
holding out. The dissenting arbitrator in the matter, Georges Abi-Saab, protested that the ruling extends arbitral authority “over a
vast new field” and threatens to undermine “the desperate interna-
White & Case’s Carolyn Lamm (left), Jonathan Hamilton, and Andrea Menaker: Arbitrating against Argentina on behalf of 60,000 claimants.
By Michael D. Goldhaber
Photograph by Douglas Sonders