6 - Jurisdiction of Arbitral Tribunals over Sovereign Debt Disputes

Summary

The jurisdiction of arbitral tribunals to entertain sovereign bond disputes, which is primarily governed by the definition of investment as provided in applicable investment treaties, is the first stage at which such an appropriate balance is to be explored. This study has found that both the inclusion and exclusion of sovereign bonds as a protected investment reflect the policy decisions of contracting parties, and the ‘negotiated restructuring’ exception may embody a possible balance between bondholder protection and respect for negotiated debt restructuring. In the absence of an explicit reference to sovereign bond instruments, interpretative yardsticks, such as contribution, risk and territoriality as identified either in investment treaties or in the ICSID Convention may afford a balanced consideration taking into account of both the modern development of financial markets and policy decisions regarding the extent to which treaty protection should be provided.