From Pari Passu to Par in Parem ? A Brief history of Argentina’s Sovereign-Debt Litigation and its Outcome

International Law Matters is pleased to welcome this guest post from Alexandre Belle.  Alexandre is a LLM student at the University of Glasgow in Scotland.  He completed his master’s degree in law at the Université catholique de Louvain in Belgium. Follow him on twitter @Alexlubelle

Sovereign-debt litigation is interesting for two reasons. First of all, the topicality of the question is undeniable as demonstrated by recent US decisions and the emotion they provoked in the legal doctrine. But more than this, sovereign-debt litigation also reminds us of a fascinating and frightening reality: that a nation state, the cornerstone of modern society, can default. The sudden growth of litigation on sovereign debt also highlights the fundamentally hybrid nature of sovereign debt as an instrument created through contractual means in order to achieve a public purpose.

The purpose of this contribution is to focus on Argentina’s reconstruction and its troubles with US courts, as it constitutes a clear-cut example of the judicial, economic, and political issues on sovereign-debt litigation. At the origin of today’s litigation before US courts lies Argentina’s economic crisis between 1998 and 2001 that was caused by a forced deflation of Argentina’s economy and a lack of liquidity of the South American republic government.  This economic crisis led Argentina into the most important debt-restructuring process in history[1] ($85 billion dollars (US)). In 2005, cumbersome and fruitless negotiations with its creditors led Argentina to make a unilateral offer, proposing to pay $62.3 billion (US) of the total sum owed in principal[2]. Ninety-three percent of the bondholders accepted this offer; and since then, Argentina has fulfilled its obligation towards them. Continue reading