ICSID has rejected Slovak Postal Bank’s claim against Greece for PSI losses on 9 April 2015. Click here for award.
This is what I had written before the case concluded:
Poštová Banka is a Slovak bank that alleges to have purchased Greek sovereign bonds in 2010 (along with its Cypriot shareholder, Istrokapital SE.) which were subject to the 2012 haircut. They argue that under the Greece-Slovak Republic and the Cyprus-Greece bilateral investment treaties they are entitled to compensation for their losses. This recent case, only lodged with ICSID in May 2013 is probably one of many to follow challenging Greece’s measures to deal with its financial crisis. The Treaty between the Hellenic Republic and the Czech and Slovak Federal Republic was signed on 3.6.1991. When Slovakia gained its independence from Czechoslovalia on January 1, 1993, it assumed the rights and responsibilities singed by the Federal entity previously. Therefore the terms of the Greece-Czechoslovakia BIT became the content of a Greece-Slovakia treaty. The treaty in its definitions section (art 1) states that investment covers every kind of asset including (art 1.c) claims to money or to any performance under contract having a financial value. Returns are defined as including amounts yielded by an investment (art 2). The treaty affords MFN and national treatment to investors (Art 3). Article 4 offers full security and warrants compensation for expropriation unless an expropriatory measure is taken in the public interest under due process of law, the measure is clear and non discriminatory and prompt adequate and effective compensation is paid. This compensation is to amount to the market value of the affected investment before the measure became public knowledge (art 4.2.c). If losses are incurred due to a state of emergency or other exceptional situation the treaty provides (Art 5) that investors will receive treatment no less favourable than afforded to others (Greeks or third party nationals). The jurisdiction of ICSID as the investor-state dispute resolution forum is asserted in Art 10. Interestingly, the receipt of compensation under an insurance contract does not offer a bar to arbitration (Art 10.3).
A Slovak national (or entity) who had purchased Greek bonds prior to the haircut could utilise the provisions of the BIT to formulate a series of arguments. For a Treaty claim to exist on the basis of the Greek Slovak BIT, an investor (claiming Slovak nationality or corporate registration and in possession of old Greek bonds through primary or secondary market purchase) would need to show that their rights under Art 1 (or 2) were violated by a state act. The investor would most likely claim that the introduction of the CACs by legislation constitutes a sovereign act which resulted in the diminution in value of their investment. Such investment would arguably fall under the Treaty as a contract of financial value. The loss sustained could be treated as an expropriation warranting compensation. The allegation of expropriation would be based upon the lack of compensation for the losses suffered by the investor (diminution of value of the bonds) and potentially discriminatory treatment as the haircut did not extent to the institutional holdings of Greek bonds, nor to foreign law denominated bonds. Under the MFN clause such discrimination would be considered a violation of Treaty standards. On the assumption that investors convince the tribunal to proceed (overcoming jurisdictional challenges) and win on the substantive ground (expropriation), they would claim restitution to the face value of the pre-haircut bonds. The Greek response to expropriation/discrimination claims will be multifaceted, challenging claims on jurisdictional and substantive grounds.
A quick decision from ICSID suggests that Postova did not clear the jurisdictional hurdles. Now that the decision is published, I will offer a case note.