International Law Protection of Creditors Holding Debt Instruments Governed by Domestic Law

Abstract

AbstractChapter 5 concerns international law protection of creditors holding debt instruments governed by domestic law. International law can restrict the way in which a sovereign debtor treats its creditors holding debt governed by domestic law during a sovereign debt restructuring in several ways. First, sovereign debtors may be obliged to treat their creditors according to minimum standards under customary international law, which contains rules on due treatment of foreigners and their property. This is normally referred to as the ‘international minimum standard’ and is discussed in Section 5.2. Second, a sovereign debtor may have promised a certain standard of treatment to its creditors in an international treaty. Rights in international investment agreements (IIAs) are discussed in Section 5.3, while Section 5.4 examines requirements under the European Convention on Human Rights (ECHR). Creditors have no specific rights to be treated equally by sovereign debtors under customary international law, IIAs, or the ECHR. However, all these rules potentially provide creditors with a certain level of protection against discriminatory treatment. The chapter considers whether the rights of creditors are protected under the different regimes that govern sovereign debt restructurings, as well as to what extent creditors are protected (substantive protection) and how this protection relates to the question of intercreditor equity. International law subjects may also hold debt instruments governed by domestic law. Creditors of domestic law governed debt instruments who are themselves subjects of international law are not normally protected by the international law provisions discussed in this chapter.