Thread by @GrundSebastian

In March 2012, Greece implemented the biggest sovereign debt restructuring in history (+€200bn).

In May 2020, the @BVerfG rendered its final decision after 6 years of bondholder litigation.

[For an overview of the litigation, see my paper: papers.ssrn.com/sol3/papers.cf…] 1/x

- To recall, +90% of 🇬🇷 sovereign debt was governed by DOMESTIC law, allowing 🇬🇷 to retroactively change the terms of the bonds.
- 🇬🇷 retrofitted a Collective Action Clause (CAC) to facilitate a bondholder vote on the restructuring through the Bondholder Act 4050/2012. 2/x

- Bondholders argued that 🇬🇷 CAC Retrofit violated their property rights.
- But the highest 🇬🇷 Court & the @ECHR_CEDH held that the CAC Retrofit was not expropriatory and did not violate the 🇬🇷 Constitution or the European Convention on Human Rights (see @astridiversen) 3/x

- Bondholders in 🇩🇪 and 🇦🇹 were dissatisfied and tried to challenge the 🇬🇷 CAC Retrofit in the Courts at home (see papers.ssrn.com/sol3/papers.cf…)
- The questions were whether 🇩🇪/🇦🇹 Courts had jurisdiction & 🇬🇷 immunity.
- The @EUCourtPress denied both.
(curia.europa.eu/juris/document…) 4/x

- In its May 2020 judgement, the @BVerfG focused on the issue of 🇬🇷 sovereign immunity for the CAC Retrofit.
- The @BVerfG concluded that while issuing sovereign bonds is a "commercial" activity (no immunity), the CAC Retrofit constituted a "sovereign" activity (immunity). 5/x

- The @BVerfG thus rejected the "once a trader always a trader" doctrine when it comes to domestic-law bonds.
- Since the 🇬🇷 CAC Retrofit relied on a 🇬🇷 law passed by the 🇬🇷 Parliament, it enjoyed immunity in foreign courts. (see for a discussion -- papers.ssrn.com/sol3/papers.cf…). 6/x

- The @BVerfG reaffirmed a more general principle that sovereign bonds governed by domestic law are essentially immune from legal challenges in foreign courts
- In sum, not a single bondholder successfully the 🇬🇷 CAC Retrofit (background --> onlinelibrary.wiley.com/doi/full/10.11…). 7/x

- However, since 2012, 🇬🇷 issued all new bonds under English law -- repeating a CAC Retrofit will be impossible going forward.
- For implications, see @ManuelidesY's paper: papers.ssrn.com/sol3/papers.cf…. On whether 🇮🇹 could emulate the 🇬🇷 strategy: papers.ssrn.com/sol3/papers.cf…. 8/x

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