Hedge Funds May Sue Greece
Hedge Funds Look to Sue Greece over Bond Payments
Among the many solutions discussed by the hedge funds looking to prevent a Greek debt restructuring was an interesting, although not very feasible solution: sue Greece in the European Court of Human Rights. This highlights the lengths at which these funds might go to ensure bond payments from Greece. Greece is considering legislation that would force private bondholders to suffer losses, not including its largest bondholder: the European Central Bank.
The novel approach would have the funds arguing in the European Court of Human Rights that Greece had violated bondholder rights, though that could be a multiyear project with no guarantee of a payoff. And it would not be likely to produce sympathy for these funds, which many blame for the lack of progress so far in the negotiations over restructuring Greece’s debts.
The tactic has emerged in conversations with lawyers and hedge funds as it became clear that Greece was considering passing legislation to force all private bondholders to take losses, while exempting the European Central Bank, which is the largest institutional holder of Greek bonds with 50 billion euros or so.
Legal experts suggest that the investors may have a case because if Greece changes the terms of its bonds so that investors receive less than they are owed, that could be viewed as a property rights violation — and in Europe, property rights are human rights. Source
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