Ar tarptautiniai ir nacionaliniai teisės aktai efektyviai saugo investuotojų į valstybės vertybinius popierius teises valstybės nemokumo atveju? ; Does international and national legislation protect effectively the investors' rights in public securities of the state in case of insolvency?
This Master's thesis is dedicated to the analysis of investor protection mechanisms in case of state insolvency. The classic notion of state immunity provides that a state is the sovereign that is immune from judicial proceedings. However, Lithuania as well as other states waive the sovereign immunity and participate in financial markets as equal entities. Contractual relationship forms between a state and an investor who has purchased debt securities issued by the state. An investor who invests into the state securities and participates in the financial market shall be entitled to special protection, as he remains the weaker party to the relations in any case. The thesis has analysed interpretation of the notion of sovereign insolvency in international law; however, no such notion has been found. The research has shown that this notion is construed as a state's incapacity to comply with its financial liabilities. Thus, according to the world's practice, if a state has become insolvent, it is incapable of complying with the assumed financial liabilities to its creditors, i.e. high profile foreign and local banks and investors holding bonds or other debt securities of the state. Key factors determining a state's resolution to proclaim own insolvency are excessive indebtedness of the state, slow economic growth. State's insolvency and incapacity to comply with the assumed liabilities as well as debt restructuring have negative effects on financial markets, given that the state's, i.e. issuer's, debt securities have spread all over the world. In such a situation, the state launches a debt restructuring offer to its investors with the intention to amend terms and conditions of the bonds or postpone their repurchase. The Master's thesis provides comprehensive analysis of investor rights in case of a state's intention to restructure the debt. Hence, if a state is incapable of paying the nominal value of bonds to the respective bondholders, it launches an offer to exchange the bonds held to new restructured bonds and compensation of other sorts. Lithuania and other EU member states are subject to a Collective Action Clause (CAC) that establishes state securities restructuring conditions for the cases where a state is incapable of paying the primary nominal value of the securities. The European Parliament has established that all new more than one year maturity securities issued by Governments of the Eurozone, i.e. state-issued bonds, shall be subject to the CAC. These clauses are aimed at creating more favourable conditions for agreement between the state and its private sector creditors, considering that the private sector is involved. However, the concern is whether or not inclusion of such clauses into bond subscription agreements might create an obstacle for the investors to dispute such offer and reject debt restructuring. As a result, state debt restructuring would satisfy state's interests by compromising the investors' interests. Absence of the CAC from bond agreements might pose difficulties for the investors to protect the violated rights and reject debt restructuring on pari passu basis. Many scientists acknowledge that there is currently no universal system that would govern state debt restructuring and protection of investor interests. Witnessing the state bankruptcy and incapacity to pay the debt to the bondholders in Greece as well as the effect of it on other member states of the Eurozone, the European Union has adopted a resolution to establish the European Stability Mechanism (ESM) to tighten budget discipline and enforce coordination of economic and financial policies of the member states. The thesis also discusses the implications of legislative acts and institutions for investors protecting their violated rights. Analysis of investor protection mechanisms is unreasonable unless the possibility for investors to seek protection of the violated rights is discussed. Hence, the Master's thesis has also involved review of two options for the investors to protect the violated rights. The first option is to address the International Centre for Settlement of Investment Disputes, where investors initiate judicial disputes on the basis of the Bilateral International Agreement, or to apply to foreign national courts according to the governing law specified in the respective bond subscription agreement. Investors address the International Centre for Settlement of Investment Disputes primarily due to failure of national courts in a number of countries to directly ensure enforcement of investment agreements. This investor protection mechanism has proven its value as the specialized place for resolution of investment disputes, and is the most favourable rights protection mechanism that can be used by investors at present. There is little chance for the investors' claim to be satisfied if submitted to the respective country's courts. However, if the issued bond subscription agreement specifies the governing law of a country other than the issuing country's law (e.g. English law), investors have more chances when submitting the claim to the other country's courts.