Belgium’s Bond Law Will Have No Effect

Belgium’s Bond Law Will Have No Effect

Post date : 06.09.2015 5:57 pm

Belgium, a country that has recently debated the rationale for its own existence, today provided even more reason to continue having that discussion.  By a unanimous vote of the Belgian Parliament’s Finance Committee, a provision was passed that attempts to limit the amount so-called “vulture lenders” could collect on debt.

It is striking to note that in casting their votes today, Belgian lawmakers ignored their own Central Bank, which sent a letter warning the members of the Committee against its adoption.  In its letter, the Central Bank specifically warned against legal problems that the bill would likely bring, and it admonished lawmakers to set “more objective” criteria.

While Argentina’s government, which lobbied heavily in favor of the bill’s passage, will no doubt trumpet today’s action as an important development, make no mistake:  Belgium’s law won’t have any effect on Argentina’s self-imposed predicament.  Argentina still faces judgments ordering it to honor contracts that it agreed to.  Moreover, Argentina is still locked out of capital markets until it resolves its dispute with creditors.

For more on Belgium’s misguided attack on creditor rights, check out ATFA Chairman Robert Shapiro’s op-ed in last week’s Wall Street Journal Europe.  Importantly, Shapiro noted that the bill’s own authors seemed to recognize the limited impact of their actions, and that they were hoping that its symbolism would spur “broader national and international initiatives.”  Perhaps as a premonition of coming legal challenges, the bill’s own text includes a giant qualifier, stating that, “this law is applied subject to the application of international treaties, EU law and bilateral treaties.”

Instead of lobbying for meaningless anti-creditor legislation that will have no effect on its own situation, Argentina’s leaders should be negotiating with creditors.