When Recovering Against a Sovereign, Know Your Opponent

J.S. Held’s Inaugural Global Risk Report Examines Potential Business Risks & Opportunities in 2024

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The material in this article was researched, compiled, and written by J.S. Held. It was originally published by ThoughtLeaders4 Disputes Magazine in their November 2023 special edition, “States of Conflict: Navigating Sovereign & States Disputes and Enforcement.” The full publication can be viewed here.

This year my friend was invited to participate in a poker tournament in Las Vegas. Knowing nothing about poker, she hired a professional player to teach her. Over several evenings, he trained her and taught the rest of us in attendance. My big takeaway from these gatherings was that while there certainly is significant skill involved, what sets the real professionals apart is their ability to read their opponents. Identifying tells, recognizing patterns in behaviour, and the ability to profile your opponent makes for better decision-making and an increased chance for success. The same applies for asset recovery – particularly when you are dealing with a sovereign.

For every sovereign recovery assignment, it is important to take a two-pronged approach. On one hand you must identify and map out the sovereign’s assets, the structures (and complexities) through which they are held, their value, and location. This global view allows one to subsequently assess enforcement prospects, associated costs, and the likely timing against each asset and begin to build a recovery strategy. That is, however, only half of the process and will only get award holders so far. Equally – if not more important – is being able to read one’s opponent (i.e., the State). Alongside the asset tracing work, it is critical to understand the political landscape; who are the key decisionmakers and what makes them tick? How are certain events like elections or a big push to attract foreign direct investment likely to play out? Which state companies, projects, or assets are near and dear to the government or critical to the economy? Where is the State exposed?

All of these are essential questions that must be answered if you want to bring the State to the negotiating table; and this is always the objective. Who wants to undergo the slow and costly process of enforcing an award piecemeal across multiple jurisdictions? Once you know the political landscape, you can then truly start building a comprehensive and holistic recovery strategy.

For all those lawyers reading this, enforcement and asset seizure is only one weapon in your arsenal. A comprehensive strategy, especially when dealing with a large award, encompasses more than enforcement. Strategic communications and lobbying can be equally important tools as is looking for back channels and avenues to maintain a dialogue with the State. To be effective and to use these tools properly, you must know your opponent.

Consider Perenco versus Ecuador.

After Ecuador defaulted on its undertaking to pay a USD 374 million ICSID award in the summer of 2021, Perenco engaged us to develop their recovery strategy and advise on enforcement. After an exhaustive asset tracing assignment, we had identified significant potential assets – both in terms of value and disruption – in over a dozen jurisdictions where the legal regime offered decent prospects for successful enforcement. Each jurisdiction came with different costs and different timelines. For a few, they also came with certain benefits such as interim measures, automatic recognition of ICSID awards, or no adverse costs.

However, we needed to know which lever should be pulled, when it should be pulled, and what other tools we could deploy to amplify and accomplish our work (i.e., the which, the when, and the what). To answer these questions, we needed to understand the political backdrop in Ecuador and identify what would best motivate President Guillermo Lasso and his government to come to the negotiating table.

President Lasso was elected in May 2021 by a narrow victory on a platform of strengthening the economy and improving Ecuador’s creditworthiness abroad. Under his leadership Ecuador rejoined ICSID, revised a USD 1.5 billion funding plan from the International Monetary Fund and demonstrated a strong desire to attract foreign direct investment with a more United States-oriented stance than previous governments.

As the then newly appointed Foreign Minister, Juan Carlos Holguin, stated, “[Ecuador’s] primary objective … [is] to promote the image of the new Ecuador…more confidence, more investment, more development, more employment, and more wealth for all.” The country aimed to attract USD 30 billion in foreign investment during Lasso’s four years of administration. This was a key pillar of his government’s agenda.

At the time that we were analysing and considering the “which, when, and what” question, President Lasso was facing domestic pressure. It was against this landscape that we refined and finalised our strategy deciding to kick off recovery measures with a bang by attacking the very thing that Lasso was aiming to promote and turn around: Ecuador’s economy and creditworthiness. So, while we geared up to go after Ecuador’s assets in several jurisdictions – all of which would take time and incur potentially significant costs to realise – we made our first move in a jurisdiction where we could move quickly, with little financial recourse, and make a lot of noise. This initial play was aimed at exerting pressure on President Lasso, the Minister of Finance, and the Central Bank rather than simply asset seizure.

At the end of July 2022, Perenco served notice on the banks that served as trustees for Ecuador’s sovereign bonds in Luxembourg, just days before the coupons were due to be paid thereby raising the possibility of Ecuador defaulting on its obligations to bondholders. Perenco didn’t just take legal action in Luxembourg; they told the world about it. Domestic and international media was abuzz with Ecuador’s potential default with market watchers speculating as to how Ecuador would respond. Within days the government came out publicly and stated that it would pay its debt and shortly thereafter agreed to pay Perenco in full plus interest.

Would this have been the result if Perenco went after an oil trade or a receivable following months of recognition proceedings? I think not.

While success in poker requires significant luck as well as skill, thankfully recovery does not. With the right tools, if you know who is sitting across the table from you, it’s largely a game of skill – although sometimes a bit of luck can help.


We would like to thank Ashley Messick for providing insight and expertise that greatly assisted this research.

Ashley Messick is a Managing Director within the J.S. Held Global Investigations practice. She leads J.S. Held’s Sovereign Debt Advisory practice and has extensive experience advising on sovereign and commercial disputes, asset recovery & enforcement. As a global asset tracing and recovery expert, Ashley has led several high-profile investigations involving debtors originating from Africa, Latin America, and Russia / Central Asia. Her work has included cases against former government officials charged with embezzling state funds; multi-year investigations into attachable foreign assets of sovereigns and state-owned companies; unravelling complex fraudulent schemes; and tracing the assets of individual debtors.

Ashley is ranked Band 1 by Chambers & Partners for Asset Tracing & Recovery (Investigations Agencies) and is recommended in Who’s Who Legal’s Asset Recovery Experts 2023.

Ashley can be reached at [email protected] or + 44 20 8706 1923.

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This publication is for educational and general information purposes only. It may contain errors and is provided as is. It is not intended as specific advice, legal, or otherwise. Opinions and views are not necessarily those of J.S. Held or its affiliates and it should not be presumed that J.S. Held subscribes to any particular method, interpretation, or analysis merely because it appears in this publication. We disclaim any representation and/or warranty regarding the accuracy, timeliness, quality, or applicability of any of the contents. You should not act, or fail to act, in reliance on this publication and we disclaim all liability in respect to such actions or failure to act. We assume no responsibility for information contained in this publication and disclaim all liability and damages in respect to such information. This publication is not a substitute for competent legal advice. The content herein may be updated or otherwise modified without notice.

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