* Some investors reject Athens bond swap
* Past settlements successful when holdout claims small
* Legal battles can be lengthy, expensive
By Tommy Wilkes and Sarah White
LONDON, March 14 (Reuters) - For a small band of bondholders refusing to sign up to Greece's debt restructuring, past experience shows they could more than triple their investments, but may have to wait decades for a payout.
In the small number of sovereign debt negotiations where states have given preferential treatment to one set of investors over another - such as in Peru - settlements have taken years.
Funds challenging Argentina, now eclipsed by Greece as the biggest sovereign restructuring, are finding out just how tough it can be to collect payment from a government. A decade after the country defaulted in 2002, several funds are still racking up expensive legal fees as Buenos Aires refuses to budge.
"The bottom line is it's not easy to enforce judgments against states ... money may be owed but states often can't and don't pay holdouts more than in the debt restructuring. If they did then no one could do a debt restructuring," said one lawyer familiar with previous fights between state and "holdouts".
Investors representing about 9 billion euros ($11.81 billion) out of 206 billion euros of Greek debt have so far refused to take part in Athens bond swap, part of measures to secure a rescue package from the International Monetary Fund and European Union for the country to avoid a disorderly default.
More than 95 percent of creditors participated in the bond swap this month, in which they will lose about 74 percent on the value of their investments.
The number of holdouts - hedge funds, retail investors and specialist "vulture" funds that buy debt in, or close to, default before trying to win improved repayment terms - could drop by March 23, the deadline for investors in Greek bonds governed by foreign law to decide their stance.
It is difficult to put a precise number on how much holdouts have wrung from several governments, including Peru, Brazil and the Congo, which have defaulted during the last 40-years.
But precedent suggests some of the most successful payouts occur when any dissenting group is small, represented by just one or two funds, very patient, and arguing over low amounts.
Elliott Management, one of the best-known vulture funds in the industry, made a 400 percent gain in 2000 on its purchase of Peruvian debt, settling for $58.4 million five years after its restructuring, said Rodrigo Olivares-Caminal, an academic at Queen Mary, University of London, specialising in sovereign debt restructurings.
Several sources close to Athens' debt talks said they believed Elliott was involved in Greek debt. The fund has declined to comment throughout the debt negotiations on its position.
Holdouts in Greece are focusing on the minority of bonds Athens issued under more investor-friendly foreign law. If funds can buy up enough of a particular issue to stop Athens forcing them to take losses, there is little the country can do.
In at least one of these bonds, which sources would not identify but is likely to be small, holdouts already have a stake of 75 percent - more than enough to fend off Athens, two sources close to the matter said.
This could set the scene for a long and bitter standoff between the two sides, each using the courts to try to force the other into defeat. Last week Athens said it had no extra cash for holdouts, but some investors dismissed this as a bluff.
Holdouts say that because the size of the bonds they are targeting is small, Greece will want to avoid the headache of continued legal wrangling and settle, one source familiar with their tactics said.
During the Irish bank restructurings - the closest thing to talks with a stricken European state after the government bailed out many banks - opponents to a Bank of Ireland deal, including a group of some 2,000 pensioners and investors, reached a settlement on a 75-million-pound bond.
After a campaign by Albert Kempster, a 70-something ex-farmer who took the bank to London's High Court, BoI withdrew its proposal to force losses on that particular bond before the case started. A settlement figure was not disclosed.
But not all countries pay up. Despite increasing its reserves to at least $40 billion since 2001, Argentina has refused to settle by offering its creditors materially better terms in its 2005 and 2010 restructurings.
Some of the funds which profited did so only because of a rise in value of GDP warrants tied to the bonds they owned, and which increased with the export-led economy's rebound.
Vulture funds like Elliott and Kenneth Dart's EM Ltd have little to show for their efforts in Argentina so far, although a recent court ruling that the country must pay interest to one of the holdouts has raised their hopes.
In Greece, the battle could be even harder if other European nations and the International Monetary Fund back its position.
Many of the emerging markets which faced vulture funds were deemed "rogue debtors". Unlike Greece, most did not sit down with lenders and instead sprang sudden defaults on markets.
"In the Greek situation there was ... a very different sense at the IMF and other organisations about Greece's ability to pay. It was clear, they just didn't have the money," a lawyer who advised creditors in Argentina said.
The success of Athens' bond swap is only likely to reinforce that attitude. Most Greek debt is now in official - and ultimately taxpayers' - hands.
Every euro that is paid out to a private holdout creditor is a euro Greece will not be able to remove from its debt pile, making it harder to repay the money it owes elsewhere.
But the promise of payouts will still embolden some holdouts to try their luck.
As well as Peru, Elliott once collected a multi-million dollar payout from Congo-Brazzaville, one source familiar with the matter said.
Brazil, Panama and Zambia also faced settlement claims over the repayment of their debt, although it is not clear how much money was involved and the size of any settlements.
"Litigating gains can be very attractive if someone has deep pockets and can wait 10 years to collect," Olivares-Caminal said.