Häseler, Sönke (2011): Collective action clauses in sovereign bonds. Published in: Sovereign Debt: From Safety to Default
Download (77Kb) | Preview
The universal adoption of collective action clauses (CACs) was the most promising reform proposal in recent debates on sovereign debt crisis management. Academics and the public sector had been promoting CACs since 1995, yet market practice did not begin to change until 2003. This delay is often attributed to the opposition of investors and sovereign borrowers to CACs. This article evaluates the publicly stated as well as the suspected private motives of the two sides to block the spread of CACs. It draws on a wide range of existing evidence and adds some new theoretical considerations to show that there is no reason to be sceptical of CACs unless bailouts exist as an alternative crisis resolution mechanism. This conclusion may be of interest purely for the sake of historical accuracy. But more importantly, it may help to better understand and to assess any potential future resistance from market participants, e.g. in the process of introducing CACs in bonds governed by German law.
|Item Type:||MPRA Paper|
|Original Title:||Collective action clauses in sovereign bonds|
|Keywords:||sovereign debt restructuring; sovereign default; collective action clauses; moral hazard|
|Subjects:||F - International Economics > F3 - International Finance > F34 - International Lending and Debt Problems
K - Law and Economics > K3 - Other Substantive Areas of Law > K33 - International Law
K - Law and Economics > K1 - Basic Areas of Law > K12 - Contract Law
|Depositing User:||Sönke Häseler|
|Date Deposited:||11. Dec 2011 02:08|
|Last Modified:||11. Feb 2013 19:04|
Boorman, J. 2003. Remarks in a Panel Discussion at the IMF Conference ‘Sovereign Debt Restructuring Mechanism (SDRM).’ www.imf.org/external/np/tr/2003/ tr030122.htm.
Bradley, M., J. Fox, and M. Gulati. 2008. “The Market Reaction to Legal Shocks and their Antidotes: Lessons from the Sovereign Debt Market.” Duke Law School Legal Studies Research Paper No. 211.
Buchheit, L. and M. Gulati. 2000. “Exit Consents in Sovereign Bond Exchanges.” University of California Law Review 48: 59-84.
Buchheit, L. and M. Gulati. 2002. “Sovereign Bonds and the Collective Will.” Emory Law Journal 51: 1317–64.
Chamberlin, M. 2002. “A Casual Observer’s Commentary on the Taylor Proposal and the EMCA’s Model Covenants for New Sovereign Debt Issues.” New York: Trade Association for the Emerging Markets.
Eichengreen, Barry and Richard Portes. 1995. Crisis? What Crisis? Orderly Workouts for Sovereign Debtors. London: Centre for Economic Policy Research.
Esho, N., I. Sharpe, and N. Tchou. 2004. “Moral Hazard and Collective Action Clauses in the Eurobond Market.” Working Paper, University of New South Wales.
Gelpern, A. and M. Gulati. 2007. “Public Symbol in Private Contract: A Case Study.” Washington University Law Quarterly 84: 1627-1715.
Gelpern, A. and M. Gulati. 2008. “Innovation after the Revolution: Foreign Sovereign Bond Contracts Since 2003.” Capital Markets Law Journal 4(1): 85-103.
Gugiatti, M. and A. Richards. 2003. “Do Collective Action Clauses Influence Bond Yields? New Evidence from Emerging Markets.” www.rba.gov.au/rdp/rdp2003-02.pdf.
Gugiatti, M. and A. Richards. 2004. “The Use of Collective Action Clauses in New York Law Bonds of Sovereign Borrowers.” Georgetown Journal of International Law 35(4): 815-836.
Häseler, S. 2008. “Individual Enforcement Rights in International Sovereign Bonds.” German Working Papers in Law and Economics. www.bepress.com/gwp/default/vol2010/iss1/art1.
Häseler, S. 2009. “Collective Action Clauses in International Sovereign Bonds – Whence the Opposition?” Journal of Economic Surveys 23(5): 882-923.
Häseler, S. 2010. “Trustees versus Fiscal Agents and Default Risk in International Sovereign Bonds.” German Working Papers in Law and Economics. www.bepress.com/gwp/default/ vol2010/iss1/art1.
IMF. 2002. “Collective Action Clauses in Sovereign Bond Contracts – Encouraging Greater Use.” www.imf.org/external/np/psi/2002/eng/060602a.pdf.
IMF. 2003. “Progress Report to the International Monetary and Financial Committee on Crisis Resolution.” www.imf.org/external/np/pdr/cr/2003/eng/090503.pdf.
Krueger, A. 2002. “Sovereign Debt Restructuring and Dispute Resolution.” Speech on 06/06/02. www.imf.org/external/np/speeches/2002/060602.htm.
Liu, Y. 2002. “Collective Action Clauses in International Sovereign Bonds.” IMF Working Paper. www.imf.org/external/np/leg/sem/2002/cdmfl/eng/liu.pdf.