Context as Power: Defining the Field of Battle for Advantage in Contractual Interactions

Article published in the Wake Forest Law Review

Lenders\u27 Roles and Responsibilities in Sovereign Debt Markets

Academic and policy debates about the multi-trillion-dollar sovereign debt markets presume these markets are unique. The reason is that sovereigns differ from other borrowers. To the extent observers look elsewhere for guidance, they turn to corporate debt as a comparison. For example, official actors have repeatedly intervened in sovereign debt markets by prodding market participants to draft loan contracts that simulate aspects of corporate bankruptcy. We argue that the conventional view of sovereign debt—though useful to a point—has substantially and unjustifiably limited the academic and policy agenda. Rather than dwell on the unique characteristics of sovereign borrowers, we examine the practices and incentives of sovereign lenders. We show that, when viewed through this lender-focused prism, sovereign debt has as much or more in common with consumer than with corporate debt. Using consumer debt as a metaphor, we reveal gaps in the debate over how to reform sovereign debt markets. First, assessments of the sustainability of sovereign debt presently—and unjustifiably—overlook the negative consequences of excessive debt for the borrower’ s citizens. Second, reform initiatives designed to promote “responsible lending” lack clearly articulated goals, an omission that will impair the development of a coherent reform agenda. While not a perfect metaphor, experience with consumer lending and financial regulation can help fill these gaps in our understanding of sovereign lending, producing a clearer vision of the roles and responsibilities of lenders in sovereign debt markets

Lenders\u27 Roles and Responsibilities in Sovereign Debt Markets

Academic and policy debates about the multi-trillion-dollar sovereign debt markets presume these markets are unique. The reason is that sovereigns differ from other borrowers. To the extent observers look elsewhere for guidance, they turn to corporate debt as a comparison. For example, official actors have repeatedly intervened in sovereign debt markets by prodding market participants to draft loan contracts that simulate aspects of corporate bankruptcy. We argue that the conventional view of sovereign debt—though useful to a point—has substantially and unjustifiably limited the academic and policy agenda. Rather than dwell on the unique characteristics of sovereign borrowers, we examine the practices and incentives of sovereign lenders. We show that, when viewed through this lender-focused prism, sovereign debt has as much or more in common with consumer than with corporate debt. Using consumer debt as a metaphor, we reveal gaps in the debate over how to reform sovereign debt markets. First, assessments of the sustainability of sovereign debt presently—and unjustifiably— overlook the negative consequences of excessive debt for the borrower’s citizens. Second, reform initiatives designed to promote “responsible lending” lack clearly articulated goals, an omission that will impair the development of a coherent reform agenda. While not a perfect metaphor, experience with consumer lending and financial regulation can help fill these gaps in our understanding of sovereign lending, producing a clearer vision of the roles and responsibilities of lenders in sovereign debt markets

Expanded Merchant Tort Liability, Democratic Degradation, and Mass Market Standard Form Contracts—A Two-Part Critique of Boilerplate: The Fine Print, Vanishing Rights, and the Rule of Law (Part II)

Analyzing a difficult subject that pervades contract law and which is vital to the national economy, many scholars have written about boilerplate contracts. With her 2013 book, Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law, Professor Margaret Jane Radin weighs in on the discussion. In a complement to existing contract remedies against abusive boilerplate, she proposes a new tort that she calls “intentional deprivation of basic legal rights.” She also identifies another new tort theory that deems abusive boilerplate to be a defective “product” under the law of products liability. Radin further contends that these merchant practices with their wide scale forfeiture of citizen rights threaten the democratic order previously maintained by the state’s legal rights regime. Radin terms this latter phenomenon “democratic degradation.” Radin’s tort reforms for alleviating this perceived degradation are the focus of this Article. Although her book has achieved great renown, receiving high praise from a number of prominent commentators, with plaudits such as “groundbreaking,” “a great achievement,” and a “masterpiece,” I respectfully suggest that her reforms have problems on doctrinal and normative grounds. In my Article, I summarize the author’s argument, identify my concerns, and propose an alternative formulation. My counter-thesis is that expanded merchant tort liability is unnecessary and counterproductive. Case law and statutory law already provide courts with effective remedial tools; furthermore, these doctrines take a pro-consumer perspective in key areas of mass market standard form contracting

Nine Justices and #MeToo: How the Supreme Court Shaped the Future of Mandatory Arbitration and Sexual Harassment Claims

When the Federal Arbitration Act was signed into law in 1925, none would have guessed it would be used to perpetuate a system of silence surround workplace sexual harassment. With the Supreme Court’s continued stance to liberally applying the Act to uphold arbitration agreements contained within employment agreements over the past decades, it is apparent that any change needed to protect vulnerable workers will need to come from federal legislation. The rise of the #MeToo movement across the nation, and throughout various employment sectors, may be the push needed to bring about the necessary change

A Soft Law Mechanism for Sovereign Debt Restructuring Based on the UN Principles

The ultimate goal of sovereign debt restructuring is to restore the sustainability of public debt with high probability. But this is not happening. Since 1970, more than half of the restructuring episodes with private creditors were followed by another restructuring or default within five years — evidence inconsistent with any sensible definition of »restoration of sustainability of public debt with a high probability.« This evidence suggests that relief for distressed debtors is often insufficient for achieving the main goal of a restructuring, delaying the recovery from recessions or depressions, with large negative social consequences. The United Nations General Assembly approved in September 2015 nine principles that should guide sovereign debt restructuring processes. The UN has laid out steps in the right direction. Although in the short term the creation of a multinational statutory framework for debt crises resolution does not seem to be feasible, the UN principles provide a valuable basis for the next stages of the process. This article analyzes the usefulness of those principles. Section 2 discusses how the principles could help in improving the resolution of sovereign debt crises. Section 3 explores a possible way forward along the lines of an incremental approach