Subnational insolvency : cross-country experiences and lessons

Subnational insolvency is a reoccurring event in development, as demonstrated by historical and modern episodes of subnational defaults in both developed and developing countries. Insolvency procedures become more important as countries decentralize expenditure, taxation, and borrowing, and broaden subnational credit markets. As the first cross-country survey of procedures to resolve subnational financial distress, this paper has particular relevance for decentralizing countries. The authors explain central features and variations of subnational insolvency mechanisms across countries. They identify judicial, administrative, and hybrid procedures, and show how entry point and political factors drive their design. Like private insolvency law, subnational insolvency procedures predictably allocate default risk, while providing breathing space for orderly debt restructuring and fiscal adjustment. Policymakers'desire to mitigate the tension between creditor rights and the need to maintain essential public services, to strengthen ex ante fiscal rules, and to harden subnational budget constraints are motivations specific to the public sector.Bankruptcy and Resolution of Financial Distress,Debt Markets,Banks&Banking Reform,Strategic Debt Management

Managing subnational credit and default risks

As a result of worldwide decentralization, subnational debt is rising. Subnational debt crises in major developing countries in the 1990s have led to strengthened regulatory frameworks for subnational borrowing and insolvency. With the fragility of the global recovery and increasing public debt, and the structural trends of decentralization and urbanization, it becomes more important to prudently manage subnational default risks. Although the regulatory frameworks share central features, the historical context and entry points for reform drive variations across countries. Addressing soft budget constraints is integral to the regulatory framework. Ex ante fiscal rules for subnational governments attempt to limit default risks; ex post regulation predictably allocates default risk, while providing breathing space for orderly debt restructuring and fiscal adjustment, as well as the continued delivery of essential public services. The regulatory reforms are inseparable from the reform of broader intergovernmental fiscal systems and financial markets.Bankruptcy and Resolution of Financial Distress,Debt Markets,Access to Finance,Banks&Banking Reform,Subnational Economic Development

Elusive Certainty: Implications of Donegal v Zambia

This is the final published version of the article. It was originally published by Euromoney Institutional Investor PLC in International Financial Law Review and can be found online here: http://www.iflr.com/Article/1977093/IFLR-magazine/Elusive-certainty.html

Boilerplate in International Economic Law

Boilerplate treaty provisions are identical or nearly identical terms that reflect settled legal language in treaties with different states parties. They are often taken from model treaties or templates and reflect non-negotiated “default rules” or rules that emerged in international practice, rather than individually tailored provisions adapted to the circumstances of the specific contracting parties. Although widespread in international economic law, boilerplate provisions have not been subject to much scrutiny, unlike their distant cousins in contract law. This essay highlights drivers and functions of boilerplate in international economic law along with core expectations from rationalist and behavioral approaches. Boilerplate can provide efficient solutions to international economic problems, for instance by reducing contracting costs, and provide bargaining leverage in asymmetric negotiations. Yet boilerplate can also result in unintended and unwanted consequences, such as when drafters fail to carefully consider “default” provisions or have an excessive preference for the status quo