Foreword: Of Lawyers, Leaders, and Returning Riddles in Sovereign Debt

This volume contains the research and recollections of more than a doze

Courts of Good and Ill Repute: Garoupa and Ginsburg’s Judicial Reputation: A Comparative Theory

Nuno Garoupa and Tom Ginsburg have published an ambitious book that seeks to account for the great diversity of judicial systems based, in part, on how courts are designed to marshal the power of a high public opinion of the judiciary. Judges, the book posits, care deeply about their reputations both inside and outside the courts. Courts are designed to capitalize on judges’ desire to maximize their reputation, and judges’ existing stock of reputation can affect the design of the courts which they serve. We find much to like in this book, ranging from its intriguing and ambitious positive claims to its masterful use of comparative case studies from around the globe. However, we also have questions about the ability of the theory to hang together in a unified manner and to do the work assigned to it

Sovereign Bonds and the Collective Will

The purpose of this study was to enrich the environment for llama (Lama glama) and alpaca (Vicugna pacos) in a zoo. The zoo is located in northern Sweden (Umeå, Mickelträsk). The llama herd consists of three individuals of breed qara, two males and one female and the alpaca herd consists of six individuals of breed huacaya, one male, four females and one foal. The species lived in separate enclosures, they lived outside all year round and they had a shelter for wind and rain protection. They feed on pasture and were fed hay and pellet concentrate. A behavioral-study was carried out in April 2014, a five-day study where each of the species were observed 3 h a day, 1,5 h in morning and afternoon. The behavioral of llama and alpaca were observed individually and each behavior was observed in terms of duration and frequency. The study observed if the animals had a possibility to implement their natural behaviors in their enclosures and whether they showed any abnormal- or stereotypical behaviors that can occur in captivity. The questions I wanted to answer were: (1) what behaviors are occurring, (2) Is it possible to indicate from the behaviors if the animals are doing well or not, (3) Is there a difference in behaviors in the morning and afternoon? (4) Is there a difference between the sexes? (5) What actions should be undertaken to enrich and improve the habitat for llamas and alpacas in a zoo? The results from the study show that llamas and alpacas show many normal and natural behaviors, no abnormal-or stereotypical behaviors were visible. Some behaviors were more common in morning and some in afternoon and there were differences in behaviors between the sexes. Example for some environmental enrichment for the llamas and alpacas in the zoo was to add logs, trees, shrubs and sand piles to the enclosure

Restructuring Sovereign Debt After NML v. Argentina

The decade and a half of litigation that followed Argentina’s sovereign bond default in 2001 ended with a great disturbance in the Force. A new creditor weapon had been uncloaked: The prospect of a court injunction requiring the sovereign borrower to pay those creditors that decline to participate in a debt restructuring ratably with any payments made to those creditors that do provide the country with debt relief. For the first time holdouts succeeded in fashioning a weapon that could be used to injure their erstwhile fellow bondholders, not just the sovereign issuer. Is the availability of this new weapon limited to the aggravated facts of the Argentine default or has it now moved permanently into the creditors’ arsenal? Only time (and future judicial decisions) will tell. In the meantime, however, sovereigns will occasionally find themselves in financial distress and their debts will occasionally need to be restructured. Venezuela already casts this chilly shadow over the sovereign debt market. If, in a galaxy not too far away, sovereign debt workouts are to have any chance of an orderly completion, a method must be found to neutralize this new weapon. Judging by the secondary market prices of different series of Venezuelan sovereign bonds, large amounts of money are being wagered that it cannot be done

Talking One\u27s Way Out of a Debt Crisis

The policy of Euro-area officialdom in the period 2010-2011 was to avoid, at all costs, a default and restructuring of the sovereign debt of a member of the monetary union. This policy was motivated principally, but not exclusively, by a fear that the international capital markets, if forcibly reminded of the precarious position of overindebted, growth-challenged members of a monetary union, might recoil generally from lending to European sovereigns. In short, they feared contagion. The only alternative to permitting a debt restructuring, of course, was an official sector bailout. The afflicted countries -- Greece (until 2012), Portugal, Ireland and Cyprus -- received loans from official sector sources sufficient to allow them to repay in full their maturing bond indebtedness. Whenever and wherever the crisis erupted, contagion was thus held in check by the blunt technique of smothering the outbreak -- in money. The proponents of this policy argued at the time, and argue now, that many European sovereigns in 2010 were far too fragile to endure a bout of market contagion. They argued that an acute crisis needed to be averted in order to buy time for the implementation of a gradual but more durable remedy. Had the intervening eight years been used to reduce the debt vulnerabilities of the peripheral (and even some core) states, this argument would now be powerful, indeed invincible. Unfortunately, the opposite happened. Average state indebtedness in Europe today is about one-third larger than it was in 2008. Both the member states and the market saw the reprieve as spreading a reliable official sector safety net under their exposure. So they kept on borrowing and lending. Only the zero interest rate policies of the world’s major central banks during this period have kept debt servicing costs at tolerable levels

Sovereign Debt Reform and the Best Interest of Creditors

In April 2002 the International Monetary Fund introduced a sovereign bankruptcy proposal only to be rebuffed by the United States Treasury. Where the IMF wanted a mandatory bankruptcy regime, the Treasury wanted to solve distress problems with contractual devices. Sovereign bondholders and sovereign issuers themselves flatly rejected both proposals, even though they were nominally the beneficiaries of both proponents. This Article addresses and explains this bondholder reaction. In so doing, it takes a highly skeptical view of the IMF\u27s proposal even as it shows that the incentive structure surrounding sovereign lending renders untenable the Treasury\u27s contractarian proposal. The Article\u27s analysis follows from a review and restatement of the economic learning on sovereign debt relationships. The IMF and the Treasury share the objective facilitating restructuring by substituting a regime of collective action for the prevailing practice of requiring unanimous bondholder consent to significant amendments of bond contracts. In so doing they follow a conventional wisdom respecting bond contracts under which standard unanimity provisions are inefficient and irrational. The Article shows that this dismissal of the unanimity requirement comes too quickly. Under our analysis of the problem the debtor distress, bondholders rationally may prefer to make compositions harder to conclude. There is no first best equilibrium bond contract; instead bondholders select from a menu of second best forms, making trade offs between unanimous action and collective action provisions in an imperfect world. One factor leading lenders to favor unanimous action is the need to self protect. In a world without a good faith backstop, creditors motivated by side deals can take advantage of majority rule to impose suboptimal compositions. Holding out is the only weapon available to the minority creditor. The Article argues that, given such side deals, a stable majoritarian regime cannot be achieved as a matter of free contract. Mandate will be necessary. It follows that the Treasury\u27s contractarian approach is implausible absent a backstop regime of intercreditor good faith duties. The Article draws on the history of corporate reorganization prior to the enactment of the section 77B of the Bankruptcy Act of 1934 to show that courts have grappled with these questions before, intervening aggressively on equitable principles

Restructuring Sovereign Debt After NML v. Argentina

The decade and a half of litigation that followed Argentina’s sovereign bond default in 2001 ended with a great disturbance in the Force. A new creditor weapon had been uncloaked: The prospect of a court injunction requiring the sovereign borrower to pay those creditors that decline to participate in a debt restructuring ratably with any payments made to those creditors that do provide the country with debt relief. For the first time holdouts succeeded in fashioning a weapon that could be used to injure their erstwhile fellow bondholders, not just the sovereign issuer. Is the availability of this new weapon limited to the aggravated facts of the Argentine default or has it now moved permanently into the creditors’ arsenal? Only time (and future judicial decisions) will tell. In the meantime, however, sovereigns will occasionally find themselves in financial distress and their debts will occasionally need to be restructured. Venezuela already casts this chilly shadow over the sovereign debt market. If, in a galaxy not too far away, sovereign debt workouts are to have any chance of an orderly completion, a method must be found to neutralize this new weapon. Judging by the secondary market prices of different series of Venezuelan sovereign bonds, large amounts of money are being wagered that it cannot be done