Clauses & Controversies Ep 167 - Will the Flip Clause Enter the Canon?
Jan 5, 2026
Contract innovation in sovereign debt is rare, sparking interest around the new 'flip clause.' This clause allows investors to bypass selected governing laws, coming from concerns over New York legislation. The duo explores the origins of this idea through early attempts in Sri Lanka and Suriname, highlighting its complexities. They share skepticism about its real-world effectiveness, viewing it as more symbolic than practical. A discussion on alternatives reveals simpler solutions, while weighing the costs and implications for investors wraps up their analysis.
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Early Flip Clause Experiments
- The first flip clause investors asked for appeared in Sri Lanka and resurfaced in Suriname later.
- Suriname's 2025 bond included a lengthy, multi-step flip clause that surprised the hosts.
Multi-Stage Jurisdictional Flips
- Suriname's clause allowed cascading switches: New York → English law → Delaware law with odd jurisdictional pairings.
- The hosts found the unidirectional flipping confusing and legally messy.
Why Investors Want Flip Clauses
- Flip clauses try to let investors escape a jurisdiction if its legislature enacts unfavorable rules.
- The clause pairs governing law changes with potential jurisdiction changes, which complicates enforcement expectations.