Clauses & Controversies

What's going on with Venezuela? And can we use it to talk about Blue Bonds? Venezuela has been in and out of the news. A potential forced sale of CITGO. Random creditor attempts to attach Florida assets. And a recent piece in the Financial Times about widespread environmental destruction, which requires capital (ideally in connection with a debt restructuring) to reverse. Sounds like time for another Venezuela episode. But this time, maybe with some Belize mixed in, since Belize's recent restructuring made funds available for the environment and might (to optimists, anyway) be a template for other countries. We talk with Steven Bodzin, deputy editor and Andean region reporter, and Carla Dager, ESG global lead, for REDD Intelligence, a news and information firm focusing on distressed debt and restructuring. Steven and Carla share their deep knowledge of the two countries and help us figure out what to make of recent developments. Producer: Leanna Doty

The Environmental Benefits of the Belize Restructuring There has been a lot of hype about the Belize restructuring, especially the issuance of a so-called Blue Bond and the decision to devote some of the debt savings to marine conservation. Jill Dauchy is founder and CEO of the Potomac Group, which advised The Nature Conservancy on the deal. We ask Jill about the transaction and its key players--for instance, about the importance of political risk insurance by the Development Finance Corporation. Producer: Leanna Doty

The History Behind Lawsuits Over Old Chinese and Russian Sovereign Debt Lawsuits to enforce long-defaulted Chinese bonds (by an engineer in Alabama) and Russian bonds (by the wonderfully-named Carl Marks & Co.) have a storied place in sovereign debt lore. They sit at the intersection of history, politics, and economics, mixed with a bit of law a whole lot of international intrigue. We talk with historian/geographer Elya Zhang of the University of Rochester about the back story behind these courtroom dramas and the broader history of modern Chinese sovereign debt. Producer: Leanna Doty

From Russia With ... Well, Frankly, A Bit of Concern Getting paid on an expropriation claim is difficult in the best of circumstances, even when the sovereign wants to appear hospitable to foreign investors. Russia under Vladimir Putin is not so interested in seeming hospitable. This week, we discuss the famous Yukos litigation with Paul Stephan (Virginia), whose expertise spans international law, international finance, international tax, contracts, and other fields. We also talk about Paul’s forthcoming book on what the future holds for the international legal system. Producer: Leanna Doty

From Commercial Bank Loans to Blue Bonds Sovereign debt markets have evolved significantly over the years, from syndicated bank loans, to bonds, to the current infatuation with ESG lending. Antonia Stolper (Shearman & Sterling) joins us to talk about the evolution of sovereign debt practice over the course of her eminent career. We also talk about Belize's recent debt restructuring, where some say creditors agreed to significant additional reductions in exchange for promises by Belize to invest the savings in environmental conservation projects. Antonia helps us understand what actually happened in this deal and what its implications might be for future sovereign restructurings. Producer: Leanna Doty

Does Haiti Have a Legal Right to Compensation from France? Two earlier C&C episodes explored aspects of the Haitian Independence Debt of 1825, in which Haiti agreed to pay France an "indemnity" of 150 million francs to compensate French plantation owners who had been dispossessed by Haitians' successful fight for independence. In a new paper with Kim Oosterlinck and Ugo Panizza (link below), we explore this history, its relation to the law of odious debt, and we estimate the long-term economic consequences of the debt for Haiti. (Hint: very significant.) But might Haiti have a legal right to compensation from France? In this episode, we talk with Gunther Handl (Tulane) an expert in public international law who worked on this very question in the 2000s. Many might dismiss the prospect as fantasy, but Gunther explains why Haiti is on much stronger legal footing than many would suppose. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3894623 Producer: Leanna Doty

The Domestic Costs of Imposing Capital Controls - a Constraint on Sovereign Debtors? Stephen Nelson's (Northwestern) research explores a variety of topics fundamental to sovereign debt markets, including the politics of IMF lending and the political dynamics of borrowing in developing and emerging market countries. We are huge fans of Steve and his work, which tackles important questions in unfailingly original ways. He joins us to talk about how domestic politics affects the imposition of capital controls and about the risk that IMF lending programs might lead to worse human rights outcomes. Producer: Leanna Doty

What Exactly is the Duty of Good Faith? Are the parties to sovereign debt contracts subject to a duty of good faith and fair dealing? If so, what does this mean? We have been struggling with these questions lately, especially in the context of debt restructurings that employ arguably coercive tactics (hello, Province of Buenos Aires!). The duty also may play a role in regulating the behavior of intransigent creditors. But even ignoring sovereign debt contracts, we have some fundamental questions about the duty of good faith as it applies to "ordinary" contracts. The duty can prevent parties from taking advantage of what seem to be the express terms of the contract. When does this happen, and what justifies it? Our guests are Tess Wilkinson-Ryan and David Hoffman, both brilliant contracts scholars, both of Penn Law, and both hosts of the superb Promises Promises podcast (link below). No real talk of sovereign debt contracts in this episode. Tess and Dave help us think through the role played by the duty of good faith in contract law generally. https://podcasts.apple.com/us/podcast/promises-promises/id1527875721 Producer: Leanna Doty

The Province of Buenos Aires' Restructuring The recent restructuring of the Province of Buenos Aires' multi-billion dollar debt raises many questions. Why the hardball tactics? Why did creditors cave suddenly when initially seeming to stand tough? Who were the holdouts and will they be paid in full? Will PBA's coercive tactics harm its reputation as a borrower? And who better to ask these questions than Scott Squires of Bloomberg, one of the only financial reporters to have dug deep into the legal, political, and economic details of both the Argentine republic’s restructuring and the subsequent provincial ones. Producer: Leanna Doty

Restricting Trading in Venezuela’s Sovereign Bonds: Has it Worked? The Biden administration has continued the Trump administration’s strategy of restricting trading in Venezuelan sovereign bonds as a way of bringing to heel Venezuela’s Nicholas Maduro. Has that (innovative?) strategy shown any signs of working? Thomas Laryea (Orrick, Herrington & Sutcliffe) is one of the most respected voices in the policy space on sovereign debt, with extensive experience in both the public and private sector, joins us to answer this and other questions. We ask Thomas both about what is going to happen with Venezuela’s eventual debt restructuring given the policies that have been in place for the last five years and about his evaluation of the two new mechanisms that the Official Sector put in place to deal with the debt fallout from Covid, DSSI and the Common Framework. Producer: Leanna Doty