Clauses & Controversies

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

What Do We Know About International Investment? What allows countries to borrow and to attract investment? Often the answer emphasizes the ability to make credible commitments, and this is often supposed to be easier for countries with democratic institutions. For some countries—often supposed to be those with weaker domestic institutions—agreeing to submit disputes to international investment arbitration is thought to be a way to make promises credible. Many in the civil society arena absolutely hate investment arbitration, thinking it is unfair to borrower countries. The rejoinder, of course, is that it is necessary to enable investment. As it turns out, we actually know relatively little about the factors that enable governments to make credible promises. Rachel Wellhausen (Texas) is one of the foremost experts in the political economy of international investment and finance. Her work spans the investment arbitration system, the relevance of the so-called “democratic advantage,” and other fundamental questions. She joins us to talk about the ability of governments to attract investment. Producer: Leanna Doty

Financial Contract Design Lachlan Burn and Jeff Golden, formerly of Linklaters and Allen & Overy, are two of the most respected lawyers in the capital markets world. Together and separately, they have been at the forefront of almost every effort over the past forty years to improve contract documentation and increase certainty in legal determination in financial transactions. In this episode, they talk with Mitu--Mark is away this week--about how contract production methods vary across jurisdictions (NY v. London, Common v. Civil Law, etc.) and the importance of institutional culture in organizations (e.g., ISDA, the FMLC) in which they have played key roles. Producer: Leanna Doty

Sovereign debt guru Layna Mosley discusses the key role of political philosophy in sovereign debt decisions. They explore reasons why political scientists study sovereign debt, the impact of elections and political institutions, and the influence of domestic politics on borrowing choices. The podcast also explores 'original sin' in developing countries' debt, determinants of government bond denomination, and the role of IMF and World Bank in the rise of local currency.

The Greek Restructuring of 2012 – Filling in the Gaps Greece’s restructuring of March 2012 was one of the biggest, deepest, and fastest in sovereign debt history. Much has been written about it already, but there are still significant gaps in our understanding of how matters played out on the ground. For example, how and why did the restructurers decide to move from a 75% vote requirement in each bond (the standard at the time) to a class voting mechanism (a bankruptcy model)? Were they not worried about legal risk? And what about the reversal of the threat to not pay a single cent to any holdouts? Sovereign debt guru Andrew Shutter, one of the architects of the 2012 Greek restructuring, joins us to talk about these and other questions. Producer: Leanna Doty