Most models of contracting behavior assume that contract terms are meant to be enforced, whether through legal or relational means. That assumption extends to dispute resolution terms like arbitration clauses. According to theory, contracting parties adopt arbitration clauses because they want...

The conventional wisdom is that sovereigns repay their debts not because they fear litigation but because they wish to preserve their reputation in the capital markets or because they have some other incentive to repay. The ongoing case of NML Capital v. Argentina has the potential to shatter...

This essay revisits the role of legal enforcement in sovereign debt markets. The conventional view, which has long held sway in the economic literature, is that the law of sovereign immunity denies creditors effective legal remedies when governments do not repay their debts. To many observers,...

This paper examines the intersection between two fundamental attributes of Euro Area sovereign debt. The first is that sovereigns tend to issue bonds governed by their own law, which makes a debt restructuring comparatively easy. The second is the standardized collective action clause (CAC)...

The academic literature on sovereign debt largely assumes that law has little role to play. Indeed, the primary question addressed by the literature is why sovereigns repay at all given the irrelevance of legal enforcement. But if law, and specifically contract law, does not matter, how to...

Commercial databases now make available to paying clients information about the legal terms in sovereign loan contracts. This information is important to academic researchers, to policy institutions such as the International Monetary Fund, and to investors and other market actors. For a random...

Debates about sovereign debt markets presume these markets are unique, because sovereign governments are unique borrowers. To the extent observers look elsewhere for guidance, it is to corporate debt markets. We argue that this conventional view—though useful to a point—has substantially and...

In 2016, its economy in shambles and looking to defer payment on its debts, the Venezuelan government of Nicolás Maduro proposed a multi-billion dollar debt swap to holders of bonds issued by the government's crown jewel, state-owned oil company Petroleós de Venezuela S.A. (“PDVSA”). A new...

This paper describes George Washington's administration response to a plea for emergency war financing from French colonists who were trying to quash a slave rebellion in Haiti (then Saint Domingue). Washington bypassed Congress and authorized assistance to the French planters, hoping that...

Venezuela is in a severe economic crisis. An October 2016 debt swap bought some time for the beleaguered state-owned oil company Petróleos de Venezuela, S.A. (PDVSA), but there remains speculation about default by both PDVSA and the government. The fact that Venezuela's economy is heavily...