Courts and sovereign eurobonds : credibility of the judicial enforcement of repayment

  • While focusing on the protection of distressed sovereigns, the current debate intended to reform the International Financial Architecture has hardly addressed the protection of creditors rights that varies among laws. I suspect however that this constitutes an essential determinant of the success of suggested solutions, especially under the contractual approach. Based on a sample of bonds issued by developing countries states in the period, January 1987 to December 1997, I find that, for given contract characteristics (e.g. listing markets and currency), the governing law is selected according to its ability to enforce repayment. However, although the New York law seems looser and incur larger enforcement costs than the England&Wales law, the former permits equivalent yearly credit amounts. I interpret this as a consequence of the existence of a larger set of valuable assets (e.g. trade) in the US that constitute implicit securities. My findings yield important implications for the reforms. In particular, provided that there exists a seemingly equivalent enforcement credibility between England and New York laws, the prompt implementation of the contractual approach solution should constitute a valuable first step toward efficient sovereign debt markets. October 2003.

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Author:Issam Hallak
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2003,34
Series (Serial Number):CFS working paper series (2003, 34)
Document Type:Working Paper
Year of Completion:2003
Year of first Publication:2003
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2005/06/13
Tag:Bankruptcy; Collective Action Clause; Creditor Rights Protection; Law and Finance; Sovereign Debt Restructuring Mechanism
GND Keyword:Entwicklungsländer; Gläubigerschutz; Auslandskredit; Finanzierung; Länderrating; Länderrisiko; Justiz; Justizverwaltung; Euromarkt; Schätzung; Low-income Countries
Issue:October 2003
Page Number:28
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht