Individual Enforcement Rights in International Sovereign Bonds

Sönke Häseler

MPRA Paper from University Library of Munich, Germany

Abstract: Sovereign bonds are notoriously hard to enforce. What little rights bondholders have can be vested either collectively or individually. It seems that investors, particularly in the US market, traditionally had a preference for the latter, which hindered financial market reform projects, such as the universal adoption of collective action clauses in 2003. This paper uses a range of theoretical approaches to discuss whether it is indeed in the bondholder’s collective interest to be allowed to individually sue and attach the debtor country’s assets following a default. Furthermore, it examines the landmark case of Elliott Associates v. Peru to attempt a quantitative assessment of just how much sovereign bondholders actually value individual enforcement rights. I find that even the single most important event to reinforce creditor rights in recent years had no noticeable impact on bond prices.

Keywords: sovereign debt; collective action clauses; fiscal agency agreements; trustees (search for similar items in EconPapers)
JEL-codes: F34 K12 (search for similar items in EconPapers)
Date: 2008-11-10
New Economics Papers: this item is included in nep-law and nep-reg
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https://mpra.ub.uni-muenchen.de/11518/1/MPRA_paper_11518.pdf original version (application/pdf)

Related works:
Working Paper: Individual enforcement rights in international sovereign bonds (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:11518

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