The Legal Framework of Sovereign Debt Management (eBook)

Cover 1
Introduction 17
1. The persistence of sovereign defaults 23
1.1. The insolvency of sovereign borrowers 23
1.2. The timelessness of modified debt crisis 26
1.3. The absence of institutional mechanisms 28
2. The place of international law in sovereign debt management 30
2.1. The search of a legal framework 30
2.2. The unsuccessful concrete proposals 32
2.3. Determination of the field of study 33
PART I. SOVEREIGN DEBT – BETWEEN PUBLIC INTEREST AND PRIVATE INSTRUMENTS 37
Title I. CONTRACTUALISATION OF DEBT SUPPORTS 38
CHAPTER 1. Decline of International Financial Agreements 39
1. Financial cooperation and debt policy 39
1.1. International relations and interstate financial agreements 40
1.1.1. Sovereign financial obligations and international law 40
1.1.2. Economic diplomacy through financial agreements 46
1.2. The termination of bilateral financial agreements 49
1.2.1. The absence of an international conventional framework 50
1.2.2. The challenge of international financial treaties 54
2. Multilateral financial cooperation 58
2.1. Multilateralisation of public financing 58
2.1.1. Sovereign financing by the World Bank and the International Monetary Fund 58
2.1.2. The objective of a sovereign debt management 62
2.2. Regionalisation of sovereign financing 64
2.2.1. Multiplication of public operators 64
2.2.2. Entry of financial markets in international public finance 66
CHAPTER 2. Generalisation of Private Contracts through Banking Intermediation 68
1. Banking intermediation in sovereign financing 68
1.1. Private creditors versus sovereignty 68
1.1.1. Historical intervention of private creditors 69
1.1.2. Sovereign debtors through economic prism 71
1.2. Emergence of international syndicated loan markets 74
1.2.1. International syndicated loans financing sovereign debt 75
1.2.2. Collapse of US banks and fear of contagion 77
2. Privatisation of sovereign debt 79
2.1. Private law and sovereign debt 79
2.1.1. Contractual standardisation 79
2.1.2. Managing sovereign risk 82
2.1.3. Standard covenants applied to sovereign borrowers 84
2.2. Disintermediation of debt market 87
2.2.1. A debt system organised by private operators 87
2.2.2. Disintermediation of debt products 88
Title I. CONCLUSION 91
Title II. IMPACT OF DEBT PRIVATISATION ON SOVEREIGN DEBT DEFAULT 92
CHAPTER 3. Financialisation of Sovereign Debt and Imposition of Market Practices 93
1. Internationalisation of sovereign debt instruments 93
1.1. Configuration of sovereign debt primary market 93
1.1.1. Predominance of sovereign debt bonds 94
1.1.2. Heterogeneous bond issuance practices 97
1.2. Sovereign debt bonds on secondary markets 101
1.2.1. A financial reference for markets 101
1.2.2. Sovereign financing securitisation 103
2. Internationalisation of sovereign debt operators 104
2.1. Professionalisation of debt operators 104
2.1.1. Concentration of operators and dispersion of investors 105
2.1.2. Professionalisation of debt management 108
2.2. States and international institutional regulators 111
2.2.1. States and organisation of financial markets 111
2.2.2. Debt management by central banks and supervisory authorities 112
CHAPTER 4. Reinforcement of Sovereign Debt Crises 113
1. Sovereign debt crises 114
1.1. From financial crisis to sovereign debt crisis 114
1.1.1. Anatomy of the crisis and analysis of a contagion 115
1.1.2. Result of a predictable situation 117
1.1.3. Criteria of sovereign default on the financial market 119
1.2. Challenges and pending questions 122
1.2.1. Lack of international financial architecture 122
1.2.2. Lack of lender of last resort for States 124
1.2.3. Legal inconsistencies in sovereign financing 127
2. Costs of default 129
2.1. Restricted funding 129
2.1.1. Financial, economic and commercial sanctions 130
2.1.2. Political consequences 131
2.2. Arbitrability of sovereign debt litigation 132
2.2.1. End of sovereign immunity on debt matters 132
2.2.2. Success of holdout creditors 135
Title II. CONCLUSION 139
PART I. CONCLUSION 140
PART II. PUBLICISATION OF SOVEREIGN DEBTMANAGEMENT 141
Title III. INSTITUTIONAL FRAMEWORK OF CONTRACTUAL INSTRUMENTS 143
CHAPTER 5. Choice of Contractual Measures for Debt Restructuring 143
1. Ad hoc restructuring fora for collective processing 144
1.1. Restructuring plans of the Paris and London Clubs 144
1.1.1. The Paris Club, from restructuring to debt reduction 144
1.1.2. The London Club, banking committees for restructuring 148
1.2. Greek restructuring under the auspices of the Troika 151
1.2.1. Towards the establishment of a European legal framework for restructuring 151
1.2.2. Unequal contribution of private creditors 155
1.2.3. Absence of formal hierarchy of creditors 157
2. Contractual clauses and litigation 159
2.1. Procedural issues of the Argentine Republic 159
2.1.1. Holdout creditors before courts 159
2.1.2. Alternative diplomatic methods 163
2.2. Legal technicality and privatisation of sovereign debt litigation 166
2.2.1. Clauses anticipating litigation 166
2.2.2. Integration of collective action clauses 168
2.2.3. Limits of contractual approach and ad hoc mechanisms 170
CHAPTER 6. International Financial Institutions and Rescheduling 171
1. The International Monetary Fund, an ad hoc rescheduling regulator 172
1.1. Mediator of renegotiations 173
1.1.1. A financial mediator and a lender of last resort 173
1.1.2. IMF and debt restructuring 178
1.2. IMF proposals to manage restructuring 181
1.2.1. The sovereign debt restructuring mechanism 181
1.2.2. Renunciation to the sovereign debt restructuring mechanism 184
2. International financial institutions and debt management 186
2.1. Sovereign indebtedness versus development 186
2.1.1. Initiators of debt management 187
2.1.2. Debt renegotiation and debt relief 189
2.2. Monitoring sovereign debt levels 192
Title III. CONCLUSION 196
Title IV. SOVEREIGN DEBT MANAGEMENT, AN INTERNATIONAL PRIORITY FOR STATES 197
CHAPTER 7. Global Debt Management and Framework Proposals 198
1. Institutional action to restore financial multilateralism 198
1.1. Strengthening international cooperation 199
1.1.1. Status quo of the international consensus 199
1.1.2. Promoting financial multilateralism 202
1.2. Sharing good management practices 204
1.2.1. International audits 204
1.2.2. Towards an accounting of the overall debt level 206
2. Defining rules to ensure stability 208
2.1. Financial innovation for collective interest 208
2.1.1. Modifying global finance 209
2.1.2. Towards a regulation of European debt bonds 210
2.2. A unique way to multilateral dispute settlement 211
2.2.1. A mutualisation of benefits 211
2.2.2. Towards a European crisis resolution framework 216
CHAPTER 8. Elaboration of an International Economic Law of Sovereign Indebtedness 218
1. General principles for comprehensive operations 219
1.1. Soft law and international financing law 220
1.1.1. Codes of good conduct, reports and information sharing 220
1.1.2. Towards a standardised debt management 221
1.2. Soft law regulation of sovereign financing 223
1.2.1. Soft law and international financial institutions 223
1.2.2. Soft law and market professionals 226
1.2.3. Soft law and the United Nations Conference on Trade and Development 230
2. An imperfect law for sovereign debt management 233
2.1. De-formalisation of international law 234
2.2. Enhancing general principles 237
Title IV. CONCLUSION 241
PART II. CONCLUSION 242
GENERAL CONCLUSION 243
Bibliography 249