Sovereign Immunity And Sovereign Debt, W. Mark C. Weidemaier
Dec 2013
Sovereign Immunity And Sovereign Debt, W. Mark C. Weidemaier
W. Mark C. Weidemaier
The law of foreign sovereign immunity changed dramatically over the course of the 20th century. The United States abandoned the doctrine of absolute immunity and opened its courts to lawsuits by private claimants against foreign governments. It also pursued a range of other policies designed to shift such disputes into litigation or arbitration (and thus relieve political actors of pressure to intervene on behalf of disappointed creditors). This article uses a unique data set of sovereign bonds to explore how international financial contracts responded to these legal and policy initiatives. The article makes three novel empirical and analytical contributions. The …
Indiana Jones, Contracts Originalist, W. Mark C. Weidemaier
Dec 2013
Indiana Jones, Contracts Originalist, W. Mark C. Weidemaier
W. Mark C. Weidemaier
The process of drafting a contract can be routine, almost automated. Over a long enough time, lawyers may stop paying attention to contract language or even forget why it is there. The problem is acute with standard-form contracts and perhaps especially so with financial contracts such as sovereign bonds. How should courts interpret contract language when neither the parties, nor their lawyers, nor any other relevant player in the market can credibly explain what it does? This essay addresses this question in the context of one of the most contested interpretive questions in modern international finance: the meaning of the …
A People's History Of Collective Action Clauses, W. Mark C. Weidemaier, Mitu Gulati
Dec 2012
A People's History Of Collective Action Clauses, W. Mark C. Weidemaier, Mitu Gulati
W. Mark C. Weidemaier
For two decades, collective action clauses (CACs) have been part of the official-sector response to sovereign debt crisis, justified by claims that these clauses can help prevent bailouts and shift the burden of restructuring onto the private sector. Reform efforts in the 1990s and 2000s focused on CACs. So do efforts in the Eurozone today. CACs have even been suggested as the cure for the US municipal bond market. But bonds without CACs are still issued in major markets, so reformers feel obliged to explain why they know better. Over time, a narrative has emerged to justify pro-CAC reforms. It …
Reforming Sovereign Lending: Modern Initiatives In Historical Context, W. Mark C. Weidemaier
Dec 2011
Reforming Sovereign Lending: Modern Initiatives In Historical Context, W. Mark C. Weidemaier
W. Mark C. Weidemaier
In response to the Eurozone sovereign debt crisis, policymakers have initiated a range of reforms falling at both poles of the “hard”/“soft” law continuum. One of the most ambitious is the United Nations Conference on Trade and Development’s initiative to identify what it calls “Principles of Responsible Sovereign Lending and Borrowing.” The Principles aim to transform attitudes about sovereign lending in general, and sovereign loan contracts in particular, through consensus-building, promulgating model contract terms, and other soft law approaches. Principle 15, for example, envisions the use of collective action clauses (CACs) to ensure that debt restructurings occur “promptly, efficiently, and …
How Markets Work: The Lawyer's Version, W. Mark C. Weidemaier, Mitu Gulati
Dec 2011
How Markets Work: The Lawyer's Version, W. Mark C. Weidemaier, Mitu Gulati
W. Mark C. Weidemaier
In this article, we combine two sources of data to shed light on the nature of transactional legal work. The first consists of stories about contracts that circulate widely among elite transactional lawyers. Surprisingly, the stories portray lawyers as ineffective market actors who are uninterested in designing superior contracts, who follow rather than lead industry standards, and who depend on governments and other outside actors to spur innovation and correct mistakes. We juxtapose these stories against a dataset of sovereign bond contracts produced by these same lawyers. While the stories suggest that lawyers do not compete or design innovative contracts, …
Contracting For State Intervention, W. Mark C. Weidemaier
Dec 2009
Contracting For State Intervention, W. Mark C. Weidemaier
W. Mark C. Weidemaier
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 to arbitrate disputes and because they believe that a counter-party who has agreed to arbitrate will keep that promise rather than incur the resulting legal or extra-legal sanction. In this article, I describe how this standard account cannot explain the origins of arbitration clauses in sovereign bond contracts. Drawing on original archival research and secondary sources, the article traces …