Law Commons^™

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 …