Law Commons^™

How To Restructure Venezuelan Debt (¿Cómo Restructurar La Deuda Venezolana?), Mitu Gulati, Lee C. Buchheit

Faculty Scholarship

English Abstract: There is a growing consensus that Venezuela will not be able to persist for much longer with its policy of full external debt service. The social costs are just too great. This implies a debt restructuring of some kind. Venezuela, principally through its state-owned oil company, Petróleos de Venezuela, S.A. (“PDVSA”), has extensive commercial contacts with the United States. Not since Mexico in the 1980s has an emerging market country with this level of commercial contacts attempted to restructure its New York law-governed sovereign debt. Holdout creditors in a restructuring of Venezuelan sovereign debt will therefore present a …

The Puzzle Of Pdvsa Bond Prices, Paolo Colla, Anna Gelpern, Mitu Gulati

Faculty Scholarship

Market reports in the summer of 2016 suggest that Venezuela is on the brink of default on upwards of $65 billion in debt. That debt comprises of bonds issued directly by the sovereign and those issued by the state-owned oil company PDVSA. Based on the bond contracts and other legal factors, it is not clear which of these two categories of bonds would fare better in the event of a restructuring. However, market observers are convinced — and we agree — that legal and contractual differences would likely impact the payouts on the bonds if Venezuela defaults. Using a comparison …

Deterring Holdout Creditors In A Restructuring Of Pdvsa Bonds And Promissory Notes (¿Cómo Disuadir A Acreedores 'Holdout' En Una Restructuración De Bonos Y Pagarés De Pdvsa?), Lee C. Buchheit, Mitu Gulati

Faculty Scholarship

The prospect of the potential mischief that may be caused by holdout creditors in a Venezuelan sovereign debt restructuring is probably the main reason why the Maduro administration has not attempted such an exercise. The next administration in Venezuela — whenever and however it may arrive — will not want for suggestions about how to minimize or neutralize this holdout creditor threat. This short article is another contribution to that growing literature. Were the Republic of Venezuela to acknowledge that there really is only one public sector credit risk in the country, and that the distinction between Republic bonds and …

Immovable-Associated Equipment Under The Draft Mac Protocol: A Sui Generis Challenge For The Cape Town Convention, Benjamin Von Bodungen, Charles W. Mooney Jr.

All Faculty Scholarship

UNIDROIT is in the process of adopting a fourth Protocol under the umbrella of the Cape Town Convention, the MAC Protocol, which will cover mining, agricultural and construction equipment. This article addresses a challenge faced by the MAC Protocol that was not encountered in the development of the previous Protocols - the potential for MAC equipment to be associated with immovable property in ways that result in the holder of an interest in the immovable property acquiring an interest in the associated MAC equipment under the law of the State in which the immovable property is located. The article first …

Is The Wto Passé?, Kyle Bagwell, Chad P. Bown, Robert W. Staiger

Dartmouth Scholarship

No abstract provided.

The Pricing Of Non-Price Terms In Sovereign Bonds: The Case Of The Greek Guarantees, Stephen J. Choi, Mitu Gulati

Faculty Scholarship

In March 2012, Greece conducted one of the biggest and most brutal sovereign debt restructurings ever, asking holders of Greek government bonds to take net present value haircuts of near 80 percent. Greece forced acquiescence to its terms from a large number of its bonds by using a variety of legal strong-arm tactics. With the vast majority of Greek bonds, the tactics worked. There were, however, thirty-six bonds guaranteed by the Greek state, which, because of the weakness of the underlying companies, were effectively obligations of the Greek state. Yet, on these thirty six bonds, even though Greece desperately needed …

Targeted Subordination Of Official Sector Debt, Lee C. Buchheit, Mitu Gulati

Faculty Scholarship

If Greece’s debt is unsustainable, and most observers (including the IMF) seem to think it is, the country’s only source of funding will continue to be official sector bailout loans. Languishing for a decade or more as a ward of the official sector is undesirable from all perspectives. The Greeks bridle under what they see as foreign imposed austerity; the taxpayers who fund the official sector loans to Greece balk at the prospect of shoveling good money after bad. The question then is how to facilitate Greece’s ability to tap the private capital markets at tolerable interest rates. The IMF’s …

Talking One's Way Out Of A Debt Crisis, Lee C. Buchheit, G. Mitu Gulati

Faculty Scholarship

The policy of Euro-area officialdom in the period 2010-2011 was to avoid, at all costs, a default and restructuring of the sovereign debt of a member of the monetary union. This policy was motivated principally, but not exclusively, by a fear that the international capital markets, if forcibly reminded of the precarious position of overindebted, growth-challenged members of a monetary union, might recoil generally from lending to European sovereigns. In short, they feared contagion.

The only alternative to permitting a debt restructuring, of course, was an official sector bailout. The afflicted countries -- Greece (until 2012), Portugal, Ireland and Cyprus …

The Sovereign-Debt Listing Puzzle, Elisabeth De Fontenay, Josefin Meyer, Mitu Gulati

Faculty Scholarship

The claim that stock exchanges perform certification and monitoring roles in securities offerings is pervasive in the legal and financial literatures. This article tests the validity of this “bonding hypothesis” in the sovereign-bond market—one of the oldest and largest securities markets in the world. Using data on sovereign-bond listings for the entire post-World War II period, we provide the first comprehensive report on sovereigns’ historical listing patterns. We then test whether a sovereign bond issue’s listing jurisdiction affects its yield at issuance, as the bonding hypothesis would predict. We find little evidence of bonding in today’s sovereign-debt market. Instead, we …

Competing For Refugees: A Market-Based Solution To A Humanitarian Crisis, Joseph Blocher, Mitu Gulati

Faculty Scholarship

The current refugee crisis demands novel legal solutions, and new ways of summoning the political will to implement them. As a matter of national incentives, the goal must be to design mechanisms that discourage countries of origin from creating refugees, and encourage host countries to welcome them. One way to achieve this would be to recognize that persecuted refugee groups have a financial claim against their countries of origin, and that this claim can be traded to host nations in exchange for acceptance. Modifications to the international apparatus would be necessary, but the basic legal elements of this proposal already …

Pricing Contract Terms In A Crisis: Venezuelan Bonds In 2016, Elena Carletti, Paolo Colla, Mitu Gulati, Steven Ongena

Faculty Scholarship

As of this writing in June 2016, the markets are predicting Venezuela to be on the brink of default. On June 1, 2016, the 6 month CDS contract traded at about 7000bps which translates into a likelihood of default of over 90%. Our interest in the Venezuelan crisis is that its outstanding sovereign bonds have a unique set of contractual features that, in combination with its near-default status, have created a natural experiment. This experiment has the potential to shed light on one of the long standing questions that sits at the intersection of the fields of law and finance, …

Tlos And Global Financial Markets: The Case Of Derivatives, Hannah L. Buxbaum

Articles by Maurer Faculty

No abstract provided.

A No-Tribunal Sdrm And The Means Of Binding Creditors To The Terms Of A Restructuring Plan, Charles W. Mooney Jr.

All Faculty Scholarship

The paper addresses two discrete but related and essential attributes of a sovereign debt restructuring mechanism (SDRM). It first considers the merits and feasibility of an SDRM that would provide a procedure for proposing and adopting a restructuring plan for a sovereign debtor’s debt which would not involve any tribunal or administrator (a No-Tribunal SDRM). The No-Tribunal SDRM would undertake the restructuring as if the sovereign debtor and its creditors were subject to the Model CAC regime. In addition to embodying a novel and interesting structure for an SDRM—and one that eliminates the difficult hurdle of identifying a satisfactory tribunal—adoption …

An Innovative Matrix For Dispute Resolution: The Dubai World Tribunal And The Global Insolvency Crisis, Jayanth K. Krishnan, Harold Koster

Articles by Maurer Faculty

This study examines a legal experiment that occurred during the height of the global financial crisis. As markets from the United States to Europe to the Global South shook, one country – the United Arab Emirates – found itself on the brink of economic collapse. In particular, in 2009 the U.A.E’s Emirate of Dubai was contemplating defaulting on $60 billion of debt it had amassed. Recognizing that such a default would have cataclysmic reverberations across the globe, Dubai’s governmental leaders turned to a small group of foreign lawyers, judges, accountants, and business consultants for assistance. Working in a coordinated fashion, …

A Framework For A Formal Sovereign Debt Restructuring Mechanism: The Kiss Principle (Keep It Simple, Stupid) And Other Guiding Principles, Charles W. Mooney Jr.

All Faculty Scholarship

Given the ongoing work on a multilateral restructuring process for sovereign debt in the UN, consideration of the content and implementation of a sovereign debt restructuring mechanism (SDRM) is timely. The framework and content of the SDRM proposed here differs from earlier proposals in several important respects. For the classification and supermajority voting of claims in the approval a restructuring plan, it would mimic the structure and operation of the model collective action clauses (Model CACs) proposed by the International Capital Markets Association. Restructuring under a qualified sovereign debt restructuring law (QSDRL) would be guided by four principles: (i) observe …

Mega-Regional Trade, Joshua Meltzer

Brookings Scholar Lecture Series

This lecture will discuss the impact of the Trans Pacific Partnership negotiations and the Transatlantic Trade and Investment Partnership negotiations on U.S. economic competitiveness and leadership in Asia and Europe. This will lead into a discussion of large Free Trade Areas (FTA), or groups of countries that have few or no price controls in the form of tariffs or quotas between each other. FTAs allow the agreeing nations to focus on their comparative advantages and to produce the goods they are comparatively more efficient at making, thus increasing the efficiency and profitability of each country. We will explore the impact …

Hacking The Wealth Of Nations: Managing Markets Amid Malware, David P. Fidler

Articles by Maurer Faculty

No abstract provided.

The Cape Town Convention’S Improbable-But-Possible Progeny Part Two: Bilateral Investment Treaty-Like Enforcement Mechanism, Charles W. Mooney Jr.

All Faculty Scholarship

This Essay is Part Two of a two-part essay series that outlines and evaluates two possible future international instruments. Each instrument draws substantial inspiration from the Cape Town Convention and its Aircraft Protocol (together, the “Convention”). The Convention governs the secured financing and leasing of large commercial aircraft, aircraft engines, and helicopters. It entered into force in 2006. It has been adopted by sixty-six Contracting States (fifty-eight of which have adopted the Aircraft Protocol), including the U.S., China, the E.U., India, Ireland, Luxembourg, Russia, and South Africa.

This Part of the Essay explores whether an investor-state dispute settlement (ISDS) feature …

Trade, Bert Chapman

Libraries Faculty and Staff Scholarship and Research

Provides a historical overview of analysis of U.S. foreign trade policy during the early decades of the country's history. Examines bilateral U.S. trade relations with France and Great Britain, provides import and export statistics, details on commodities and products imports and exported, trade statistics, and information on the political and economic factors shaping U.S. trade during this period.

Niche Markets And Their Lessons, Cally Jordan

Faculty Papers & Publications

Markets are full of nooks and crannies. Out of the glare of the big economies and their public exchanges, markets specializing by financial product, activity, or industry thrive, often attracting little by way of formal regulatory oversight. But there is another kind of specialized market, one which is geographically and politically determined albeit internationally focused. Luxembourg, Ireland, Dubai, Bahrain, Malaysia, Singapore, Switzerland, among others, these are some of the world’s niche markets.

It is a hard business being a niche market, operating in a competitive and often unforgiving environment, engaging in constant repositioning and facing inherent limitations on growth. Surprisingly, …

Differentiating Among International Investment Disputes, Julie A. Maupin

Faculty Scholarship

Can investor-state arbitration tribunals, which exercise jurisdiction over limited claims involving discrete parties, render awards that deliver individualized justice while also promoting systemic fairness, predictability and coherence? The answer, I argue, is a qualified yes – provided that the methods employed are tailored to the particular characteristics of each dispute. Using three well-known investment arbitrations as case studies, I illustrate that investor-state disputes vary widely in terms of their socio-legal, territorial, and political impacts. Significant variances along these three dimensions call for a differentiated approach to investor-state dispute resolution. I outline what such an approach might look like and analyze …

From Pigs To Hogs, Stephen J. Choi, Mitu Gulati

Faculty Scholarship

The question of whether, and to what extent, markets price contract terms in government bond issues has been one of considerable debate in the literature. We use a natural experiment thrown up by the Euro area sovereign debt crisis of 2010-2013 to test whether a particular set of contract terms – ones that gave an advantage to sovereign guaranteed bonds over garden variety sovereign bonds – was priced. These contract terms turned out to be important for the holders of guaranteed bonds during the Greek debt restructuring of 2012, where they helped the holders of guaranteed bonds escape the haircut …

Santa Anna And His Black Eagle: The Origins Of Pari Passu?, Benjamin Chabot, Mitu Gulati

Faculty Scholarship

One of the most debated issues in international finance is the meaning of the pari passu clause in sovereign bonds. The clause is ubiquitous; it is in almost every single foreign-law sovereign bond out there. Yet, almost no one seems to agree on its meaning. One way to cut the Gordian knot is to track down the origins of the clause. Modern lawyers may have simply copied the clause from the documents of their predecessors without understanding its meaning. But surely the people who first drafted the clause knew what it meant. Four enterprising students at Duke Law School may …

Qualification Of Taxable Entities And Treaty Protection, Anthony C. Infanti, Bernard Moens

Articles

This report was prepared for the 2014 International Congress of the International Fiscal Association. The general reporters for the Congress asked IFA branches around the world to prepare a report designed to provide information on how countries address (1) the question of when domestic and foreign entities are treated as transparent or taxable and (2) conflicts between different countries’ treatment of entities as transparent or taxable for treaty purposes. This report constitutes the IFA U.S.A. Branch’s submission to the general reporters.

The report is divided into two sections. The first section of the report provides a general description of how …

Remittances From Puerto Rico: Unsuspected Transnational Locality In Times Of Crisis, Sheila I. Velez Martinez

Articles

This paper looks at immigrant remittances from Puerto Rico as a tool to understand how immigrant communities have faced and engaged the economic crisis. For example, from the data reviewed, it stems that immigrant remittances sent from Puerto Rico do not follow the same patterns as remittances sent from the United States and Europe inasmuch as they seem less affected by the global financial crisis and local unemployment rates. The research conducted also tends to indicate that money transfers from Puerto Rico might allow us to grasp the growing economic transnational relationships that are being maintained by varied immigrant communities …

Harmonizing Choice-Of-Law Rules For International Insolvency Cases: Virtual Territoriality, Virtual Universalism, And The Problem Of Local Interests, Charles W. Mooney Jr.

All Faculty Scholarship

This paper explores the potential content and feasibility of a set of harmonized choice of law rules (HICOL Rules) that would apply in insolvency proceedings. It contemplates a main insolvency proceeding opened in a debtor’s center of main interests (“COMI”) and the existence of (or possibility of opening) one or more non-main (or secondary) proceedings. It also contemplates the possibility that an insolvency representative in a main or non-main proceeding may seek and be granted recognition in another state under the UNCITRAL Model Law on Cross-Border Insolvency (codified as Chapter 15 of the Bankruptcy Code in the U.S.) Under HICOL …

The Bankruptcy Code’S Safe Harbors For Settlement Payments And Securities Contracts: When Is Safe Too Safe?, Charles W. Mooney Jr.

All Faculty Scholarship

This Article addresses insolvency law-related issues in connection with certain financial-markets contracts, such as securities contracts, commodity contracts, forward contracts, repurchase agreements (repos), swaps and other derivatives, and master netting agreements. The Bankruptcy Code provides special treatment—safe harbors—for these contracts (collectively, qualified financial contracts or QFCs). This special treatment is considerably more favorable for nondebtor parties to QFCs than the rules applicable to nondebtor parties to other contracts with a debtor. Yet even some strong critics of the safe harbors concede that some special treatment may be warranted. This Article offers a critique of the safe harbor for settlement payments, …

Export Controls: A Contemporary History, Bert Chapman

Libraries Faculty and Staff Presentations

Provides highlights of my recently published book Export Controls: A Contemporary History. Describes the roles played by multiple U.S. Government agencies and congressional oversight committees in this policymaking arena including the Commerce, Defense, State, and Treasury Departments. It also reviews the roles played by international government organizations such as the Missile Technology Control Regime, export oriented businesses, and research intensive universities.

Mining, Uranium, Bert Chapman

Libraries Faculty and Staff Scholarship and Research

Provides an overview of uranium mining's role and influence in the American West with comparative information on uranium mining in foreign countries.

Subsidies, Agricultural, Bert Chapman

Libraries Faculty and Staff Scholarship and Research

Provides historical and contemporary information on U.S. Government agricultural subsidies and how they affect agricultural policy in the Western U.S.