Law Commons^™

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 …

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 …

Injunctions against foreign sovereigns have come under criticism on comity and enforcement grounds. We argue that these objections are overstated. Comity considerations are important but not dispositive. Enforcement objections assign too much significance to the court’s inability to impose meaningful contempt sanctions, overlooking the fact that, when a foreign sovereign is involved, both money judgments and injunctions are enforced through what amounts to a court-imposed embargo. This embargo discourages third parties from dealing with the sovereign and, if sufficiently costly, can induce the sovereign to comply. Nevertheless, we are skeptical about injunctions in sovereign debt litigation. They are prone to …