Herding cats: Collective-Action clauses in sovereign debt-the genesis of the project to change market practice in 2001 through 2003

Law and Contemporary Problems

Volumn 73, Issue 4, 2010, Pages 29-38

  Quarles, Randal ^a  

^a NONE

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EID: 79952011559     PISSN: 00239186     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (12)

1. This was principally an issue for debt instruments governed by the law of New York, one of the two main jurisdictions for the governing law of nonlocal debt issued by emerging markets. Most such debt not issued under New York law was issued under English law, and sovereign debt governed by the laws of England had long included provisions for certain types of collective action by creditors.
2. See INT'L MONETARY FUND, GLOBAL FINANCIAL STABILITY REPORT: GLOBAL FINANCIAL SYSTEM RESILIENCE IN THE FACE OF CYCLICAL CHALLENGES 46 (2006), available at http://www.imf.org/External/Pubs/FT/GFSR/2006/01/pdf/chp1.pdf.
3. See, e.g., NOURIEL ROUBINI & BRAD SETSER, BAILOUTS OR BAIL-INS (2004).
4. See generally Anna Gelpern & Mitu Gulati, Public Symbol in Private Contract: A Case Study, 84 WASH. U. L. REV. 1627 (2006).
5. JOHN B. TAYLOR, GLOBAL FINANCIAL WARRIORS 100 (2007).
6. ROBERT E. RUBIN & JACOB WEISBERG, IN AN UNCERTAIN WORLD, at x-xii (2003).
7. See generally John B. Taylor, Discretion Versus Policy Rules in Practice, 39 CARNEGIE-ROCHESTER CONF. SERIES ON PUB. POL'Y 195 (1993).
8. See GEORGE P. SHULTZ & KENNETH W. DAM, ECONOMIC POLICY BEYOND THE HEADLINES 1-2 (2d ed. 1998) (describing Shultz's handling of a strike by East Coast longshoremen).
9. Secretary O'Neill supported the collective-action clause approach to his problem, but since his fundamental aim was enhancing the restructuring options for distressed sovereign debt, he did not want to suspend work on a sovereign bankruptcy process until it was clear that the collective-action clauses would work. Accordingly, we encouraged a "dual-track" process-with the Treasury encouraging work on collective-action clauses and the IMF developing a sovereign bankruptcy regime called the "Sovereign Distress Resolution Mechanism"-until the clauses actually began to be adopted in debt contracts seventeen months later.
10. 15 U.S.C. § 77 (2006).
11. David A. Skeel Jr. provides an interesting and comprehensive review of this history that largely reinforces the view I had developed as a young man poring through the Davis Polk warehouse files.
12. See generally DAVID A. SKEEL, JR., DEBT'S DOMINION (2001).