Breaking the Impasse: A Two-Pronged Approach for Resolving Sovereign Debt Holdout Disputes

Authors

Alexander Shapos, Benjamin N. Cardozo School of Law

Abstract

Sovereign debt holdout disputes implicate billions of dollars. For nearly a decade, one such dispute has led to a de facto embargo on Argentina as well as an inability for investment funds to enforce multibillion-dollar judgments. Thus, it is significantly in the interests of both future sovereign bond issuers and future creditors to preemptively avoid unproductive impasses. But with no existing formal bankruptcy regime, sovereigns are left to litigate, arbitrate, or negotiate their debt disputes. This Note proposes that litigation is an inappropriate remedy to resolve such disputes-and instead, it proposes a two-pronged approach for preventing and resolving disputes. The first prong proposes that sovereigns consider including mandatory arbitration clauses in primary issues of indebtedness. The second prong proposes negotiation strategies to induce greater participation in debt restructurings. These negotiation strategies include omitting RUFO Clauses from exchange bonds and issuing a new type of exchange bond-a convertible sovereign bond.

Disciplines

Banking and Finance Law | Dispute Resolution and Arbitration | International Law | Law

Recommended Citation

Alexander Shapos, Breaking the Impasse: A Two-Pronged Approach for Resolving Sovereign Debt Holdout Disputes, 17 Cardozo J. Conflict Resol. 243 (2015).
Available at: https://larc.cardozo.yu.edu/cjcr/vol17/iss1/10