“An Extortion and an Act of Piracy”

2020 ◽  
pp. 147-178
Author(s):  
Pierre-Hugues Verdier
Keyword(s):  
Sovereign Debt ◽  
Investment Fund ◽  
Private Debt ◽  
Debt Restructuring ◽  
Financial Infrastructure ◽  
Restructuring Process ◽  
Court Proceedings ◽  
Debt Holders ◽  
Global Banks ◽  
The U.S

This chapter examines the efforts by Argentine bondholders that refused to consent to the country’s debt restructuring to use U.S. court proceedings to enforce their claims. It shows how, despite the theoretical availability of legal remedies against defaulting sovereigns, debt holders historically faced severe practical limitations of their ability to identify and attach assets to satisfy their claims. The chapter then relates how NML Capital, a U.S.-based investment fund, convinced a U.S. federal judge to accept a controversial interpretation of the bonds’ pari passu clause and to issue an injunction prohibiting Argentina from paying its other bondholders unless it also paid the holdouts. By extending the injunction to global banks and other central elements of the international financial infrastructure, the U.S. court effectively imposed financial sanctions on Argentina to enforce a private debt claim. This strategy proved successful, compelling Argentina to repay the holdout bondholders. The decision threatened to disrupt the sovereign debt restructuring process and led the IMF and other multilateral actors to initiate reforms to strengthen the legal basis for future restructurings.

Global Banks on Trial

2020 ◽  
Author(s):  
Pierre-Hugues Verdier
Keyword(s):  
Tax Evasion ◽  
Information Exchange ◽  
Sovereign Debt ◽  
Criminal Cases ◽  
Financial Infrastructure ◽  
Compliance Officers ◽  
The 2008 Financial Crisis ◽  
Financial Indices ◽  
Fundamental Shift ◽  
Global Banks

In the years since the 2008 financial crisis, U.S. prosecutors have brought dozens of criminal cases against the world’s most powerful banks, charging them with manipulating financial indices, helping their customers evade taxes, evading sanctions, and laundering money. To settle these cases, global banks like UBS, Barclays, HSBC, and BNP Paribas paid tens of billions of dollars in fines. They also agreed to extensive internal reforms, hiring hundreds of compliance officers, spending billions on new systems, and installing independent corporate monitors. In effect, they agreed to become worldwide enforcers of U.S. law and policies. This book examines the U.S. enforcement campaign against global banks across four areas: benchmark manipulation, tax evasion, sanctions violations, and sovereign debt. It shows that U.S. prosecutors have unilaterally carved out a new role as global bank regulators, heralding a fundamental shift in how international finance is overseen. Their ability to do so stems from U.S. control over vital hubs of the international financial system, from which they can threaten global banks with exclusion. In some areas, these unilateral U.S. actions have ushered in important multilateral reforms, such as the rise of automatic tax information exchange and better-regulated financial indices. In other areas, such as financial sanctions, unilateralism has attracted protests from other states and attempts to bypass U.S.-based financial infrastructure, which could undermine the country’s power.

Introduction

2020 ◽  
pp. 1-40
Author(s):  
Pierre-Hugues Verdier
Keyword(s):  
Case Studies ◽  
International Cooperation ◽  
Transnational Networks ◽  
Regulatory Agencies ◽  
Payment Systems ◽  
Criminal Cases ◽  
Financial Infrastructure ◽  
Global Banks ◽  
The U.S

This chapter provides an overview of U.S. criminal enforcement actions against global banks, including aggregate statistics about their targets and the penalties levied. It then examines the characteristics and motives of the principal actors involved: the global banks themselves, the regulatory agencies that supervise them, and the prosecutors who brought criminal cases against them. The chapter develops the book’s three central arguments, which structure the case studies examined in the following chapters. First, it argues that prosecutors bring to global bank oversight a set of priorities, incentives, and tools that differ fundamentally from those of the specialized agencies and transnational networks that traditionally occupied that field. Second, it contends that the U.S. government’s ability to impose its will on global banks stems from its control over vital hubs of the international financial infrastructure, such as the U.S. dollar and U.S.-based payment systems. Third, it argues that although U.S. enforcement actions have triggered complaints of unilateralism and can in some cases be self-interested, they can also unlock obstacles to international cooperation and lead to widespread benefits.

scholarly journals Where Credit is due: on the Puerto Rican Debt Crisis

2017 ◽  
Vol 9 (1) ◽  
pp. 6-16
Author(s):  
Eric Joshi ◽  
Amogh Joshi
Keyword(s):  
Puerto Rico ◽  
Puerto Rican ◽  
Sovereign Debt ◽  
Debt Crisis ◽  
The United States ◽  
Negotiation Process ◽  
Unique Contribution ◽  
Debt Restructuring ◽  
Macroeconomic Indicators ◽  
Restructuring Process

This paper provides a comprehensive breakdown of the ongoing economic crisis in the Commonwealth of Puerto Rico. It explores the backdrop of the crisis by analyzing Puerto Rico’s relationship with the U.S., macroeconomic indicators and pertinent legislations. It’s entirely unique contribution is the analysis of the newly introduced act- PROMESA, which enables Puerto Rico to restructure its debt. We have provided an explanation of the important sections of this legislation which govern the debt negotiation process. The PROMESA act has been extended to apply to other unincorporated territories of the United States as well should they run into arrears, which broadens the scope of this paper. We have extended the findings of pre-existing body of work on sovereign debt restructuring hurdles and explained how PROMESA addresses them. We have also used previous works to suggest measures to expedite Puerto Rico’s debt restructuring process with creditors. This paper could also serve as a handbook for creditors looking to navigate through the post-PROMESA debt restructuring process.

Jurisdiction and Cognate Matters

2018 ◽  
Author(s):  
Hayk Kupelyants
Keyword(s):  
Sovereign Debt ◽  
English Court ◽  
Debt Restructuring ◽  
International Jurisdiction ◽  
Class Actions ◽  
Brussels Regulation

Chapter 3 examines the international jurisdiction in sovereign debt disputes and particularly the following matters: service of proceedings; the jurisdiction under the Brussels Regulation, the jurisdiction under English national rules; individual standing of beneficial bondholders; class actions. The chapter also examines the issue of pre-emptive strikes in sovereign debt litigation, in other words whether private creditors may initiate legal actions before the conclusion of the sovereign debt restructuring and how courts may constrain such litigation. The chapter argues that the English courts may stay proceedings if they are brought in contravention of the powers of bondholders under majority action clauses. The chapter lastly addresses the issue of whether the majority may modify the bonds after the English court has issued a judgment.

Risk Management Optimization for Sovereign Debt Restructuring

2015 ◽  
Vol 6 (2) ◽  
Author(s):  
Andrea Consiglio ◽  
Stavros A. Zenios
Keyword(s):  
Risk Management ◽  
Scenario Analysis ◽  
Sovereign Debt ◽  
Risk Measure ◽  
Policy Tools ◽  
Debt Restructuring ◽  
Tail Risk ◽  
Debt Sustainability ◽  
Scenario Optimization ◽  
Management Optimization

AbstractDebt restructuring is one of the policy tools available for resolving sovereign debt crises and, while unorthodox, it is not uncommon. We propose a scenario analysis for debt sustainability and integrate it with scenario optimization for risk management in restructuring sovereign debt. The scenario dynamics of debt-to-GDP ratio are used to define a tail risk measure, termed

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