Individual Enforcement Rights in International Sovereign Bonds

Sovereign bonds are notoriously hard to enforce. What little rights bondholders have can be vested either collectively or individually. It seems that investors, particularly in the US market, traditionally had a preference for the latter, which hindered financial market reform projects, such as the universal adoption of collective action clauses in 2003. This paper uses a range of theoretical approaches to discuss whether it is indeed in the bondholder’s collective interest to be allowed to individually sue and attach the debtor country’s assets following a default. Furthermore, it examines the landmark case of Elliott Associates v. Peru to attempt a quantitative assessment of just how much sovereign bondholders actually value individual enforcement rights. I find that even the single most important event to reinforce creditor rights in recent years had no noticeable impact on bond prices.