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Collective Action Clauses In International Sovereign Bond Contracts - Whence The Opposition?

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  • Sönke Häseler

Abstract

In the debate on strengthening the international financial architecture, which peaked in 2002 after a series of emerging market sovereign debt crises, the universal adoption of collective action clauses (CACs) was the most promising reform proposal. Academics and the official sector had been promoting CACs at least since 1995, yet market practice did not begin to change until 2003. This delay is often attributed to the opposition of investors and sovereign borrowers to CACs. This paper evaluates the publicly stated as well as the suspected private motives of the two sides to block the proliferation of CACs. It draws on a wide range of existing evidence and adds some new theoretical considerations to show that there is no reason to be sceptical of CACs unless bailouts exist as an alternative crisis resolution mechanism. This conclusion may be of interest purely for the sake of historical accuracy. But more importantly, it may help to better understand any potential future resistance by market participants, for example in the process of introducing CACs in bonds governed by German law. Copyright © 2009 Blackwell Publishing Ltd.

Suggested Citation

  • Sönke Häseler, 2009. "Collective Action Clauses In International Sovereign Bond Contracts - Whence The Opposition?," Journal of Economic Surveys, Wiley Blackwell, vol. 23(5), pages 882-923, December.
  • Handle: RePEc:bla:jecsur:v:23:y:2009:i:5:p:882-923
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    Cited by:

    1. Eger, Thomas, 2011. "Solidarität und Wettbewerb in der Europäischen Union in Zeiten der Finanz- und Verschuldungskrise," Discussion Papers 1/11, Europa-Kolleg Hamburg, Institute for European Integration.
    2. Alfredo Bardozzetti & Davide Dottori, 2013. "Collective action clauses: how do they weigh on sovereigns?," Temi di discussione (Economic working papers) 897, Bank of Italy, Economic Research and International Relations Area.

    More about this item

    JEL classification:

    • K3 - Law and Economics - - Other Substantive Areas of Law
    • F3 - International Economics - - International Finance

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