Sovereign Debt Restructuring and U.S. Executive Power (Reestructuración de Deuda Soberana y el Poder Ejecutivo Norteamericano)

Capital Markets Law Journal (Forthcoming)

Duke Law School Public Law & Legal Theory Series No. 2018-55

49 Pages Posted: 3 Oct 2018 Last revised: 1 Nov 2018

See all articles by Lee C. Buchheit

Lee C. Buchheit

Center for Contract and Economic Organization

Mitu Gulati

University of Virginia School of Law

Date Written: November 1, 2018

Abstract

English Abstract: The sovereign debt problems of some countries may not be susceptible to a satisfactory resolution through the application of conventional sovereign debt restructuring techniques. Countries with large stocks of debt owed to multiple and mutually antagonistic groups of creditors may fall into this category. In one such case (Iraq, beginning in 2003), the U.N. Security Council encouraged the restructuring of a diverse Saddam-era debt stock by immunizing Iraq’s principal external assets against seizure by private creditors holding Saddam-era claims. With or without a covering U.N. Security Council Resolution, however, the Executive Branch of the U.S. Government has the legal power to facilitate a foreign sovereign debt restructuring in cases where an orderly resolution of the sovereign’s debt difficulties is in the national security and foreign policy interests of the United States. Venezuela, assuming a satisfactory change in the administration currently governing that country, may be a candidate for such official sector legal assistance. The sole purpose of such a measure would be to encourage prospective holdouts to join a negotiated, consensual restructuring of the sovereign’s debt; it would therefore have no application whatever to the legal enforceability of any new debt instruments issued by the sovereign as part of that restructuring

Spanish Abstract: Las técnicas convencionales para la reestructuración de deuda soberana de algunos países pueden no ser idóneas para lograr una solución satisfactoria a tales problemas de endeudamiento soberano. Dentro de esta categoría de países pueden incluirse aquellos que presentan cuantías muy elevadas de endeudamiento con múltiples grupos de acreedores y mutuamente antagonistas entre sí. El Consejo de Seguridad de las Naciones Unidas intervino en uno de estos casos (Iraq, al comienzo de 2003) para facilitar la reestructuración de la deuda por cuantías muy elevadas del gobierno de Saddam mediante la inmunización de los principales activos externos de Iraq, impidiendo que tales activos fuesen embargados por sus acreedores privados. Sin embargo, con o sin el blindaje de una resolución del Consejo de Seguridad de las Naciones Unidas, el Poder Ejecutivo del gobierno de los Estados Unidos de Norteamérica tiene la autoridad legal para facilitar la reestructuración de deuda soberana de aquellos países cuyas dificultades para lograr una solución ordenada de su endeudamiento sean consideradas de interés para la seguridad nacional y la política internacional de los Estados Unidos de Norteamérica. Venezuela, dando por sentado que se ha producido un cambio satisfactorio en el gobierno en ese país, podría ser considerada candidata para la referida asistencia legal del sector oficial.

Note: Downloadable document is in English and Spanish.

Keywords: Sovereign Debt, Restructuring, Venezuela, Algiers Accords, Executive Power

JEL Classification: H63, H74, H81, F34, K12, K22, K33

Suggested Citation

Buchheit, Lee C. and Gulati, Mitu, Sovereign Debt Restructuring and U.S. Executive Power (Reestructuración de Deuda Soberana y el Poder Ejecutivo Norteamericano) (November 1, 2018). Capital Markets Law Journal (Forthcoming), Duke Law School Public Law & Legal Theory Series No. 2018-55, Available at SSRN: https://ssrn.com/abstract=3243663

Lee C. Buchheit

Center for Contract and Economic Organization ( email )

New York, NY

Mitu Gulati (Contact Author)

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

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