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Sovereign defaults in court

  • For centuries, defaulting governments were immune from legal action by foreign creditors. This paper shows that this is no longer the case. Building a dataset covering four decades, we find that creditor lawsuits have become an increasingly common feature of sovereign debt markets. The legal developments have strengthened the hands of creditors and raised the cost of default for debtors. We show that legal disputes in the US and the UK disrupt government access to international capital markets, as foreign courts can impose a financial embargo on sovereigns. The findings are consistent with theoretical models with creditor sanctions and suggest that sovereign debt is becoming more enforceable. We discuss how the threat of litigation affects debt management, government willingness to pay, and the resolution of debt crises.

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Metadaten
Document Type:Article
Language:English
Author(s):Julian Schumacher, Christoph Trebesch, Henrik Enderlein
Parent Title (English):Journal of International Economics
ISSN:0022-1996
Publisher:Elsevier BV
Publication year:2021
Publishing Institution:Hertie School
DOI:https://doi.org/10.1016/j.jinteco.2020.103388
Release Date:2024/07/18
Volume:131
Article Number:103388
Licence of document (German):Metadaten / metadata
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