We study the occurrence of holdout litigation in the context of sovereign defaults. The number of creditor lawsuits against foreign governments has strongly increased over the past decades, but there is a large variation across crisis events. Why are some defaults followed by litigation and others not? What explains the general increase in lawsuits? We address these questions using an economic model of litigation and a new data set capturing the near universe of cases filed against defaulting sovereigns. We find that creditors are more likely to litigate when debt restructurings are large, when governments impose high losses (haircuts), and when the defaulting country is more vulnerable to litigation (open economies and those with a low legal capacity). We conclude that sovereign debt lawsuits can be predicted reasonably well with a simple framework from the law and economics literature.
Dieser Aufsatz beschreibt unterschiedliche Typen von Staatsbankrotten und weist auf Veränderungen seit der Mitte der 1990er Jahre hin. Er zeigt, warum das Thema für die internationale und vergleichende politische Ökonomie von Bedeutung ist, warum aber gerade die empirische Literatur an erheblichen Mängeln leidet. Ein Staatsbankrott beschreibt sehr unterschiedliche Phänomene, die hier anhand von elf Kriterien dargestellt werden. Der Aufsatz stützt sich auf drei neue Datensätze, die deskriptiv auf Veränderungsprozesse hin ausgewertet werden. Dabei wird deutlich, dass sich bei ökonomischen Charakteristika, im juristischen und politisch-institutionellen Kontext sowie bei den Rahmenbedingungen im internationalen Finanzmarkt wichtige Veränderungen ergeben haben, die von der Forschung aufgegriffen werden sollten.
Sovereign defaults in court
(2021)
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.