7 A Taxonomy of Challenges to Sovereign Debt Restructurings

Subject(s):

Bondholder — Debt — Sovereign debt

Chapter 7 presents a taxonomy of challenges to the outcomes of sovereign debt restructuring, i.e. in what cases private creditors may argue that the restructurings was abusive, oppressive or otherwise invalid and has to be eviscerated accordingly. The starting point here is that the afflicted minority bondholder may challenge the abusive application of collective action clauses, at least in actions couched against the majority of bondholders that put the collective action clauses to use. The source of that power is the obligation of the majority to exercise its broad powers in good faith for the benefit of all bondholders and not to oppress minority bondholders. The chapter then proceeds to discuss the various iterations of this idea in respect of different collective action clauses.