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Article | Harvard Business Law Review | Spring 2015

Sovereign Debt Restructuring: Evaluating the Impact of the Argentina Ruling

by Laura Alfaro

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Abstract

Recent rulings in the ongoing litigation over the pari passu clause in Argentinian sovereign debt instruments have generated considerable controversy. Some official-sector participants and academic articles have suggested that the rulings will disrupt or impede future sovereign debt restructurings by encouraging holdout creditors to litigate for full payment instead of participating in negotiated exchange offers. This paper critically examines this claim and argues that the incentives for holdout litigation are limited because of (1) significant constraints on creditor litigation, (2) substantial economic and reputational costs associated with such litigation, and (3) the availability of contractual provisions and negotiating strategies that mitigate the debtor's collective action problems. It also argues that the fact-specific equitable remedy in the Argentina case was narrowly tailored to Argentina's unprecedented disregard for court opinions and for international norms of negotiating sovereign debt restructurings and is therefore unlikely to be used in future debt restructurings.

Format: Print Read Now

Citation:

Alfaro, Laura. "Sovereign Debt Restructuring: Evaluating the Impact of the Argentina Ruling." Harvard Business Law Review 5, no. 1 (Spring 2015): 47–71.

About the Author

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Laura Alfaro
Warren Alpert Professor of Business Administration
General Management

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More from the Author

  • Case | HBS Case Collection | November 2016 (Revised March 2018)

    Brexit

    Laura Alfaro, Jesse Schreger and Haviland Sheldahl-Thomason

    After more than 40 years of membership in the European Union, the United Kingdom voted via referendum to separate from the EU on June 23, 2016. Following the surprise verdict (termed Brexit), a political upheaval followed, with many ministers, including Prime Minister David Cameron, resigning or being sacked, and markets collapsed. As markets recovered, Theresa May was chosen as the new prime minister of the UK in charge of leading the separation.
    The future of the UK and its relationship with Europe was uncertain. No country had ever left the EU before, so there was no precedent to follow and no clear indication of what the UK planned to do after exiting. Why had the British voted to leave? Would the UK and the EU be able to agree on a mutually beneficial arrangement? What would be the effects, politically and economically, on the UK and European countries? The impact of the disunion on the relationship between the EU and the UK was yet to be seen.

    Keywords: Voting; International Relations; Government and Politics; System Shocks; United Kingdom; European Union;

    Citation:

    Alfaro, Laura, Jesse Schreger, and Haviland Sheldahl-Thomason. "Brexit." Harvard Business School Case 717-028, November 2016. (Revised March 2018.)  View Details
    CiteView DetailsEducatorsPurchase Related
  • Case | HBS Case Collection | February 2018

    Lisbon Revisited

    Laura Alfaro and Haviland Sheldahl-Thomason

    Citation:

    Alfaro, Laura, and Haviland Sheldahl-Thomason. "Lisbon Revisited." Harvard Business School Case 718-039, February 2018.  View Details
    CiteView DetailsEducatorsPurchase Related
  • Chapter | Handbook of International Trade and Transportation | 2018

    Transportation Cost and the Geography of Foreign Investment

    Laura Alfaro and Maggie Chen

    Falling transportation costs and rapid technological progress in recent decades have precipitated an explosion of cross-border flows in goods, services, investments, and ideas led by multinational firms. Extensive research has sought to understand the geographic patterns of foreign direct investment (FDI). This chapter reviews existing theories and evidence specifically addressing questions including: How is FDI distributed across space? Why does the law of gravity apply? How do the costs of transporting goods, tasks, and technologies influence firms’ decisions to separate tasks geographically and locate relative to one another? We discuss a variety of theoretical mechanisms through which transport cost and other geographic friction influence FDI and present the key empirical studies and findings.

    Keywords: Foreign Direct Investment; Cost; Transportation; Geographic Scope; Geographic Location;

    Citation:

    Alfaro, Laura, and Maggie Chen. "Transportation Cost and the Geography of Foreign Investment." In Handbook of International Trade and Transportation, edited by Bruce Blonigen and Wesley W. Wilson. Edward Elgar Publishing, 2018.  View Details
    CiteView Details Read Now Related
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