Seminar SOVEREIGN STATE INSOLVENCY November 2008 by Philip R Wood Special Global Counsel, Allen & Overy LLP Visiting Professor in International Financial.

Seminar

SOVEREIGN STATE INSOLVENCY

November 2008

by Philip R WoodSpecial Global Counsel, Allen & Overy LLP

Visiting Professor in International Financial Law, University of OxfordYorke Distinguished Visiting Fellow, University of CambridgeVisiting Professor, Queen Mary College, University of London

Visiting Professor, London School of Economics & Political Science

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Wreck of Medusa

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What is state insolvency?

Historical background Early history: wars, kings and more wars The 19th century serial disasters The 20th century: three disasters The 21st century - the big one Who's next?

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53. Map: State insolvency 1980-2005

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56. Map: Bank insolvencies 1980-2002

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Comparison with corporate bankruptcies (1)

Realisation Management Freeze on creditor actions Dissenting creditors Disclosure

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Comparison with corporate bankruptcies (2)

Preferences Security Priorities Discharge

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Comparison with corporate bankruptcies (3)

Delinquencies Currency Interest Set-off Debt/equity conversions

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Protections to insolvent states

Local assets inviolable Monetary sovereignty Legislative sovereignty IMF Agreement art VIII, s 2(b) Sovereign immunity Insulation of state entities

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Rescheduling ladder of priorities

1. Supra-national creditors/trade debt/interbank debt./ small creditors

2. Government debt/public bond issues/commercial banks

3. Non-accepting creditors

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Architecture

IMF Paris Club London Club Bondholder committees

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Rescheduling practice: key points

Banks (reschedule or exchange) Bonds (exchange) Central bank Rescheduled debt: short-leash Debt reconciliation Most favoured debt clause Collective action clauses Exit consents (Ecuador 1999)

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Finally

IMF sovereign debt restructuring mechanism

Conclusions

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Venus in shell