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
