Much has been written about the coming sovereign debt crisis. Social spending occasioned by Covid, a strengthened dollar, rising interest rates, and inflation in energy and food prices have driven many poor countries to the brink of default. There is currently no single program or apparatus to bring all debtors and creditors to the table in order to facilitate the restructuring of sovereign debt. China is one of the world’s largest creditors—largely because of the Belt and Road infrastructure program—but it is unclear if and how China will participate in restructuring with the IMF and the so-called Paris Club of wealthy nations.
Any defaults will take place in a new legal landscape: new collective action clauses allowing a supermajority of bondholders to consent to restructuring; new bond indenture terms restricting bondholders’ ability to sue; and new legislation restricting bond-holder rights will shape sovereign debt litigation this time around. My colleagues at Quinn Emanuel have written up an insightful article exploring these issues, offering a preview of the type of litigation we might expect to see in the near future.
Here’s the link to read their work in full.