Foreign law court enforcement and delays in sovereign debt restructuring

This thesis seeks to examine contemporary factors that prevent an orderly resolution to a sovereign debt crisis. It comprises of five chapters. The first chapter introduces the research and highlights its main contributions. The second chapter narrates the background and motivation for the study. The third chapter studies a related paper on holdouts in sovereign debt restructuring and finds that, under a discrete time version with two creditors, asymmetric pure strategy Nash equilibria exists. This result, overlooked by the original paper, implies immediate agreement as the time between successive periods tends to zero. The fourth chapter investigates the impact of heterogeneous beliefs on delays in sovereign debt restructuring and finds that parties inefficiently delay settlement when their combined beliefs of court-outcomes are sufficiently heterogeneous. The chapter also explores other model expositions and establishes delay conditions. The fifth chapter studies the implied duty on the debtor to act in good faith in sovereign debt restructuring and is divided into two parts. The first part theoretically examines the efficiency and distributional impacts from enforcing a good faith duty on the debtor when bargaining with heterogeneous creditors. Here, good faith is defined as the non-violation of the court interpretation of the pari passu clause. The second part identifies judicial attempts made to enforce the good faith debtor duty to negotiate and proposes a doctrinal threshold that restricts judicial intervention to situations in which there is clear evidence of a failure, on the part of the debtor, to negotiate in good faith.