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The universal adoption of collective action clauses CACs was the most promising reform proposal in recent debates on sovereign debt crisis management. Academics and the public sectorhad been promoting CACs since 1995, yet market practice did not begin to change until 2003. This delay is often attributed to the opposition of investors and sovereign borrowers to CACs.This article evaluates the publicly stated as well as the suspected private motives of the two sides to block the spread of CACs. It draws on a wide range of existing evidence and adds some new theoretical considerations to show that there is no reason to be sceptical of CACs unless bailouts exist as an alternative crisis resolution mechanism. This conclusion may be of interest purely for the sake of historical accuracy. But more importantly, it may help to better understand and to assess any potential future resistance from market participants, e.g. in the process of introducing CACs in bonds governed by German law.

Item Type: MPRA Paper -

Original Title: Collective action clauses in sovereign bonds-

Language: English-

Keywords: sovereign debt restructuring; sovereign default; collective action clauses; moral hazard-

Subjects: F - International Economics > F3 - International Finance > F34 - International Lending and Debt ProblemsK - Law and Economics > K3 - Other Substantive Areas of Law > K33 - International LawK - Law and Economics > K1 - Basic Areas of Law > K12 - Contract Law-

Autor: Häseler, Sönke


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