IDEAS home Printed from https://ideas.repec.org/a/bpj/globdv/v8y2017i1p14n5.html
   My bibliography  Save this article

To Pay or Not to Pay? Evaluating the Belgian Law Against Vulture Funds

Author

Listed:
  • Sourbron Leentje Ann

    (Hasselt University, Faculty of Business Economics, BE-3500 Hasselt, Belgium)

  • Vereeck Lode

    (Hasselt University, Faculty of Business Economics, Martelarenlaan 42, BE-3500 Hasselt, Belgium)

Abstract

Vulture funds are a grave problem for sovereign debt markets. Their uncooperative behavior delays the resolution of sovereign debt crises, inflicting harm on the economic health of financially distressed countries and consenting exchange bondholders. The unconventional ratable payment interpretation of the pari passu clause has strengthened their legal position. Various strategic, contractual, national and international remedies have so far proven ineffective. The most recent initiative, the Belgian Law Against Vulture Funds, establishes a variant of champerty by granting vulture funds nothing more than the purchase price, while allowing countries under attack of vulture funds to make payments to exchange bondholders via clearing houses in Belgium without the risk of attachment. This paper describes the Belgian anti-vultures law and its implications. We claim this law goes in the direction of improving the workings of sovereign debt markets. However, the Belgian bypass may lead to contempt of court in other jurisdictions, making it a costly and risky option for distressed countries. To be effective, the Belgian law should be part of a multilateral convention or adopted in other countries as a model law. Either way, it proves the need of an international framework.

Suggested Citation

  • Sourbron Leentje Ann & Vereeck Lode, 2017. "To Pay or Not to Pay? Evaluating the Belgian Law Against Vulture Funds," Journal of Globalization and Development, De Gruyter, vol. 8(1), pages 1-14, June.
    • Handle: RePEc:bpj:globdv:v:8:y:2017:i:1:p:14:n:5
    DOI: 10.1515/jgd-2017-0010
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/jgd-2017-0010
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.1515/jgd-2017-0010?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Cole, Harold L & Kehoe, Patrick J, 1998. "Models of Sovereign Debt: Partial versus General Reputations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 55-70, February.
    2. Eichengreen, Barry & Mody, Ashoka, 1999. "Would Collective Action Clauses Raise Borrowing Costs?," CEPR Discussion Papers 2343, C.E.P.R. Discussion Papers.
    3. Eichengreen, Barry & Mody, Ashoka, 2000. "Would Collective Action Clauses Raise Borrowing Costs? An Update and Additional Results," Department of Economics, Working Paper Series qt46p4z4c4, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    4. Bulow, Jeremy & Rogoff, Kenneth, 1989. "Sovereign Debt: Is to Forgive to Forget?," American Economic Review, American Economic Association, vol. 79(1), pages 43-50, March.
    5. Eichengreen, Barry & Mody, Ashoka, 2000. "Would collective action clauses raise borrowing costs? - an update and additional results," Policy Research Working Paper Series 2363, The World Bank.
    6. Li Yuefen, 2015. "The Long March towards an International Legal Framework for Sovereign Debt Restructuring," Journal of Globalization and Development, De Gruyter, vol. 6(2), pages 329-341, December.
    7. Bank for International Settlements, 2013. "Sovereign risk: a world without risk-free assets?," BIS Papers, Bank for International Settlements, number 72.
    8. Christoph Trebesch & Mr. Michael G. Papaioannou & Mr. Udaibir S Das, 2012. "Sovereign Debt Restructurings 1950-2010: Literature Survey, Data, and Stylized Facts," IMF Working Papers 2012/203, International Monetary Fund.
    9. Jonathan Eaton & Mark Gersovitz, 1981. "Debt with Potential Repudiation: Theoretical and Empirical Analysis," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 48(2), pages 289-309.
    10. Juan J. Cruces & Christoph Trebesch, 2013. "Sovereign Defaults: The Price of Haircuts," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(3), pages 85-117, July.
    11. Mooney Charles W., 2015. "A No-Tribunal SDRM and the Means of Binding Creditors to the Terms of a Restructuring Plan," Journal of Globalization and Development, De Gruyter, vol. 6(2), pages 215-238, December.
    12. Schwarcz Steven L., 2015. "Sovereign Debt Restructuring: A Model-Law Approach," Journal of Globalization and Development, De Gruyter, vol. 6(2), pages 343-385, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Martin Guzman, 2020. "An Analysis of Argentina’s 2001 Default Resolution," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 62(4), pages 701-738, December.
    2. Martin Guzman, 0. "An Analysis of Argentina’s 2001 Default Resolution," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 0, pages 1-38.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stijn Claessens & M. Ayhan Kose, 2013. "Financial Crises: Explanations, Types and Implications," CAMA Working Papers 2013-06, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    2. Schumacher, Julian & Trebesch, Christoph & Enderlein, Henrik, 2021. "Sovereign defaults in court," Journal of International Economics, Elsevier, vol. 131(C).
    3. Kenneth Kletzer & Mr. Barry J. Eichengreen & Mr. Ashoka Mody, 2003. "Crisis Resolution: Next Steps," IMF Working Papers 2003/196, International Monetary Fund.
    4. Filippo Brutti & Philip Sauré, 2016. "Repatriation of Debt in the Euro Crisis," Journal of the European Economic Association, European Economic Association, vol. 14(1), pages 145-174.
    5. Ghosal, Sayantan & Thampanishvong, Kannika, 2013. "Does strengthening Collective Action Clauses (CACs) help?," Journal of International Economics, Elsevier, vol. 89(1), pages 68-78.
    6. Jeffrey A. Frankel, 2010. "Monetary Policy in Emerging Markets: A Survey," NBER Working Papers 16125, National Bureau of Economic Research, Inc.
    7. Fløgstad, Cathrin N. & Nordtveit, Ingvild, 2014. "Lending to developing countries: How do official creditors respond to sovereign defaults?," Working Papers in Economics 01/14, University of Bergen, Department of Economics.
    8. Guido Sandleris, 2016. "The Costs of Sovereign Default: Theory and Empirical Evidence," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 1-27, April.
    9. Trebesch, Christoph & Zabel, Michael, 2017. "The output costs of hard and soft sovereign default," European Economic Review, Elsevier, vol. 92(C), pages 416-432.
    10. Silvia Marchesi, 2016. "Life after default? Private vs. official sovereign debt restructurings," Development Working Papers 398, Centro Studi Luca d'Agliano, University of Milano, revised 26 Aug 2016.
    11. Thomas, Jonathan P., 2004. "Bankruptcy proceedings for sovereign state insolvency and their effect on capital flows," International Review of Economics & Finance, Elsevier, vol. 13(3), pages 341-361.
    12. Mihalache, Gabriel, 2020. "Sovereign default resolution through maturity extension," Journal of International Economics, Elsevier, vol. 125(C).
    13. Juan J. Cruces & Christoph Trebesch, 2013. "Sovereign Defaults: The Price of Haircuts," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(3), pages 85-117, July.
    14. Flores Zendejas, Juan, 2015. "Capital Markets and Sovereign Defaults: A Historical Perspective," Working Papers unige:73325, University of Geneva, Paul Bairoch Institute of Economic History.
    15. Sandleris, Guido, 2016. "The costs of sovereign default: theory and empirical evidence," LSE Research Online Documents on Economics 123224, London School of Economics and Political Science, LSE Library.
    16. Eden, Maya & Kraay, Aart & Qian, Rong, 2012. "Sovereign defaults and expropriations : empirical regularities," Policy Research Working Paper Series 6218, The World Bank.
    17. Toan Phan, 2016. "Information, Insurance and the Sustainability of Sovereign Debt," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 22, pages 93-108, October.
    18. Phan, Toan, 2017. "Sovereign debt signals," Journal of International Economics, Elsevier, vol. 104(C), pages 157-165.
    19. Filippo Brutti & Philip U. Sauré, 2014. "Repatriation of Debt in the Euro Crisis: Evidence for the Secondary Market Theory," Working Papers 2014-03, Swiss National Bank.
    20. Pablo A. Gluzmann & Martin M. Guzman & Joseph E. Stiglitz, 2018. "An Analysis of Puerto Rico's Debt Relief Needs to Restore Debt Sustainability," NBER Working Papers 25256, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Belgian Law Against Vulture Funds; sovereign debt restructuring; sovereign default; vulture funds;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • K33 - Law and Economics - - Other Substantive Areas of Law - - - International Law

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:globdv:v:8:y:2017:i:1:p:14:n:5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.