Restructuring Sovereign Debt Under Local Law: Are Retrofit Collective Action Clauses Expropriatory?

Abstract

The European sovereign debt crisis has generated a number of controversial restructuring proposals that would have seemed appropriate only for emerging markets just a few years ago, but now are among the few options available to sustain the Eurozone. The leading proposal involves legislation that would mandate collective action clauses in untendered bonds governed under local law. This Note evaluates whether enacting this legislation and utilizing it in a debt restructuring would engender successful investor claims of invalid expropriation against the sovereign in American courts, and concludes that a successful claim of invalid expropriation is unlikely.