The New Guano: Legal Enforcement in Modern Sovereign Debt Markets

Abstract

This essay examines the significance of the decades-long litigation against Argentina following that country’s default and subsequent restructuring of its public debt. Although litigation spanned nearly two decades, most accounts focus on the so-called pari passu injunction: the extraordinary remedy that ultimately induced Argentina to pay. Yet the litigation is more important for what it reveals about the evolving structure of sovereign debt markets. Effective legal enforcement does not require new law—or, anyway, not much new law. It requires specialized litigants, ready access to capital, and the ability to further mitigate the risk of investing in litigation through portfolio diversification. Such actors and mechanisms are routinely present in other forms of civil litigation, but have until recently played a limited role in sovereign debt markets. The lasting significance of the NML litigation is that it marks their arrival in force.