Qualified Restrictions Research Articles

Towards a more robust sovereign debt restructuring architecture: innovations from Ecuador and Argentina

The Collective Action Clauses published by the International Capital Markets Association in 2014/2015 aim to facilitate orderly and consensual sovereign debt restructurings. The clauses were designed to give sovereigns flexibility in structuring and consummating a transaction that would be capable of attracting broad creditor support, while safeguarding the integrity of the process and the rights of creditor minorities. The recent restructurings of Argentina and Ecuador presented the first opportunities for the ICMA CACs to be tested in practice, but the “re-designation” and “PAC-man” strategies first seen in the Argentine restructuring revealed shortcomings in the ICMA contractual architecture. Argentina’s and Ecuador’s creditors responded by negotiating tailored refinements to the standard CACs that would mitigate the risk that a sovereign could compel a restructuring that is not supported by the requisite creditor supermajorities. The qualified restrictions on “re-designation” and “PAC-man” adopted by Ecuador and Argentina enhance the ICMA architecture and provide strong incentives for a sovereign to engage constructively with its private creditors in a consensus-building process that results in a restructuring proposal capable of achieving supermajority support.

Restrictions on Assignment of Commercial Leases: A Comparative Perspective

The operation of restrictions on the assignment of commercial leases is examined in a number of common law jurisdictions to ascertain whether lessons can be learned to inform the future development of the law. It is concluded that while absolute restrictions have a useful role to play, there is a case for banning them in sectors of the market where tenants lack adequate legal advice. Drawing on the US experience, it is considered that qualified restrictions have little to commend them. In relation to fully qualified restrictions, it is submitted that the ‘reasonableness' standard needs to be rebalanced in favour of tenants. Even if that were to be achieved however, vulnerable tenants would still need protection from sophisticated drafting mechanisms adverse to their interests. A special statutory regime for small commercial tenants is recommended.