The Transformation of Public Interests in Sovereign Debt Disputes – An Empirical Analysis

Our research investigates the handling of the public interest by courts in sovereign debt holdout litigation. A few recent cases have created the impression that courts do not care much about the public interest when holdout creditors sue debtor states. We check this assumption with a large-n case sample.

Initially, we collected and analyzed more than 100 decisions of US courts since 1970. Debtor states usually invoke specific defenses in order to introduce the public interest in a sovereign debt restructuring into the case. We carefully coded the cases and the defenses invoked by using multiple variables.

So far, we found that the use of defenses and their success rate varied considerably over time. While foreign sovereign immunities were the most successful public interest defense in the 1980s, the decline of sovereign immunity led to the emergence of other public interest defenses in the 1990s. The 2000s saw a decline in the success rate of public interest defenses and a rise in the success rate of private law-based defenses, in line with changing market and policy conditions. Since 2010, there has been a revival of public interest defenses.

We presented first results at an interdisciplinary conference on sovereign debt research in Geneva in October 2017 (slides: www.jura.uni-frankfurt.de/69013813/Goldmann-Pustovit-Defenses-20171002.pdf). The overwhelming feedback encouraged us to continue and expand the research. In 2018, we would like to include additional jurisdictions in the database (UK, EU, Germany, Argentina, Greece, investment law). This will allow comparative analysis to identify worldwide trends. Also, we want to connect our study with research in economics on the occurrence of holdout litigation. The database will be useful for further research.