Sovereign debt and holdout disruption A good faith and relational contract approach

This thesis explores solutions to holdout creditor disruption of sovereign debt restructuring by examining a contract law theory of sovereign debt: i.e., sovereign debts as relational contracts. This thesis examines what attributes of sovereign debts that make them relational contracts and the legal consequences of sovereign debts as relational contracts. The key consequence of sovereign debt as a relational contract is the duty of good faith. The thesis considers the duty of good faith in three relational scenarios: counterparty, intercreditor, and assignment of sovereign debt obligations. For each, it explores where these duties exist, what they require of parties to sovereign debt contracts, and how holdout disruption of sovereign debt restructuring may be violative of the good faith conduct required in each case. Select precedent cases of holdout disruption of sovereign debt restructurings decided in New York courts are examined with a view to exploring how an application of the duty of good faith in each case could have successfully combated the holdout disruption and enabled the sovereign debt restructuring exercise to succeed. The enquiry on relational contract theory, the relational character of sovereign debt, the duty of good faith as an incident of relational contracts, and the possible application of the duty of good faith to combat holdout disruption, as undertaken in this thesis, is done from a comparative overview of English and New York laws, with brief comments on a plausibly even more effective application of the duty of good faith in Continental European jurisdictions.