Clauses & Controversies

What if POTUS wanted an OBBD?

Let us say, purely hypothetically, that there is a point at which some combination of the spending excesses of the One Big Beautiful Bill, the government shutdown, a rejection by the Supreme Court of tariff mania, and more, result in a shortfall of revenues for the current administration. And let us also say that POTUS goes to his brains trust to ask how best to do an OBBD/R (One Big Beautiful Default/Restructuring). What path might the brains trust take? And what about the option of taxing the treasury holdings of foreign governments, which the administration has already signaled its interest in?

Producer: Leanna Doty

Ep 163 - What if POTUS wanted an OBBD?

Imperial Chinese Bonds: Are They Coming Back to Life in 2020? 

Bloomberg’s Tracy Alloway, financial reporter extraordinaire, and sovereign debt guru Lee Buchheit join us for a discussion of zombie sovereign bonds. Over the last year, there have been stories in Bloomberg, the Financial Times and on NPR on the possible resuscitation of claims against China for non-payment of bonds that were issued over a century ago by the Imperial Government. The driving force for these stories has been the efforts of a group of supporters of President Trump who apparently hold a big bunch of these antique bonds and want President Trump to negotiate a settlement for them as part of his trade talks with China.

Producer: Leanna Doty

Ep 2 - Imperial Chinese Bonds (ft. Tracy Alloway, Lee Buchheit, Alex Xiao)

Venezuela’s Oil Company is Up For Grabs – and the Absence of Ten Words in its Governing Law Clause May Decide Who Gets it

The governing law clause is perhaps the most basic provision in every contract. Yet, it is so routine that few pay attention to it.  Failure to pay attention to its precise wording though can bite one in the backside as the ongoing litigation between investors in Venezuelan bonds and the government-in-exile of that country demonstrates.  Mark and Mitu discuss the Venezuelan governing law clause drama, as well as a number of other similar situations that have cropped up in recent years, including with Ukraine, Puerto Rico, and Mozambique.

Producer: Leanna Doty

Ep 1 - Venezuela’s Oil Company is Up For Grabs

Gold Clause Mumbo Jumbo

We love to talk about the Gold Clause Cases from the 1930s and wonder why our colleagues are less enthusiastic. In this episode, we talk with constitutional law expert Gerard Magliocca (Indiana) about the cases, which are the subject of Gerard’s wonderful article, The Gold Clause Cases and Constitutional Necessity. The basic plot is that, in the 1930s, the U.S. needed to devalue the currency but feared that this would bankrupt private borrowers and magnify the government’s own debt burden. The reason? Loan contracts called for repayment in gold dollars indexed to their pre-devaluation value. So the government abrogated these clauses, and the Supreme Court looked the other way. We talk with Gerard about the Court’s motivations, how it dodged a constitutional crisis, the baffling (to us, anyway) reasoning underlying the Perry decision, and the potential relevance of the case to today’s covid-19 crisis.

Producer: Leanna Doty

Ep 3 - Gold Clause Mumbo Jumbo (ft. Gerard Magliocca)

Where Did All the Secured Loans Go? 

Once upon a time, many governments could borrow in foreign markets only if they pledged assets to back the loan. Today, sovereigns almost never do this, although it happens in other debt markets. In Episode Four, we talk with Noel Maurer (George Washington University) about property rights and revenue pledges. Sovereigns used to promise creditors priority to customs duties, specific taxes, etc. Creditors (or their home governments) even appointed agents to manage the borrower’s revenue institutions. For the most part, these pledges have disappeared from modern sovereign lending—a transition documented in Noel’s terrific book, The Empire Trap. We talk with Noel about why this might be. Also, Donald Trump’s willingness to buy and sell sovereign territory. (Remember the Greenland drama?) We ask whether Donald Trump would pledge parts of the U.S. if he thought it would lower borrowing costs.

Producer: Leanna Doty

Ep 4 - Where Did All the Secured Loans Go? (ft. Noel Maurer)

Why all the Sturm and Drang Over Force Majuere?

Recently, thanks to COVID-19, there has been much talk about the otherwise generally obscure civil law concept of force majeure. Our dear friend, the incomparable Eric Posner, tells us how this concept tends to play out in the US context and why every major law firm in the country seems to be writing client memos on it. Of greatest interest to us is the question of whether sovereign debtors can invoke the international law version (at least a close cousin) of it – the doctrine of economic necessity – to obtain temporary relief from their debt obligations today so as to divert resources to fight the pandemic. Eric kindly engages in a discussion of the complexities that would be involved.

Producer: Leanna Doty

Ep 5 - Why all the Sturm and Drang Over Force Majuere? (ft. Eric Posner)

Clauses and Controversies: A Podcast about International Finance, Contract Clauses and the Controversies Surrounding These Clauses