This article proposes a rule of contractual interpretation for regulatory contracts defined as contracts 1) used by a large number of market participants, 2) subject to limitations on deviation, and 3) designed with market problems (such as negative externalities) in addition to transactional problems (such as transaction costs) in mind. The rule states that the outcome of the interpretation of regulatory contracts must not be inconsistent with the objectives of the regulatory framework applicable to the market in which the contract is used. The article suggests that the reliance on that rule is normatively justified in cases where the regulatory objectives are clearly defined and particularly when the alternative outcome is to void the contract or its provision. By adopting the regulatory rule for contract interpretation, courts can preserve the autonomy of private regulatory regimes created through contracts without sacrificing public policy objectives. Several examples of the application of the rule to the interpretation of selected provisions of the ISDA Master Agreement and the ISDA Credit Definitions are discussed.
{"title":"Contracts as regulation: the ISDA Master Agreement","authors":"M. K. Borowicz","doi":"10.1093/cmlj/kmaa026","DOIUrl":"https://doi.org/10.1093/cmlj/kmaa026","url":null,"abstract":"This article proposes a rule of contractual interpretation for regulatory contracts defined as contracts 1) used by a large number of market participants, 2) subject to limitations on deviation, and 3) designed with market problems (such as negative externalities) in addition to transactional problems (such as transaction costs) in mind. The rule states that the outcome of the interpretation of regulatory contracts must not be inconsistent with the objectives of the regulatory framework applicable to the market in which the contract is used. The article suggests that the reliance on that rule is normatively justified in cases where the regulatory objectives are clearly defined and particularly when the alternative outcome is to void the contract or its provision. By adopting the regulatory rule for contract interpretation, courts can preserve the autonomy of private regulatory regimes created through contracts without sacrificing public policy objectives. Several examples of the application of the rule to the interpretation of selected provisions of the ISDA Master Agreement and the ISDA Credit Definitions are discussed.","PeriodicalId":43720,"journal":{"name":"Capital Markets Law Journal","volume":" ","pages":""},"PeriodicalIF":0.7,"publicationDate":"2020-12-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1093/cmlj/kmaa026","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43142645","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
All sovereign debt restructurings risk undershooting (providing less debt relief than is needed to restore the country to long-term sustainability) or overshooting (extracting more debt relief from creditors than turns out to have actually been necessary).
Of these, undershooting will be the greater risk in sovereign debt workouts in the post-Covid era. Bondholders can be expected to prefer short and shallow debt restructurings that provide near-term debt relief (time enough to sell out of sticky positions). As for the future, creditors will endorse Doris Day’s assessment—que será será. For their part, politicians in the debtor country may also prefer a quick restructuring that provides abundant short-term debt relief even if it complicates the life of the next administration.
The last time a systemic emerging market sovereign debt crisis was handled through a series of short and shallow debt restructurings was in the 1980s. It bequeathed to the debtor countries what is still called the Lost Decade. Can a similar fate be avoided in the decade that has just begun?
{"title":"Avoiding a lost decade—sovereign debt workouts in the post-Covid era","authors":"Buchheit L, Gulati M.","doi":"10.1093/cmlj/kmaa028","DOIUrl":"https://doi.org/10.1093/cmlj/kmaa028","url":null,"abstract":"<span><div><div>Key points</div><ul><li>All sovereign debt restructurings risk undershooting (providing <span style=\"font-style:italic;\">less</span> debt relief than is needed to restore the country to long-term sustainability) or overshooting (extracting <span style=\"font-style:italic;\">more</span> debt relief from creditors than turns out to have actually been necessary).</li><li>Of these, undershooting will be the greater risk in sovereign debt workouts in the post-Covid era. Bondholders can be expected to prefer short and shallow debt restructurings that provide near-term debt relief (time enough to sell out of sticky positions). As for the future, creditors will endorse Doris Day’s assessment—<span style=\"font-style:italic;\">que será será.</span> For their part, politicians in the debtor country may also prefer a quick restructuring that provides abundant short-term debt relief even if it complicates the life of the next administration. </li><li>The last time a systemic emerging market sovereign debt crisis was handled through a series of short and shallow debt restructurings was in the 1980s. It bequeathed to the debtor countries what is still called the Lost Decade. Can a similar fate be avoided in the decade that has just begun?</li></ul></div></span>","PeriodicalId":43720,"journal":{"name":"Capital Markets Law Journal","volume":"90 1","pages":""},"PeriodicalIF":0.7,"publicationDate":"2020-12-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138540247","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The information document (prospectus) that must be published before securities are offered to the public is intended to provide interested investors with the information they need to decide whether or not to purchase them. Once the prospectus has been approved by the competent financial regulator, it serves as a European passport. In other words, the securities to which the offer relates may be offered to the public on the basis of the approved prospectus throughout the EU/EEA. The Prospectus Directive was replaced by the Prospectus Regulation, which is directly applicable in all Member States, with effect from 21 July 2019. Like its predecessor, the Prospectus Regulation is primarily regarded as an instrument of EU financial supervision law. In other words, under the Prospectus Regulation the competent financial regulator may enforce information obligations through administrative law in the event of Key points
{"title":"The influence of the EU prospectus rules on private law","authors":"D. Busch","doi":"10.1093/cmlj/kmaa029","DOIUrl":"https://doi.org/10.1093/cmlj/kmaa029","url":null,"abstract":"The information document (prospectus) that must be published before securities are offered to the public is intended to provide interested investors with the information they need to decide whether or not to purchase them. Once the prospectus has been approved by the competent financial regulator, it serves as a European passport. In other words, the securities to which the offer relates may be offered to the public on the basis of the approved prospectus throughout the EU/EEA. The Prospectus Directive was replaced by the Prospectus Regulation, which is directly applicable in all Member States, with effect from 21 July 2019. Like its predecessor, the Prospectus Regulation is primarily regarded as an instrument of EU financial supervision law. In other words, under the Prospectus Regulation the competent financial regulator may enforce information obligations through administrative law in the event of Key points","PeriodicalId":43720,"journal":{"name":"Capital Markets Law Journal","volume":" ","pages":""},"PeriodicalIF":0.7,"publicationDate":"2020-12-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1093/cmlj/kmaa029","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48003872","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Forest for the trees: are the directors not responsible for disclosures in prospectuses?","authors":"Chee Keong Low, Tak Hay Low","doi":"10.1093/cmlj/kmaa022","DOIUrl":"https://doi.org/10.1093/cmlj/kmaa022","url":null,"abstract":"","PeriodicalId":43720,"journal":{"name":"Capital Markets Law Journal","volume":"15 1","pages":"509-523"},"PeriodicalIF":0.7,"publicationDate":"2020-12-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1093/cmlj/kmaa022","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45900408","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The Commonwealth of Puerto Rico and certain of its affiliated entities have filed “bankruptcy” petitions under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act ("PROMESA"). This short paper provides a brief update on the current status of the restructuring process. As is well known, Puerto Rico’s economy was already deeply distressed, and then came hurricanes, earthquakes, and COVID-19. Given the poor state of the local economy, the island arguably needs extensive debt relief. Before COVID-19, the oversight board had proposed modest debt relief, and even that was deemed unacceptable by bondholders, who argued for cuts to local pensions equal to those being faced by bondholders. As a result, the restructuring process is apt to continue to be quite lengthy and contentious. Puerto Rico’s indeterminate legal status – as neither U.S. state nor independent nation – further complicates matters.
{"title":"Puerto Rico: Act III","authors":"S. Lubben","doi":"10.1093/cmlj/kmaa023","DOIUrl":"https://doi.org/10.1093/cmlj/kmaa023","url":null,"abstract":"The Commonwealth of Puerto Rico and certain of its affiliated entities have filed “bankruptcy” petitions under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act (\"PROMESA\"). This short paper provides a brief update on the current status of the restructuring process. As is well known, Puerto Rico’s economy was already deeply distressed, and then came hurricanes, earthquakes, and COVID-19. Given the poor state of the local economy, the island arguably needs extensive debt relief. Before COVID-19, the oversight board had proposed modest debt relief, and even that was deemed unacceptable by bondholders, who argued for cuts to local pensions equal to those being faced by bondholders. As a result, the restructuring process is apt to continue to be quite lengthy and contentious. Puerto Rico’s indeterminate legal status – as neither U.S. state nor independent nation – further complicates matters.","PeriodicalId":43720,"journal":{"name":"Capital Markets Law Journal","volume":"15 1","pages":"453-463"},"PeriodicalIF":0.7,"publicationDate":"2020-12-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1093/cmlj/kmaa023","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43115744","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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