Uncertainty, speculation, subjectivity: The expanding judicial role in sovereign debt workouts

Abstract

This chapter situates a discussion of the NML decision against Argentina within a wider political economy context to better understand the expanding judicial role in sovereign debt workouts. The observed surge in debt demand, growing debt to Gross Domestic Product ratios in debt states increasingly reliant on refinancing their budgetary deficits and a fragmenting consensus that sustained the informal debt workout process so far indicate that sovereign debt speculators that drive demand are making investment decisions in conditions of uncertainty. This paper delineates the political economy contexts in which these speculators evolved as legal subjects. In modern debt markets, the common law courts have become instrumental in entrenching the subjectivity of the debt speculator. This role is an overlooked factor that explains their expansive influence on sovereign debt workouts.