The Global Law of Debt

Abstract

Corporate debt financing and the restructuring of large corporations are now governed by what this Article calls the “global law of debt,” a transnational system shaped more by law firms, investment banks, and investors in New York and London than by national laws or court decisions. Large companies can now optimize governing law on a transaction-by-transaction basis, for example by borrowing in New York and then restructuring that debt in the United Kingdom, or by borrowing in London through English-law governed contracts with New York-law interpretation for select provisions.  This Article provides the first account of this development, tracing its origins to the 1960s, when New York and London debt professionals expanded into each other’s markets, creating an entangled system that fostered mutual learning and competition.  In 1978, Congress enacted a new bankruptcy law that gave American lawyers and investors corporate restructuring expertise that they later exported abroad.  In the post-pandemic era, London emerged as a global restructuring hub rivaling the United States.  These developments have produced a robust global debt market, but they have also unsettled long-standing assumptions about the rights of creditors as Chapter 11’s primacy fades and controversial American innovations that erode creditor protections proliferate globally.

JEL Classification: K22, K20, G33, G30, G34