Injunctions in Sovereign Debt Litigation
40 Pages Posted: 27 Sep 2013 Last revised: 16 Nov 2013
Date Written: November 15, 2013
Injunctions against foreign sovereigns have come under criticism on comity and enforcement grounds. We argue that these objections are overstated. Comity considerations are important but not dispositive. Enforcement objections assign too much significance to the court’s inability to impose meaningful contempt sanctions, overlooking the fact that, when a foreign sovereign is involved, both money judgments and injunctions are enforced through what amounts to a court-imposed embargo. This embargo discourages third parties from dealing with the sovereign and, if sufficiently costly, can induce the sovereign to comply. Nevertheless, we are skeptical about injunctions in sovereign debt litigation. They are prone to dramatic spillover effects precisely because they cannot reach their primary target, the sovereign government. Recent decisions in NML v. Argentina illustrate the way in which a court’s inability to compel compliance by the sovereign may lead it to impose dramatic and potentially unwarranted costs on third parties, turning traditional equitable analysis on its head.
Keywords: sovereign debt, sovereign immunity, injunctions, Argentina
JEL Classification: F34, K41
Suggested Citation: Suggested Citation