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Injunctions in Sovereign Debt Litigation

40 Pages Posted: 27 Sep 2013 Last revised: 16 Nov 2013

Mark C. Weidemaier

University of North Carolina (UNC) at Chapel Hill - School of Law

Anna Gelpern

Georgetown University Law Center

Date Written: November 15, 2013

Abstract

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

Weidemaier, Mark C. and Gelpern, Anna, Injunctions in Sovereign Debt Litigation (November 15, 2013). Yale Journal on Regulation, 2014, Forthcoming; UNC Legal Studies Research Paper No. 2330914. Available at SSRN: https://ssrn.com/abstract=2330914

Mark C. Weidemaier (Contact Author)

University of North Carolina (UNC) at Chapel Hill - School of Law ( email )

Van Hecke-Wettach Hall, 160 Ridge Road
CB #3380
Chapel Hill, NC 27599-3380
United States
919.843.4373 (Phone)

Anna Gelpern

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States

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