Collective Action Clauses in the Euro Area: A Law and Economic Analysis of the First Five Years
Capital Markets Law Journal, Forthcoming
25 Pages Posted: 3 Feb 2019
Date Written: January 18, 2019
This paper reviews the first five years of experience with Collective Action Clauses (CACs) for European sovereign debt, focusing on both the legal and the economic dimension. First, we present a chronology of the legislative acts to incorporate CACs in European sovereign debt contracts alongside landmark lawsuits that have challenged their viability in the context of the Greek government debt restructuring of 2012. Second, we find in an empirical analysis that the introduction of CACs and related lawsuits had limited effects on sovereign bond pricing, both around the time of their announcement as well as in the time since. Based on this treatment of CACs in European courts and on financial markets, we conclude that the gradual and ex-ante reform approach was less risky than relying on potential ex-post action.
Keywords: Sovereign Debt Restructuring, Collective Action Clauses, CACs, Greece, Euro Area Sovereign Debt Crisis, Government Bond Pricing, Sovereign Yield
JEL Classification: F33, F34, G12, H63, K12
Suggested Citation: Suggested Citation