Collective Action Clauses in the Euro Area: A Law and Economic Analysis of the First Five Years

Capital Markets Law Journal, Forthcoming

21 Pages Posted: 3 Feb 2019

See all articles by Christoph Grosse Steffen

Christoph Grosse Steffen

Banque de France

Sebastian Grund

Harvard University, Law School, Students; University of Vienna - Section for International Law & International Relations

Julian Schumacher

European Central Bank (ECB)

Date Written: January 18, 2019

Abstract

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

Grosse Steffen, Christoph and Grund, Sebastian and Schumacher, Julian, Collective Action Clauses in the Euro Area: A Law and Economic Analysis of the First Five Years (January 18, 2019). Capital Markets Law Journal, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3318570

Christoph Grosse Steffen

Banque de France ( email )

Paris
France

Sebastian Grund (Contact Author)

Harvard University, Law School, Students ( email )

1563 Massachusetts Avenue
Cambridge, MA 02138
United States

University of Vienna - Section for International Law & International Relations ( email )

Schottenbastei 10-16
Vienna, 1010
Austria

Julian Schumacher

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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