The Emperor's Old Bonds

14 Pages Posted: 20 Mar 2020

See all articles by Michael Chen

Michael Chen

Duke University School of Law

Charlie Fendrych

Duke University School of Law

Andres Paciuc

Duke University, School of Law, Students

Date Written: February 23, 2020

Abstract

Tracy Alloway’s recent article in Bloomberg has suggested that Trump’s trade war may finally provide relief to American holders of defaulted, pre-1950s Chinese bonds. Here, we examine the hurdles set before these bondholders, namely establishing jurisdiction over the People’s Republic of China as sovereign and the long-lapsed statute of limitations. We also evaluate the Chinese government’s possible recourse.

The key takeaways from our investigation: To establish jurisdiction in the U.S., the bond must be denominated in U.S. Dollars or state a place of performance within the country. To overcome the long-expired statute of limitations, and win an equitable remedy, it must be shown that the PRC not only violated an absolute priority or pari passu clause, but also that they are a “uniquely recalcitrant” debtor. Finally, despite China’s commitment to the odious debt doctrine, the doctrine is unlikely to provide meaningful legal protection in the event of an otherwise successful suit.

Overall, it is a difficult suit to bring, but through our investigations we have discovered one issue in particular which holds the greatest danger — or perhaps the greatest promise: the 1919 Gold Bond.

Keywords: bonds, sovereign debt, China, imperial bonds, Trump, FSIA, pari passu

Suggested Citation

Chen, Michael and Fendrych, Charlie and Paciuc, Andres, The Emperor's Old Bonds (February 23, 2020). Available at SSRN: https://ssrn.com/abstract=3544241 or http://dx.doi.org/10.2139/ssrn.3544241

Michael Chen (Contact Author)

Duke University School of Law ( email )

Durham, NC
United States

Charlie Fendrych

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States

Andres Paciuc

Duke University, School of Law, Students ( email )

Durham, NC
United States

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