Michael Waibel

Managing subnational credit and default risks

As a result of worldwide decentralization, subnational debt is rising. Subnational debt crises in major developing countries in the 1990s have led to strengthened regulatory frameworks for subnational borrowing and insolvency. With the fragility of the global recovery and increasing public debt, and the structural trends of decentralization and urbanization, it becomes more important to prudently manage subnational default risks. Although the regulatory frameworks share central features, the historical context and entry points for reform drive variations across countries. Addressing soft budget constraints is integral to the regulatory framework. Ex ante fiscal rules for subnational governments attempt to limit default risks; ex post regulation predictably allocates default risk, while providing breathing space for orderly debt restructuring and fiscal adjustment, as well as the continued delivery of essential public services. The regulatory reforms are inseparable from the reform of broader intergovernmental fiscal systems and financial markets.

Subnational Insolvency and Governance: Cross-country Experiences and Lessons

Does decentralization enhance service delivery and poverty reduction? Drawing on cutting edge research, expert contributors address this fundamental question facing policy-makers in developing as well as advanced countries. This timely book builds upon insights on the recent developments in the intergovernmental literature first outlined in the Handbook of Fiscal Federalism. New empirical evidence from across the globe is presented: policy-oriented chapters evaluate fiscal federalism with an emphasis on the effectiveness of decentralized service delivery, the decentralization process in different parts of the world is appraised, and specially commissioned research focuses on the political economy process and the outcomes of the decentralization process. The role of international agencies, as explicit donors, is examined in several chapters.

Two Worlds of Necessity in ICSID Arbitration: CMS and LG&E

Two recent ICSID cases, CMS v. Argentina and LG&E v. Argentina, diverge on the application of necessity under customary international law. The LG&E tribunal affirmed that Argentina’s financial crisis amounted to a state of necessity. On virtually identical facts, CMS had reached the opposite conclusion 18 months earlier. This unhealthy split of opinion highlights that necessity is ill-suited to financial crises. The state of Necessity is at best a crude defence appropriate so long as international law in this area remains underdeveloped. Lack of payment capacity will strike a better balance of host country and investor interests in future sovereign debt crises. This defence is also more amenable to adjudication by national courts and international tribunals.

Making Transnational Law Work in the Global Economy: Essays in Honour of Detlev Vagts

Making Transnational Law Work in the Global Economy December 30th, 2018 Making Transnational Law Work in the Global Economy Essays in Honour of Detlev Vagts Pieter H F Bekker Rudolf Dolzer Dr Michael Waibel on Amazon com FREE shipping on qualifying offers This tribute to Professor Detlev Vagts of the Harvard Law School brings together his colleagues at Harvard and the American Society of International Law

A Good Day and Salutory Warning for the European Union

On 30 June 2009, the German Federal Constitutional Court (Bundesverfassungsgericht, “BVerfG”) gave a unanimous judgment (2 BvE 2/08) on the constitutionality of Germanys ratification of the Lisbon Treaty. This detailed and nuanced decision is bound to feature prominently alongside its earlier influential judgments in matters European (Solange I, Solange II, Maastricht) and radiate far beyond German borders. The court addressed a range of issues relating to the meaning of democracy, separation of powers, federalism, subsidarity and sovereignty in light of the evolution of the European experiment. This case note analyses key aspects of the courts decision.

Pitting the MFN Genie Back in the Bottle

This essay underscores the importance of background understandings in general international law for interpreting brief, open-ended clauses such as most favored nation (MFN) clauses. Contrary to Simon Batifort and J. Benton Heaths claim, I suggest that often interpreters of MFN clauses cannot limit themselves to the text, context, and preparatory materials of a specific MFN clause. A common international negotiating technique, including for investment treaties, is to rely on the general background understanding of what a clause typically means in international law—its default meaning. I also argue that MFN clauses have played a surprisingly limited role in the international investment regime to date. In the main, they have functioned as a stepping stone for procedural and substantive guarantees found in third-party investment treaties. This use, and the limited role of MFN clauses in investment treaty awards, stands in sharp contrast to MFN clauses in the trade regime.

State Liability in the EEA

In Sveinbjornsdottir v. Government of Iceland, the EFTA Court extended the principle of state liability from EU law to the European Economic Area. Consequently, EFTA States are obliged to compensate individuals for damage caused by breaches of EEA law for which they are responsible. The EFTA Court has affirmed that the same three conditions apply to state liability claims as in EU law, but with some possible modifications. Section 2 addresses the justifications for state liability in the EEA and Sect. 3 explores the criteria for establishing state liability. Section 4 looks at a contentious example of the lack of state liability—the Icesave I case before the EFTA Court.

The (Mis)Alignment of the Trade and Monetary Legal Orders

Following the catastrophe of the Great Depression and World War II, two separate, but interrelated international legal orders arose, one for international monetary matters, and the other for international trade. Since every transaction in the cross-border sale of goods, outside of barter, involves both a movement of goods and a movement of money, these two orders intersect. This interface poses challenges for the coordination and settlement of two distinct areas of international and national law and policy, governed by two different international organizations that work with different government departments, which departments, in turn, are staffed by professionals with different disciplinary backgrounds and policy priorities and who are pressed to be responsive to different economic constituencies. The book chapter assesses the implications of the coordination and alignment of these two legal orders for three important issues confronting the world economy today. First we address the close alignment of the two legal orders on the issue of balance of payments, where trade restrictions are introduced on balance of payments grounds. We next assess their relative misalignment as regards exchange rates in which there is considerable contestation over potential government manipulation of exchange rates that affect trade competitiveness, posing the threat of “currency wars.” We then address their potential conflict regarding capital controls and the liberalization of financial services under the GATS, its Annex on Financial Services, and a web of plurilateral and bilateral preferential trade agreements. We conclude regarding the reasons for and implications of variation in the alignment of the monetary and trade legal orders in addressing these three critical regulatory issues.

Steering Sovereign Debt Restructurings Through the CDS Quicksand

A central policy concern since the onset of the Greek debt crisis in 2010 has been whether sovereign debt restructurings trigger credit default swaps (CDS). For the first time since AIG threatened to default on its CDS in 2008, the Greek debt crisis returned CDS to the global spotlight. The question of whether sovereign debt restructurings trigger CDS matters not only for buyers and sellers of CDS, but for financial stability more generally. While there was universal agreement that a failure to pay when due would trigger a failure to pay credit event under CDS, whether formally ‘voluntary’ restructurings also trigger a credit restructuring event was uncertain prior to the Greek debt restructuring in March 2012. With the benefit of the experience on the Greek restructuring February/March 2012, this article assesses how likely five types of restructuring, ranging from a simple bond exchange over the use of CACs to exit consent are to trigger CDS. The paper is structured into five parts. Part I outlines techniques for restructuring sovereign debt; Part II describes how CDS work and the challenges they raise in debt restructurings. Part III examines the most important credit event in the context of sovereign debt restructurings, the restructuring credit event. Part IV analyses whether five different types of sovereign debt restructurings techniques trigger CDS. Finally, Part V examines the central role of ISDA determinations committees.

Making Transnational Law Work in the Global Economy: Introduction: a Festschrift to celebrate Detlev Vagts' contributions to transnational law

This Festschrift honours Professor Detlev Vagts and celebrates his profound scholarly contributions to and influence on the study and practice of transnational law over the last half-century. On the occasion of his recent retirement from the Harvard Law School faculty and his eightieth birthday, the book brings together a wide range of leading scholars and practitioners from around the globe with a personal connection to the honouree: his colleagues at Harvard Law School and the American Society of International Law (ASIL, especially its Journal), as well as academics, judges and practitioners, many of them former students of Detlev Vagts, with whom his rich life and career have intersected. The book spans the entire spectrum of modern transnational law. Soon after graduating from law school, Detlev Vagts realised that in the new reality of international relations, law may more readily be understood as extending beyond the classical State system. Philip Jessup, in his famous Storrs Lectures at Yale in 1956, labelled this phenomenon ‘transnational law’, which he defined as ‘all law which regulates actions or events that transcend national frontiers. Both public and private international law are included, as are other rules which do not wholly fit into such standard categories.’ The increasing mobility of people, capital and goods required an expansion of the legal horizon beyond classical public international law and a State-centred view of norm-making. Since then, transnational law has moved to the centre of the law curriculum everywhere. For decades, it has been central to law practice in major world centres.