Seminar SOVEREIGN STATE INSOLVENCY November 2008 by Philip R Wood Special Global Counsel, Allen & Overy LLP Visiting Professor in International Financial Law, University of Oxford Yorke Distinguished Visiting Fellow, University of Cambridge Visiting Professor, Queen Mary College, University of London Visiting Professor, London School of Economics & Political Science

BK: Wreck of Medusa

BK: What is state insolvency? Historical background  Early history: wars, kings and more wars  The 19th century serial disasters  The 20th century: three disasters  The 21st century - the big one  Who's next?

BK: Map: State insolvency

BK: Map: Bank insolvencies

BK: Comparison with corporate bankruptcies (1)  Realisation  Management  Freeze on creditor actions  Dissenting creditors  Disclosure

BK: Comparison with corporate bankruptcies (2)  Preferences  Security  Priorities  Discharge

BK: Comparison with corporate bankruptcies (3)  Delinquencies  Currency  Interest  Set-off  Debt/equity conversions

BK: Protections to insolvent states  Local assets inviolable  Monetary sovereignty  Legislative sovereignty  IMF Agreement art VIII, s 2(b)  Sovereign immunity  Insulation of state entities

BK: Rescheduling ladder of priorities 1.Supra-national creditors/trade debt/interbank debt./ small creditors 2.Government debt/public bond issues/commercial banks 3.Non-accepting creditors

BK: Architecture  IMF  Paris Club  London Club  Bondholder committees

BK: Rescheduling practice: key points  Banks (reschedule or exchange)  Bonds (exchange)  Central bank  Rescheduled debt: short-leash  Debt reconciliation  Most favoured debt clause  Collective action clauses  Exit consents (Ecuador 1999)

BK: Finally IMF sovereign debt restructuring mechanism Conclusions

BK: Venus in shell