Most recently, the International Capital Market Association (ICMA) recommended new terms for government bonds. Though the ICMA’s proposal leaves unresolved the hundreds of billions of bonds written under the old terms, the new framework says in effect that Griesa’s interpretation was wrong, and recognizes that leaving it in place would make restructuring impossible.
The ICMA’s proposed contractual terms clarify the pari passu clause that was at the heart of Griesa’s muddle-headed ruling. The intent of the clause – a standard component of sovereign-bond contracts – was always to ensure that the issuing country treated identical bondholders identically. But it has always been recognized that senior creditors – for example, the International Monetary Fund – are treated differently.
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