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Mark Weidemaier
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Mitu Gulati and Mark Weidemaier We have previously discussed how Euro area sovereign bonds with Collective Action Clauses or CACs (issued after Jan 1, 2013) and without CACs (issued prior to Jan 1, 2013) potentially differ in their vulnerability to... Continue reading
Posted Feb 19, 2019 at Credit Slips
Mark Weidemaier and Mitu Gulati A few days ago, we wondered why the U.S. government had constrained U.S. holders of PDVSA debt instruments to sell only to non-U.S. parties. The constraint would likely kill liquidity for these bonds and impose... Continue reading
Posted Feb 4, 2019 at Credit Slips
Mitu Gulati and Mark Weidemaier Beginning January 1, 2013, Euro Area authorities required member countries to include “collective action clauses,” or “CACs,” in sovereign bonds with a maturity over one year. CACs are a voting mechanism by which a bondholder... Continue reading
Posted Feb 3, 2019 at Credit Slips
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Mark Weidemaier and Mitu Gulati We gather that there is still activity in the U.S. government to think through the implications of the recent expansion of sanctions against Venezuela. Here’s the original version of the most relevant Executive Order. In... Continue reading
Posted Jan 29, 2019 at Credit Slips
Mark Weidemaier and Mitu Gulati Even by the eccentric standards of its ongoing debt crisis, weird things are afoot in Venezuela. Opposition leader Juan Guaidó has declared himself president and been recognized by the U.S. and other governments. That’s not... Continue reading
Posted Jan 29, 2019 at Credit Slips
Mitu Gulati & Mark Weidemaier Last week, the Government of Puerto Rico, acting through the Financial Oversight and Management Board (and in conjunction with the creditors’ committee), filed a claims objection seeking to invalidate roughly $6 billion of its General... Continue reading
Posted Jan 23, 2019 at Credit Slips
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Mitu Gulati & Mark Weidemaier More and more creditors are filing lawsuits against Venezuela, and we had been planning to do a post on how the dominos were falling. But then we came across a piece by Ben Bartenstein of... Continue reading
Posted Jan 14, 2019 at Credit Slips
Max: Neither is really about odious debt, though the loan to the Yanukovich government has some of those hallmarks. Unlike odious debt, for example, duress doesn't ask about the legitimacy of the borrower government or whether the loan was used to advance citizen welfare.
Ted Edwards: It is interesting to speculate, for sure. Certainly the Russian government isn't trying too hard to make friends in London... And you're right that the judges were more willing to tackle the underlying politics than I had expected. If this goes to trial, it will be hard to avoid those arguments now.
Ukraine and Russia have been battling it out in English courts over whether Ukraine must repay a $3 billion Russian loan from 2013. The loan was unusual both in structure and in substance. For example, although essentially a bilateral loan,... Continue reading
Posted Sep 14, 2018 at Credit Slips
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[Updated with Crystallex's brief opposing the stay.] In an earlier post, I noted some open questions that had to be answered before Crystallex could execute on PDVSA’s 100% ownership stake in PDV Holding (PDV-H). To recap: The federal district judge... Continue reading
Posted Sep 4, 2018 at Credit Slips
I have had a bit of time to digest the district court’s ruling that PDVSA is Venezuela’s alter ego, and here are some preliminary thoughts. The opinion is 75 pages and covers a lot of ground, but I’ll focus on... Continue reading
Posted Aug 11, 2018 at Credit Slips
[Edit: Here is the opinion, with redactions related to the OFAC license.] Just a quick post for now, as the court is keeping its opinion under seal for the time being. Crystallex, a creditor of Venezuela, has been trying to... Continue reading
Posted Aug 10, 2018 at Credit Slips
Millions of American workers are parties to arbitration agreements that require them to bring claims against their employers in individualized arbitration proceedings (rather than as part of a class or collective action, as authorized by some federal and state laws... Continue reading
Posted May 21, 2018 at Credit Slips
Though none of it is earth-shaking, there has been a lot of news out of Venezuela recently, so it seemed an appropriate time for an update. The election looms. Henri Falcón leads some polls, though those are presumably unreliable indicators,... Continue reading
Posted May 18, 2018 at Credit Slips
Mitu Gulati and Mark Weidemaier About two weeks ago, we held a small conference at the University of North Carolina School of Law: How Best to Restructure the Venezuelan Debt. The conference focused on proposals developed this semester by students... Continue reading
Posted Apr 16, 2018 at Credit Slips
Mitu Gulati and Mark Weidemaier Earlier, we posted about whether holders of Venezuelan bonds would be better off accelerating and obtaining judgments sooner rather than later. In a nutshell, here was the point: When a restructuring comes (and it will),... Continue reading
Posted Mar 12, 2018 at Credit Slips
Although these rules derive from the FAA, they preempt contrary state rules and also apply in state court. That's the result of cases like Buckeye and Nitro-Lift, which held preempted state law rules that allowed courts to decide questions that would have been assigned to the arbitrator under the interpretive rules developed by the US Supreme Court. https://supreme.justia.com/cases/federal/us/546/440/opinion.html https://supreme.justia.com/cases/federal/us/568/11-1377/
Chuck: While the statutes aren't quite this clear, you are right that they allow for (and sometimes require) judicial resolution of these questions. But for the most part, these are default rules. Almost every dispute concerning the validity and scope of the arbitration clause can be delegated to the arbitrator, if the contract is sufficiently clear about the delegation. The exceptions are disputes about whether an arbitration agreement exists at all (always for the court, whatever the arbitration agreement has to say on the subject) and disputes over the validity of any delegation to the arbitrator. As an example of the latter, if a party argues that the arbitration agreement is invalid because the arbitrator is biased, it should be impossible to delegate that question to arbitration. tl;dr -- these are mostly default rules, which can be changed by contract.
On the incorporation by reference question, I'm re-posting the relevant part of my response to Adam's comment on my prior post. Bottom line, despite some unfavorable precedent, Clifford has a decent argument here. The question is whether incorporation of institutional rules delegates to the arbitrator questions that would ordinarily be reserved for a court. The problem for Clifford is that there are a bunch of cases holding that incorporation by reference is sufficiently “clear and unmistakable.” But I think she wins anyway. First, I don’t know of any cases involving the ADRS rules. Those rules seem quite clear that the arbitrator *may* decide such questions if the parties submit them (the arbitrator “shall have the power”). However, the rules seem equally clear that the parties need not submit them. Compare JAMS rule 11, which says that disputes of this nature “shall be submitted to and ruled on” in arbitration. The arbitration agreement lets the claimant pick their preferred rule set (and in fact Essential Consultants picked ADRS). If one accepts my reading of the ADRS rules, this means that the contract gives Clifford, as plaintiff, an option not to delegate questions of "arbitrability" to the arbitrator. On that understanding--which I think follows fairly straightforwardly from the language of the rules--she can't be required to arbitrate such questions. For what it's worth, the ALI’s project for a new Restatement of the U.S. Law of International Commercial Arbitration also takes the view that institutional arbitration rules allow but usually do not require arbitrators to rule on questions of "arbitrability." Conceivably this position may influence courts, and I see no reason to distinguish between domestic and international arbitration on this question. And of course the Restatement's understanding makes extra sense given the language of the ADRS rules. Finally, there is some support for the notion that incorporation by reference may only work in commercial contracts between sophisticated parties. (There's a recent 4th Circuit case, for instance.) The Clifford contract isn't exactly a contract of adhesion, but its entire point seems to be to obfuscate the terms of and parties to the deal. Long story short: I think she has a decent argument against incorporation by reference.
Adam: On incorporation by reference: The question is whether incorporation of institutional rules delegates to the arbitrator questions that would ordinarily be reserved for a court. The problem for Clifford is that there are a bunch of cases holding that incorporation by reference is sufficiently “clear and unmistakable.” But I think she wins anyway. First, I don’t know of any cases involving the ADRS rules. Those rules seem quite clear that the arbitrator *may* decide such questions if the parties submit them (the arbitrator “shall have the power”). However, the rules seem equally clear that the parties need not submit them. Compare JAMS rule 11, which says that disputes of this nature “shall be submitted to and ruled on” in arbitration. The arbitration agreement lets the claimant pick their preferred rule set (and in fact Essential Consultants picked ADRS). If one accepts my reading of the ADRS rules, this means that the contract gives Clifford, as plaintiff, an option not to delegate questions of "arbitrability" to the arbitrator. On that understanding--which I think follows fairly straightforwardly from the language of the rules--she can't be required to arbitrate such questions. For what it's worth, the ALI’s project for a new Restatement of the U.S. Law of International Commercial Arbitration also takes the view that institutional arbitration rules allow but usually do not require arbitrators to rule on questions of "arbitrability." Conceivably this position may influence courts, and I see no reason to distinguish between domestic and international arbitration on this question. And of course the Restatement's understanding makes extra sense given the language of the ADRS rules. Finally, there is some support for the notion that incorporation by reference may only work in commercial contracts between sophisticated parties. (There's a recent 4th Circuit case, for instance.) The Clifford contract isn't exactly a contract of adhesion, but its entire point seems to be to obfuscate the terms of and parties to the deal. Long story short: I think she has a decent argument against incorporation by reference. On whether the arbitrator exceeds powers: Only if the contract doesn’t delegate such questions to the arbitrator in the first place! I think this is actually a hard question, and arbitration folks might disagree. But here is how I have been thinking about it: Imagine a court decides that there is a written arbitration agreement between Clifford and somebody. Now imagine the agreement expressly says that the arbitrator must resolve challenges to the scope and validity of the arbitration agreement. Whether a 3d party can invoke the clause is such a challenge, it seems to me. Here’s a roughly analogous case, in which the court refuses to consider the argument that a 3d party was not entitled to demand arbitration: https://law.justia.com/cases/federal/appellate-courts/F2/886/469/19384/. (The opinion is flawed, as the court should have first ruled that there was an agreement to arbitrate, not a “prima facie” agreement, but the outcome is that the arbitrator decides whether the 3d party can invoke the clause.) Anyway, if I were a judge I would not find that Clifford’s contract contains an adequate delegation, so all of these questions would remain for the court.
Adam: Yes, these are also possibilities, among many other reasons to doubt the validity of the settlement agreement and to deny confirmation to the arbitrator's interim award. But that's not the point of the post. Assuming Daniels is a party to an arbitration agreement, which she seems to acknowledge, then most or all of these questions can be delegated to the arbitrator. Had that happened, the arbitrator's resolution of, say, whether EC could initiate the proceeding, would be entitled to deference. (As an analogy, there are cases where courts refer to arbitration disputes over whether non-parties are entitled to invoke the arbitration agreement.) The point of the post is that this arbitration agreement fails to make such a delegation, so all of these questions are for courts to decide. Similarly, if an arbitrator were to resolve questions like these over Daniels's objection or in her absence, that decision would not be entitled to judicial deference.
[Edited to correct names; too many aliases involved in this one] For readers who haven't been following along: Stephanie Clifford, aka Stormy Daniels, is an adult film star who allegedly had a sexual relationship with Donald Trump in the mid-2000s.... Continue reading
Posted Mar 7, 2018 at Credit Slips
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Mark Weidemaier and Mitu Gulati People have been asking for months when investors will accelerate PDVSA and Venezuela bonds that have fallen into default. Rumor has it that some investors have already done so. But there seems to be a... Continue reading
Posted Feb 28, 2018 at Credit Slips
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Mitu and I have been posting jointly of late about restructuring options for PDVSA and Venezuela. Alas, I’ll have to write this one myself, because it’s time to talk about an idea that Mitu and Lee Buchheit have proffered for... Continue reading
Posted Feb 15, 2018 at Credit Slips
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