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Sovereign Debt and Human Rights$
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Ilias Bantekas and Cephas Lumina

Print publication date: 2018

Print ISBN-13: 9780198810445

Published to Oxford Scholarship Online: January 2019

DOI: 10.1093/oso/9780198810445.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 13 June 2021

Towards a More Ethical Lending to Sovereigns

Towards a More Ethical Lending to Sovereigns

(p.339) 18 Towards a More Ethical Lending to Sovereigns
Sovereign Debt and Human Rights

Barry Herman

Oxford University Press

This chapter examines the relationship between a private household in one country and the foreign government whose bond the household has purchased. What is the ‘right’ thing for a household to want to do when the government encounters economic difficulties and faces pressure to cut back social spending that was advancing human rights objectives? Individual bondholders are in any case rarely empowered to act on their ethical priorities. The nature of sovereign bond contracts gives ethical savers little room to give vent to their ethical preference. The chapter also specifies the concerns that ethical savers have to face when they have lent to a sovereign government that defaults on its foreign bonds. After specifying the characteristics of the problem, the chapter addresses an actual case in point, which, while not a sovereign case per se, involves the essential characteristics of the sovereign case. It will be argued that the source of the ethical frustration derives from the structure of the bond contract. The suggested solution is to redesign sovereign bond contracts in a more human rights-supportive way.

Keywords:   Debt ethics, sovereign bonds, sovereign defaults, social spending, insolvency, debt workout mechanisms, Puerto Rico

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