The Emperor's Old Bonds

Andres Paciuc, Mike Chen & Charlie Fendrych, have just published their delightful paper on Chinese Imperial Debt in the Duke Journal of Comparative and International Law. This is a version of a paper that they did for my sovereign debt class with Mark Weidemaier a few years ago. Bravo! The paper is available here.

Here is the abstract:

Recent news articles have suggested that Trump’s trade war may finally provide relief to American holders of defaulted, pre-1950s Chinese bonds. Here, we examine the hurdles set before these bondholders, namely establishing jurisdiction over the People’s Republic of China as a sovereign and the long-lapsed statute of limitations. We also evaluate the Chinese government’s possible recourse.

Our investigation yielded key takeaways. First, to establish jurisdiction in the U.S., the bond must be denominated in U.S. Dollars or state a place of performance within the country. Second, to overcome the long-expired statute of limitations and win an equitable remedy, it must be shown that the PRC violated an absolute priority or pari passu clause and is a “uniquely recalcitrant” debtor. Finally, despite China’s commitment to the odious debt doctrine, the doctrine is unlikely to provide meaningful legal protection in an otherwise successful suit. Overall, it is a difficult suit to bring. However, through our investigations, we have discovered one issue in particular which holds the greatest danger—or perhaps the greatest promise: the Chinese Government 2-Year 6% Treasury Notes of 1919.