Hostname: page-component-669899f699-vbsjw Total loading time: 0 Render date: 2025-04-27T04:59:53.647Z Has data issue: false hasContentIssue false
  • English
  • Français

Origin Myths, Contracts, and the Hunt for Pari Passu

Published online by Cambridge University Press:  27 December 2018

Mark Weidemaier ,
Robert Scott  and
Mitu Gulati
Get access Rights & Permissions [Opens in a new window]

Abstract

We use interviews with corporate lawyers and a data set of contracts to explore an elite area of legal practice: sovereign bond lending. Sovereign debt lawyers work at prestigious global law firms, yet the contracts they produce include some terms that defy explanation. Lawyers often account for the existence of these terms through origin myths. Focusing on one contract term, the pari passu clause, we explore two puzzling aspects of these myths. First, we demonstrate that the myths are inaccurate as to both the clause's origin and the role of lawyers in contract drafting. Second, the myths often are unflattering, inaccurately portraying lawyers as engaged in little more than rote copying. We probe this disjuncture between the myths and lawyers' actual practices and explore why contracts origin myths might hold such appeal for this elite segment of the bar.

Type
Articles
Information
Law & Social Inquiry , Volume 38 , Issue 1 , Winter 2013 , pp. 72 - 105
Copyright
Copyright © American Bar Foundation, 2013 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

References

Ahmed, Faisal Z., Alfaro, Laura, and Maurer, Noel. 2010. Lawsuits and Empire: On the Enforcement of Sovereign Debt in Latin America. Law & Contemporary Problems 73 (4): 39–46.Google Scholar
Asiedu‐Akrofi, Derek. 1992. Sustaining Lender Commitment to Sovereign Debtors. Columbia Journal of Transnational Law 30 (1): 1–56.Google Scholar
Asiedu‐Akrofi, Derek. 1995. Negative Pledge Clauses in International Loan Agreements. Law & Policy in International Business 26 (2): 407–58.Google Scholar
Bennett, W. Lance, and Feldman, Martha S. 1981. Reconstructing Reality in the Courtroom: Justice and Judgment in American Culture. New Brunswick, NJ: Rutgers University Press.Google Scholar
Ben‐Shahar, Omri, and Pottow, John A. E. 2006. On the Stickiness of Default Rules. Florida State University Law Review 33 (3): 651–82.Google Scholar
Blackman, Jonathan I., and Mukhi, Rahul. 2010. The Evolution of Modern Sovereign Debt Litigation: Vultures, Alter Egos and Other Legal Fauna. Law and Contemporary Problems 73 (4): 47–61.Google Scholar
Borchard, Edwin. 1951. State Insolvency and Foreign Bondholders. New Haven, CT: Yale University Press.Google Scholar
Boyle, Francis A. 1999. Foundations of World Order: The Legalist Approach to International Relations, 1898–1922. Durham, NC: Duke University Press.Google Scholar
Bradfield, Michael, and Jacklin, Nancy. 1984. The Problems Posed by the Negative Pledge Covenants in International Loan Agreements. Columbia Journal of Transnational Law 23 (1): 131–42.Google Scholar
Bradley, Michael, Cox, James D., and Gulati, Mitu. 2010. The Market Reaction to Legal Shocks and Their Antidotes: Lessons from the Sovereign Debt Market. Journal of Legal Studies 39 (1): 289–324.Google Scholar
Buchheit, Lee C. 1990. Negative Pledge Clauses: The Games People Play. International Financial Law Review 9 (7): 10–11.Google Scholar
Buchheit, Lee C. 1991. The Pari Passu Clause sub specie aeternitatis . International Financial Law Review 10 (12): 11–12.Google Scholar
Buchheit, Lee C., and Pam, Jeremiah S. 2004. The Pari Passu Clause in Sovereign Debt Instruments. Emory Law Journal 53 (Special Edition): 869–922.Google Scholar
Buchheit, Lee C., and Reisner, Ralph. 1988. The Effect of the Sovereign Debt Restructuring Process on Inter‐Creditor Relationships. University of Illinois Law Review 1998 (2): 493–517.Google Scholar
Cassis, Youssef. 2006. Capitals of Capital: A History of International Financial Centres, 1780–2005. Cambridge: Cambridge University Press.Google Scholar
Choi, Stephen J., and Gulati, G. Mitu. 2004. Innovation in Boilerplate Contracts: An Empirical Examination of Sovereign Bonds. Emory Law Journal 53 (Special Edition): 929–96.Google Scholar
Coates, John C. 2001. Explaining Variation in Takeover Defenses: Blame the Lawyers. California Law Review 89 (5): 1301–1421.Google Scholar
Conley, John M., and Williams, Cynthia A. 2005. Engage, Embed, and Embellish: Theory versus Practice in the Corporate Social Responsibility Movement. Journal of Corporation Law 31 (1): 1–38.Google Scholar
Craig, Neville B. 1907. Recollections of an Ill Fated Expedition. Philadelphia, PA: J.B. Lippincott Co.Google Scholar
Dinwoodie, D. H. 1970. Dollar Diplomacy in Light of the Guatemalan Loan Project, 1900–1913. Americas 26:237–53.Google Scholar
Economides, Kim, and O'Leary, Majella. 2007. The Moral of the Story: Toward an Understanding of Ethics in Organizations and Legal Practice. Legal Ethics 10 (1): 5–25.Google Scholar
Engle, David M. 1993. Origin Myths: Narratives of Authority, Resistance, Disability, and Law. Law & Society Review 27 (4): 785–826.Google Scholar
Ewick, Patricia, and Silbey, Susan. 2003. Narrating Social Structure: Stories of Resistance to Legal Authority. American Journal of Sociology 108 (6): 1328–72.Google Scholar
Financial Markets Law Committee. 2005. Issue 79: Pari Passu Clause. London: Bank of England.Google Scholar
Finnemore, Martha. 2003. The Purpose of Intervention: Changing Beliefs about the Use of Force. Ithaca, NY: Cornell University Press.Google Scholar
Fisch, Jill E., and Gentile, Caroline. 2004. Vultures or Vanguards: The Role of Litigation in Sovereign Debt Restructuring. Emory Law Journal 53 (Special Edition): 1043–1113.Google Scholar
Flood, John. 1991. Doing Business: The Management of Uncertainty in Lawyers' Work. Law & Society Review 25 (1): 41–72.Google Scholar
Gelpern, Anna. 2005. After Argentina. Rutgers School of Law‐Newark Research Paper No. 011. http://ssrn.com/abstract=880794 (accessed August 4, 2011).Google Scholar
Gelpern, Anna. 2009. Financial Crisis Containment. Connecticut Law Review 41 (4): 1051–1106.Google Scholar
Gelpern, Anna, and Gulati, Mitu G. 2006. Public Symbol in Private Contract: A Case Study. Washington University Law Review 84 (7): 1627–1715.Google Scholar
Goetz, Charles J., and Scott, Robert E. 1985. The Limits of Expanded Choice: An Analysis of the Interactions between Express and Implied Contract Terms. California Law Review 73 (2): 261–322.Google Scholar
Goffman, Erving. 1959. The Presentation of Self in Everyday Life. New York: Anchor Books.Google Scholar
Gulati, Mitu G., and Scott, Robert E. n.d. The Three and a Half Minute Transaction: Boilerplate and the Limits of Contract Design. Unpublished manuscript, last modified October 2, 2011 (in author's possession).Google Scholar
Hagan, Sean. 2005. Designing a Legal Framework to Restructure Sovereign Debt. Georgetown Journal of International Law 36 (2): 299–402.Google Scholar
Hobsbawm, Eric. 1983. Introduction: Inventing Traditions. In The Invention of Tradition, ed. Hobsbawm, Eric and Ranger, Terence, 1–2. Cambridge: Cambridge University Press.Google Scholar
Johnston, Jason Scott. 1990. Strategic Bargaining and the Economic Theory of Contract Default Rules. Yale Law Journal 100 (3): 615–64.Google Scholar
Kahan, Marcel, and Klausner, Michael. 1997. Standardization and Innovation in Corporate Contracting (Or “The Economics of Boilerplate”). Virginia Law Review 83 (4): 713–70.Google Scholar
Kastner, Tal. 2010. The Persistent Ideal of Agreement in an Age of Boilerplate. Law & Social Inquiry 35 (3): 793–823.Google Scholar
Lipson, Charles. 1985. Standing Guard: Protecting Foreign Capital in the Nineteenth and Twentieth Centuries. Berkeley: University of California Press.Google Scholar
Mandeng, Ousmène Jacques. 2004. Intercreditor Distribution in Sovereign Debt Restructuring. IMF Working Paper WP/04/183. http://www.imf.org/external/pubs/ft/wp/2004/wp04183.pdf (accessed October 2, 2011).Google Scholar
Mather, Lynn, McEwen, Craig A., and Maiman, Richard J. 2001. Divorce Lawyers at Work: Varieties of Professionalism in Practice. Oxford: Oxford University Press.Google Scholar
McEwen, Craig, Mather, Lynn, and Maiman, Richard J. 1994. Lawyers, Mediation, and the Management of Divorce Practice. Law & Society Review 28 (1): 149–86.Google Scholar
Mitchener, Kris, and Weidenmier, Marc. 2005a. Empire, Public Goods, and the Roosevelt Corollary. Journal of Economic History 65 (3): 658–92.Google Scholar
Mitchener, Kris, and Weidenmier, Marc. 2005b. Supersanctions and Sovereign Debt Repayment. National Bureau of Economic Research Working Paper #11472. http://www.nber.org/papers/w11472 (accessed October 2, 2011).Google Scholar
Miyazaki, Hirokazu. 2004. The Method of Hope: Anthropology, Philosophy, and Fijian Knowledge. Palo Alto, CA: Stanford University Press.Google Scholar
Monteagudo, Manuel. 2010. Peru's Experience in Sovereign Debt Management and Litigation: Some Lessons for the Legal Approach to Sovereign Indebtedness. Law & Contemporary Problems 73 (4): 201–14.Google Scholar
Myers, Margaret G. 1945. The League Loans. Political Science Quarterly 60 (4): 492–526.Google Scholar
O'Barr, William M., and Conley, John M. 1992a. Fortune and Folly: The Wealth and Power of Institutional Investing. Homewood, IL: Business One Irwin.Google Scholar
O'Barr, William M., and Conley, John M. 1992b. Managing Relationships: The Culture of Institutional Investing. Financial Analysts Journal 48 (5): 21–27.Google Scholar
Olivares‐Caminal, Rodrigo. 2009a. To Rank Pari Passu or Not to Rank Pari Passu: That is the Question in Sovereign Bonds after the Latest Episode of the Argentine Saga. Law and Business Review of the Americas 15 (4): 745–78.Google Scholar
Olivares‐Caminal, Rodrigo. 2009b. Understanding the Pari Passu Clause in Sovereign Debt Instruments: A Complex Quest. International Lawyer 43 (3): 1217–33.Google Scholar
Pérez, Louis A. Jr., and Weissman, Deborah M. 2007. Public Power and Private Purpose: Odious Debt and the Political Economy of Hegemony. North Carolina Journal of International Law and Commercial Regulation 32 (4): 699–748.Google Scholar
Rauchway, Eric. 1997. Willard Straight and the Paradox of Liberal Imperialism. Pacific Historical Review 66 (3): 363–97.Google Scholar
Republic of Chile. 1921. Prospectus for 8% Gold Bonds (in author's possession).Google Scholar
Riles, Annelise. 2006. Introduction to Documents: Artifacts of Modern Knowledge, ed. Riles, Annelise, 1–40. Ann Arbor: University of Michigan Press.Google Scholar
Riles, Annelise. 2008. The Anti‐Network: Private Global Governance, Legal Knowledge, and the Legitimacy of the State. American Journal of Comparative Law 56 (3): 605–30.Google Scholar
Rosenberg, Emily S. 1999. Financial Missionaries to the World: The Politics and Culture of Dollar Diplomacy, 1900–1930. Cambridge, MA: Harvard University Press.Google Scholar
Scott, Robert E. 1986. A Relational Theory of Secured Financing. Columbia Law Review 86 (5): 901–77.Google Scholar
Scott, Robert E., and Triantis, George G. 2006. Anticipating Litigation in Contract Design. Yale Law Journal 115 (4): 814–79.Google Scholar
Shearing, Clifford D., and Ericson, Richard V. 1991. Culture as Figurative Action. British Journal of Sociology 42 (4): 481–506.Google Scholar
Silbey, Jessica. 2008. The Mythical Beginnings of Intellectual Property Law. George Mason Law Review 15 (2): 319–79.Google Scholar
Suchman, Mark. 2003. The Contract as Social Artifact. Law & Society Review 37 (1): 91–142.Google Scholar
Tomz, Michael. 2007. Reputation and International Cooperation: Sovereign Debt across Three Centuries. Princeton, NJ: Princeton University Press.Google Scholar
Tudor John, William. 1983. Sovereign Risk and Immunity under English Law and Practice. In International Financial Law, 2d ed., ed. Rendell, Robert S., 95–96. London: Euromoney.Google Scholar
Ukraine. 2007. Prospectus for 3.5% Notes, dated January 29 (in author's possession).Google Scholar
Weidemaier, W. Mark C. 2010. Contracting for State Intervention: The Origins of Sovereign Debt Arbitration. Law & Contemporary Problems 73 (4): 335–55.Google Scholar
Wilkins, David B., and Gulati, G. Mitu. 1998. Reconceiving the Tournament of Lawyers: Tracking, Seeding, and Information Control in the Internal Labor Markets of Elite Law Firms. Virginia Law Review 84 (8): 1581–1681.Google Scholar
Wood, Philip. 1995. Project Finance, Subordinated Debt and State Loans. London: Sweet and Maxwell.Google Scholar
Wood, Philip. 2007. The Law and Practice of International Finance. London: Sweet and Maxwell.Google Scholar
Wood, Philip. 2009. Life after Lehman: Allen and Overy Analysis of Changes in Market Practice. London: Allen and Overy.Google Scholar
Wood, Philip. 2010. Sovereign Syndicated Bank Credits in the 1970s. Law & Contemporary Problems 73 (4): 7–28.Google Scholar

Cases Cited

Elliott Assocs., L.P., General Docket No. 2000/QR/92, P 2 (Ct. App. of Brussels, 8th Chamber, Sept. 26, 2000).Google Scholar
NML Capital, Ltd. v. Republic of Argentina, Case No. 08 CV 6978 (S.D.N.Y. Sept. 28, 2011) (transcript of hearing on file with authors).Google Scholar

Statutes Cited

Argentine Law No. 26,017 (promulgated February 10, 2005).Google Scholar