Shopping for jurisdictions: a problem for international Chapter 9 insolvency?

In this paper Prof. Kunibert Raffer, the Viennese academic who first unearthed Chapter 9 of the US legal code as a model for international bankruptcy, has drafted a response to the IMF, who are insisting that the Fund must play a crucial role in the bankruptcy process, to protect sovereign debtors from so-called "Vulture" Funds. Raffer, argues that with some minor legal changes such intervention is unnecessary.

The problem of vulture funds, Raffer argues, is being used by the IMF as a reason why insolvency-type mechanisms cannot be implemented for some time. Their reasoning is that without changes to national bankruptcy laws or IMF Articles these funds will be able to shop around for countries where they can enforce their claims. This article argues however that, as the vast majority of current loan agreements are governed by US and UK law, changing the law in these countries would suffice for now.

Furthermore it is argued that future contracts, by including a combination of collective action clauses, arbitration agreements and / or waivers of immunity can effectively guard against vulture funds. The danger that bona fide creditors might shop around for jurisdictions where waivers of immunity are not voided by international debt arbitration, or might prefer contracts without any clauses eliminating the vulture problem seems unlikely as there would be no logical reason for them to do this.