New York’s revised bill addressing sovereign debt – proposed change to current 9% interest rate

New York State lawmakers this week proposed a revised champerty and sovereign debt bill (Senate Bill S5623/Assembly Bill A5290) that now includes changes to the current rate of interest provided by the New York Civil Practice Law & Rules (CPLR) that would apply in the case of sovereign debt, in addition to other provisions previously included that would weaken champerty exclusions for purchasers of sovereign debt and impose requirements on debt holders to participate “in good faith” in certain sovereign debt restructurings. The newly revised bill is part of a larger effort on behalf of New York legislators with respect to sovereign debt, including also the proposed Sovereign Debt Stability Act (Senate Bill S5542A/Assembly Bill A2970A), which aims to centralize the process for sovereign debt restructurings by establishing a mechanism for restructurings of sovereign and subnational debt governed by or enforced under New York law. See our previous client alert which discusses proposed legislation in the New York State Legislature relating to sovereign debt.

In addition to the impact that the Sovereign Debt Stability Act would have on emerging market sovereign debt – including allowing for new financing to be raised with majority creditor approval and granting such new financing higher payment priority over existing claims – the newly revised champerty and sovereign debt bill could in many cases lower the interest rate applicable in respect of defaulted sovereign debt.

Section 5004 of the CPLR sets forth the rate of interest and presently states that the rate is 9% per annum, unless otherwise provided by statute and with certain exceptions. Under the proposed revised champerty and sovereign debt bill, for claims brought after May 15, 2024, “the annual rate of interest to be paid in an action arising out of a claim against a foreign state . . . as a defendant shall be equal to the weekly average one-year constant maturity Treasury yield . . . for the calendar week proceeding [sic] the date of entry of the judgment awarding damages . . . .” For purposes of the modification to CPLR § 5004, a “claim against a foreign state” means a payment claim against a foreign state for monies borrowed or for the foreign state’s guarantee of, or other contingent obligation on, monies borrowed. The one-year constant maturity Treasury yield rate, as published by the Board of Governors of the Federal Reserve System, was 5.15% as of May 20, 2024.1

If passed, the newly revised champerty and sovereign debt bill could in many cases lower the interest rate applicable in respect of defaulted sovereign debt. This follows recent remarks made by Jay Shambaugh, Under Secretary for International Affairs, that “in key financial jurisdictions for sovereign debt, narrow, targeted updates that avoid market disruptions – such indexing prejudgment interest rates to prevailing market rates – could help further align incentives for net private flows.”2

Separately, the Sovereign Debt Stability Act seeks to introduce other significant reforms to the sovereign debt restructuring process. It is advisable for investors, creditors, and other stakeholders to closely monitor developments and assess the potential impacts on their portfolios and strategies.



Authored by Ronald Silverman, Bruno Ciuffetelli, Evan Koster, and Jennifer Lee.

Ronald Silverman
Co-Head of Americas Restructuring and Special Situations
New York
Bruno Ciuffetelli
Evan Koster
Partner, Global Coordinator for Derivatives and Commodities
New York
Jennifer Lee
Senior Associate
Washington, D.C.


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