New York State lawmakers are facing a crucial end-of-week deadline to decide the fate of a proposed bill poised to significantly alter state law pertaining to foreign sovereign debt. This legislation, known as the Champerty Fix Act by its proponents, cleared the state Senate on Tuesday, now progressing to the Assembly. The bill holds substantial global implications, as New York law governs more than 50% of all sovereign bonds worldwide. Changes to state statutes could directly impact how debt restructurings unfold and the amounts holdout creditors ultimately recover.
At its core, the measure aims to amend New York’s champerty law, which restricts the purchase of claims solely for filing lawsuits, applying it to specific claims involving debt issued or guaranteed by foreign governments. It also proposes lowering the interest rate that accrues on some judgments against foreign sovereign borrowers. Supporters argue the bill would deter investors from acquiring distressed-country debt at steep discounts and then suing for full repayment. This practice, they contend, complicates sovereign debt restructurings and drains vital funds from nations already in financial distress. Jose Gonzalez, from NY Communities for Change, stated, “Albany has a unique responsibility to ensure our legal system isn’t being used to undermine fair debt restructurings.”
Significant opposition has emerged from influential financial industry and business groups, including SIFMA, the MFA, and the Creditor Rights Coalition. These organisations contend that the bill could damage New York’s long-standing role as a leading global financial and legal centre. The bill’s path in the Assembly remains uncertain, with no assurance from leadership to advance the measure before lawmakers are scheduled to adjourn on Thursday, although the Albany session could be extended. A similar bill cleared the Senate last year but ultimately failed to advance in the Assembly.
