Sovereign bond contracts are thought to consist primarily of boilerplate. That is, except for a handful of custom terms, the contracts are assumed to adopt highly standardized provisions that are functionally identical to those used in other bond contracts. Because standardized terms may be “sticky,” this description invokes significant theoretical baggage. It implies that market participants may select widely used terms over terms that match their unique preferences.
This Article explores the phenomenon of standardization in the context of a particular contracting choice: whether to include an arbitration clause in a sovereign bond contract. These contracts are widely believed to adopt boilerplate dispute resolution provisions calling for litigation in foreign courts, typically in New York or England, even though some parties (by hypothesis) would prefer arbitration. The usual explanation for this discrepancy invokes the inherent “stickiness” of standard terms. This Article contests this explanation, demonstrating that contracts are more varied than is often assumed and arguing that a general preference for litigation, rather than default rule stickiness, may best explain the relatively infrequent use of arbitration. In the process, the Article provides a systematic empirical look at the manner in which these bond contracts structure the process of enforcing sovereign debt obligations and raises broader implications for the study of contract innovation and change.