LONDONNEW YORK, Sept 26 Reuters Investors in emerging market sovereign bonds, alarmed by efforts to limit their debt restructuring options, are adding clauses to bond deals that would allow them to switch jurisdictions to avoid such curbs.

Two recent debt agreements, one pending in Sri Lanka and another agreed last year in Suriname, included clauses that would allow investors to change the location where potential disputes settle.

Such steps show that investors are mounting their defence against law changes that proponents say would help poor countries secure debt relief, but which financial firms argue could make emerging nations39; bonds too risky for investors or too expensive for borrowers.

The ideas …are not going to go away, Andrew Wilkinson, senior restructuring partner at law firm Weil Gotshal said regarding proposed bills. They will keep coming up, because there is a problem.

Under the proposed changes to laws in New York state, which is the location for roughly half of international bond deals, commercial creditors could see their recoveries capped at the level of bilateral official lenders. They could also be forced into a preset formula to decide who gets what in a restructuring.

The rationale is that it would streamline the default process and spare the indebted nations lengthy and costly negotiations. But investors argue that they could be forced to take losses which might be manageable for government creditors but too steep for the private ones….