Restructuring Sovereign Debt Owed to Private Creditors. The Appropriate Role for International Law
The resolution of sovereign debt crises has proved a significant challenge for policy-makers and lawyers alike. How to deal with a State that is unable to repay its creditors? This question has prompted different answers over time. The Global Financial Crisis has brought the issue under the spotlight once again. Against such background, the general research question for this doctoral dissertation is: Does international law have a role to play in the restructuring of sovereign debt owed to private creditors? In order to answer this question, sovereign debt restructuring is first examined historically and then with regard to the actors involved in the process. This short overview begs the question: Are there any rules of international law consistently followed in sovereign debt restructurings over time?
Giuseppe Bianco Photo: Private
About the Project
The following section deals with the techniques used for restructuring. Firstly, private law measures are examined: exit consents and collective action clauses. Secondly, the option of negotiating an international treaty is analysed, with the example of the 1953 London Agreement on German External Debt.
Chapter Two explores the litigation stemming from sovereign debt restructurings, with special attention to the two case studies of Argentina and Greece. For each avenue taken into account, it asks whether it is an effective means and whether it fairly protects the interests of all parties involved. Firstly, as regards domestic courts, the merits stage is investigated, with a focus on the State’s police powers, the state of necessity, and the infamous pari passu clause. Secondly, the uncertainties related to the enforcement phase are highlighted, with regard eminently to immunity issues, and to the intervention of the UN Security Council in the case of Iraq.
The next section presents the involvement of investor-State arbitral tribunals, a novelty stemming from the Argentine restructuring. The question is whether such forum is appropriate for this type of disputes. In particular, the issues of the notion of investment (its territorial link and its contribution to the host country’s development) will be examined, along with the question of mass claims.
The second part attempts to sketch the way forward in this area. Chapter Four considers doctrinal efforts proposed heretofore. Several have aimed at raising alternatives within the current framework: this is the case of the odious debt concept and of the exercise of international public authority. Others have envisaged a statutory approach. The final chapter dwells on the question: how can a balanced restructuring be ensured? Firstly, de lege lata, the work achieved or in the making at different international organisations – mostly of a soft law nature – is examined. Secondly, de lege ferenda, the essential features of a balanced sovereign debt restructuring system based upon international law are spelled out.
The main claim is that international law has a role to play in the field of sovereign debt restructuring. The lack of a proper regulation by international law has pushed the different actors involved to “improvise” solutions and make use of existing mechanisms, provisions, and loopholes in a creative manner. This has led in turn to an inconsistent framework, with contradictions arising both between different countries and between different areas of Law.
This PhD-project is part of the Research Project International Financial Market Regulation, Institutions and Efficiency.
The PhD will be delivered June 2017.
University of Oslo