The Long March towards an International Legal Framework for Sovereign Debt Restructuring

Abstract

Abstract The lack of a formal sovereign debt restructuring legal framework has been considered by many as a serious deficit or missing link in the international financial architecture. However, even though the international debates on the topic have been going on for decades, heating up each time with the onset of a debt crisis and cooling down when the crises was contained, up to now such debates have not yet come to final fruition. Nevertheless the topic has never been put to sleep because of frequent and severe debt crises. These crises have never failed to demonstrate the need of a legal framework, even more so this time around. Yet, the international community chose to work on improvement of debt contracts even though it cannot redress the systemic and technical problems facing debt restructurings. In 2014, the United Nations started to work on a legal framework on debt restructuring facing political resistance and misconstrued fears of a legal framework. After more than a year’s hard work, the United Nations passed through vote a resolution on basic principles on debt restructuring processes. This is an important milestone, yet the march towards a formal legal framework is going to be long.