In the quest of a Framework for Sovereign Debt Restructuring

Judge Thomas Griesa’s recent ruling in Argentina’s case has raised enormous questions in sovereign debt markets. The case is a symptom of the current flawed market-based system for resolving sovereign debt crises. It raises fundamental issues that the global community is addressing. This article provides background for the ongoing debate on how to fix the frameworks for sovereign debt restructuring. It focuses on three sets of questions: 1) Are there quick fixes, e.g. restoring concepts such as sovereign immunity, or improvements in the private contractual approach? 2) What are the most important improvements in the private contractual approach? To what extent will these solve the problem? Are they politically achievable? 3) To the extent that quick fixes and private contractual approaches do not do the tricks, there is an obvious need for a more collective approach. What would an ideal solution look like? Are there halfway houses, politically achievable?