Commentator
Professor Stephan Schill, University of Amsterdam
Leader of the assessment
Professor Trygve Bergsåker, Departement of Private Law
Supervisors
Professor Mads Andenæs, Department of Private Law and Dr. Michael Waibel, University of Cambridge
For outline and draft text, contact Astrid Iversen.
Abstract
Research question
The main research question of the thesis is whether rules requiring parity of treatment of creditors contribute to efficient sovereign debt restructurings.
Four sub-questions will contribute to answer the main question:
a) What rules requires parity of treatment and limits the sovereign debtor’s freedom to treat its creditors differently?
b) Do the different rules provide for a common approach to what constitutes equal treatment of creditors in sovereign debt restructuring?
c) What are the consequences of a fragmented or non-coherent approach to equal treatment?
d) Are there alternative means by which the inefficiencies in the current system of sovereign debt restructuring, stemming from inter-creditor conflicts, may be resolved?
Background
There are no national or international procedures for sovereign insolvency exist. The current system of debt crisis management is primarily based on voluntary ad-hoc agreements. The debt burden is made manageable through a renegotiation of the debt agreements. Such restructurings are in principle dependent on voluntary acceptance from the creditors concerned. In addition, states are provided with a certain room for manoeuvre to implement involuntary restructurings. Despite the lack of a holistic legal framework for sovereign debt crisis resolution, fragmented international and domestic rules, including contractual provisions, soft-law mechanisms and policies from formal and informal international institutions provide creditors with rights to parity of treatment and limits sovereign debtors’ discretion to design and implement a debt restructuring.
This thesis examines the various rights of creditors to parity of treatment in sovereign debt restructurings – or seen from the opposite view; to what extent sovereign debtors may treat their creditors differently when negotiating and implementing a sovereign debt restructuring.
As the research question reflects, the thesis is not limited to establishing the content of the different rules on equal treatment. It also examines whether the rules contribute to an ‘efficient’ debt restructuring, which in this thesis is defined as a restructuring that is only implemented if necessary, and where the goal for the debtor is to reach a sustainable debt level, to the lowest possible costs for all parties involved. An efficient debt restructuring presupposes the debtor do not misuse the debt restructuring institution and asking for a more comprehensive restructuring than strictly necessary, and that creditors contribute to the debt restructurings to the extent that the debtor achieves a sustainable debt level.
By discussing whether the rules on equal treatment of creditors contributes to an efficient sovereign debt restructuring, the thesis aims at contributing to a broader debate: Are sovereign debtors provided with sufficient flexibility to implement sustainable debt crisis resolutions and are creditors sufficiently protected to ensure a well-functioning sovereign credit market.