Sustainability in Indebtedness: A Proposal for a Treaty-Based Framework in Sovereign Debt Restructuring

The debate concerning reforms in sovereign debt restructuring (SDR) ranges from those which maximize flexibility (e.g. adoption of clauses in debt contracts) to those which maximize uniformity and predictability (e.g. enacting a fixed framework similar to a domestic bankruptcy regime). This paper proposes that the principles of SDR in the United Nations General Assembly Resolution 69/319 be broadly codified into a treaty. This includes the principle of sustainability which emphasizes “inclusive growth and sustainable development” of stakeholders in SDR. In the current unsystematized regime of SDR, this proposal seeks to bridge the value of flexibility in ex post negotiations and the values of uniformity and predictability in ex ante rules under fixed bankruptcy regimes.