Types of Reforms
What Types of Reforms Are Needed?
Among those who agree on the need to improve the handling of sovereign debt restructurings, there is much debate over what type of reforms are required, with opinions traditionally split between those who advocate a market-based, contractual approach, on one hand, and those who would prefer to see a more formal, statutory mechanism, on the other. More recently, a number of alternative proposals, some of which do not fit cleanly into the contractual-statutory dichotomy, have been put forward (Brooke et al. 2013; Buchheit et al. 2013b; Gitlin and House 2014; IMF 2014).
Subtopics for Comment
3. A Sovereign Debt Tribunal and Arbitration Process
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Issues for Discussion
1. How would you assess the pros and cons of the contractual and the statutory approaches respectively? What about the arbitration approach?
2. Ostensibly, the statutory and contractual approaches seek to do many of the same things (overcome collective action problems, prevent individual bondholders from pursuing litigation, facilitate agreement on restructuring terms amongst a (super) majority of bondholders). What, then, are the real substantive differences between these two approaches? Why is one seen as more ambitious and politically unrealistic?
3. Does the arbitration approach fall somewhere in between the statutory and contractual approaches? Which actors are likely to support and oppose each of these approaches? Why?
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