United Nations Commission on International Trade Law

Since its creation in 1966, UNCITRAL has developed deep expertise and authority in particular on cross-border insolvency issues. It has never addressed sovereign insolvency per se, – but it was also never asked.

The UN General Assembly during its session this year could ask UNCITRAL to draft a revised set of principles for sovereign debt restructuring, drawing on various previous international initiatives, including those adopted on September 10.

The General Assembly could also request the Commission to report back to the Assembly in one or two years with an agreed set of draft principles, whereupon the Assembly could further discuss them, perhaps negotiate them further and then endorse them by consensus as the global norm.

Following adoption of the agreed principles, the Assembly could actually go a step further and request UNCITRAL to draft a “model law” that would give legal effect to the principles if governments adapted and adopted them into their national legislation.

If the model law were to be widely adopted, it would then be the international legal framework that Argentina was seeking. It could govern how the government debt of a country in crisis would be restructured.

In fact, the laws of the State of New York and the United Kingdom by themselves already govern most sovereign bonds issued on international financial markets. Given that fact of life, if only these two jurisdictions were to adopt the model law, a new global deal would effectively be done.

As adoption of this model law spread, it would curtail the opportunities for “forum shopping” by adventurous creditors seeking to maximize their private returns at the expense of destitute governments.