Document Type

Book Chapter

Publication Date



I argue that consistent and public process observance has a distinctly valuable function in sovereign debt restructuring, with no precise equivalent in national insolvency regimes. National regimes reflect the distribution bargains of their enactment, presumptively legitimate and binding. Debtors and creditors allocate insolvency losses in their shadow, with liquidation as a backstop and politics just outside the frame. All else equal, the restructuring process has a harder job with sovereign debt. There is no liquidation backstop and no default distribution scenario. Each crisis resolution episode must allocate losses from scratch among the country’s citizens, foreign and domestic creditors, and other stakeholders; it must generate legitimacy, secure compliance, and minimize spillovers and moral hazard ... within the constraints of sovereign immunity and non-dischargeability. Bargaining against this background can turn into an endless cat-and-mouse game, its outcome contingent on innumerable bespoke factors. Past bargains cast a faint shadow; at best, they might suggest a settlement range. A publicly visible, intelligible, consistent restructuring process can partly make up for the lack of prior settlement on loss allocation. It can anchor expectations, entrench channels of accountability, and keep sovereign debtors and creditors coming back to the negotiating table. Demand for such a public process might have been suppressed when a few governments and financial firms dominated the creditor pool in crisis after crisis, but those days are gone.

Publication Citation

A Process for Politics, published in Verbindungslinien im Recht – Festschrift für Christoph G. Paulus zum 70. Geburtstag 257 (Katharina de la Durantaye, Wolfgang Zenker, Ignacio Tirado, Jay Westbrook & David Paulus eds., Munich, Germany: Verlag C.H. Beck 2022).