Publication

This paper contends that a main impediment to the restructuring of unsustainable sovereign debt lies in a key problem in the existing clauses in debt contracts that are supposed to enable supermajority voting (such as two-thirds or three quarters of contracting parties) to amend repayment terms. The problem is that such clauses - either because they are not included in the contracts or because the majorities are too high - are often unable to deal with the situations where certain creditors buy debt at discount prices and then refuse to restructuring plans in the hope of receiving full payment. The author then outlines a piece of legislation that either England or New York State, whose legal systems govern most sovereign debt contracts, can adopt to address this issue.