U.N. General Assembly Adopts “Basic Principles” on Sovereign Debt Restructuring

The U.N. General Assembly voted at its sixty-ninth session on September 10, 2015 to adopt a set of nine “basic principles” on sovereign debt restructuring. The resolution states that sovereign debt restructuring processes should be guided by the principles of sovereignty, good faith, transparency, impartiality, equitable treatment, sovereign immunity, legitimacy, sustainability, and majority restructuring.

Voting split largely along developed and developing country lines, with 136 votes in favor, six against, and 41 abstentions. While the resolution is non-binding, the vote marks the latest development in decades-long efforts toward an international framework for sovereign debt restructuring, an effort revived by Argentina in the wake of recent litigation over its 2001 restructuring.

The United States, which voted “no,” stated its objection to a “right” to restructure sovereign debt and highlighted its concern that the principles may undermine the enforcement of contractual terms. The EU common position expressed reservations that the resolution did not adequately support the preferred creditor status of international financial institutions or the decisions of competent courts. It also noted that the IMF is the “appropriate institution” to host such discussions.

The resolution’s supporters, which include Joseph Stiglitz, Thomas Picketty, and Pope Francis, maintain that the resolution promotes financial stability and economic development. Speaking on behalf of the Group of 77 developing countries and China, South Africa stated that the resolution serves as a good basis for future discussions.