A No-Tribunal SDRM and the Means of Binding Creditors to the Terms of a Restructuring Plan

The paper addresses two discrete but related and essential attributes of a sovereign debt restructuring mechanism (SDRM). It first considers the merits and feasibility of an SDRM that would provide a procedure for proposing and adopting a restructuring plan for a sovereign debtor’s debt which would not involve any tribunal or administrator (a No-Tribunal SDRM). The No-Tribunal SDRM would undertake the restructuring as if the sovereign debtor and its creditors were subject to the Model CAC regime. In addition to embodying a novel and interesting structure for an SDRM—and one that eliminates the difficult hurdle of identifying a satisfactory tribunal—adoption of a No-Tribunal SDRM would accommodate flexibility in selecting the manner of implementing the SDRM, i.e., causing it to be binding on the sovereign debtor’s creditors. Second, the paper addresses the means by which a sovereign debt restructuring plan may become legally binding on a sovereign debtor’s creditors. Earlier SDRM proposals generally have described and assessed the details of the formulation and content of a sovereign debt restructuring plan and the procedural steps involved in a making a restructuring plan effective. The paper generally leaves these details aside. Instead, it focuses primarily on the various legal structures that could be employed to cause a sovereign debtor’s creditors to be legally bound by a restructuring plan—i.e., the implementation of a restructuring plan. Aside from contractual approaches to restructuring, this matter of binding creditors is an area of legal analysis that is somewhat underdeveloped and neglected in the literature. The paper focuses on implementation of a restructuring plan under a statutory approach imposed by rule of law. The implementation scheme or schemes chosen for an SDRM are enormously important for the acceptability of the SDRM to political actors and market participants, the effectiveness of the operation of an SDRM, and the costs of devising and adopting an SDRM