Fixing the collective action problem in sovereign debt restructuring: significance of Global South solidarity

Abstract

This paper attempts to analyse the limitations of contractual mechanisms of resolving collective action disputes against sovereign debtors. The Global South has been at the receiving end of the sovereign debt obligations and collective action clauses (CACs) agenda. The lack of control over the domestic economy and the human rights impacts of mounting sovereign debt brings to the fore the absolute lack of fairness and equity in the CAC-based framework for restructuring sovereign debt. The contemporary international order does not address the non-economic concerns of an indebted state. The unfair treatment meted out to the Global South opens the need for Third World approaches to international law (TWAIL) voices against sovereign debt. The current discourse and literature on CAC have remained mainly aloof to the contributions and importance of TWAIL in the context of CACs. Sovereign debt and the use of CACs need a fresh outlook based on the development of international human rights law. Alternative movements based on Global South solidarity against the present structural and systemic problems of sovereign debt and CACs need to be explored.