Proposals on a Future European State Bankruptcy Law

Abstract

The European Union’s response to the sovereign debt crisis, although mixed and delayed, has been revolutionary and unparalleled at best. In the backdrop of discussions on a broader role for the private sector in such crisis situations, there has been a renewed call for an institutional mechanism to effectuate ‘orderly debt restructurings’. In that connection, there have been various influential proposals calling for decisive Union action as against its silo-blinkered ad-hoc responses. This paper is a contribution to that debate and a one which unflinchingly calls for an institutional framework to deal with future sovereign restructurings in the Europe. In this regard, the author is inspired by and at the same time, goes beyond previous proposals on this issue. At the outset, the paper provides the reader with a background to the crisis and the lessons learnt from the same. It then explores the contours of a ‘good bankruptcy law’ for sovereigns and examines its need and relevance. Finally, the author unveils his own proposal for a new European Sovereign Debt Restructuring Framework, to be envisaged under the egis of the ESM Treaty. In an attempt to produce more clarity, the paper suggests certain model amendments to the ESM treaty and hopes that this will provide a basis for further debate.