Transnational networks of the sovereign debt restructuring regime

Abstract

Over the last 40 years, there have been a number of sovereign debt restructurings, most notably in the Latin American countries in the 1980s. Legally, sovereign debt restructuring has been highly problematic in terms of triggering drawn-out litigation, which can have serious adverse effects on the economy of the sovereign, let alone the citizens themselves. When it comes to resolving these crises there is no international legal mechanism or framework and, in terms of litigation, it is for national courts to adjudicate as all sovereign bonds indicate a national jurisdiction. Transnationally, there are various policy networks that play a role in shaping how sovereign debt restructurings should be done, especially in their promotion of codes of conduct and contractual clauses for sovereign bonds to make debt restructuring simpler. Thus, legal professionals have played a key role in constructing these clauses and promoting them. By using the 2012 Greek debt restructuring as a case study, I look at the role of social networks concerned with sovereign insolvency, in which EU and European actors are embedded, and to what degree policy cohesion is achieved as well as how professionals compete over controlling the issue of sovereign debt restructuring. The findings show that the high degree of contestation over sovereign debt restructuring inhibits policy cohesion, despite the EU being part of key networks on this issue, and further point to the central role of legal professionals in controlling the issue of how sovereign debt restructuring should unfold through their reflexive professional activities.