Unresolved sovereign debt problems are hurting debtor nations, their citizens and their creditors, and can pose serious systemic threats to the international financial system. The existing contractual restructuring approach — using collective action clauses to solve the holdout problem — is insufficient to make sovereign debt sustainable. A model-law approach, in which a proposed Sovereign Debt Restructuring Model Law would be enacted in New York or English law (or both), would lead to a systematic legal resolution framework for countries in severe debt crises.
