With regard to the servicing of the external debt, the country is up to date on its payments to the multilateral institutions and bilateral creditors members of the Paris Club.

National fiscal sovereignty would facilitate the final crucial step building a more mature relationship with private lenders. The eurozone was founded on the no bailout principle if member states could not repay their debts, lenders would bear the losses.

A board of 17 people, one from each eurozone economy, would be unwieldy, and unlikely to win the support of the eurozone s principal creditor countries. At the same time, a board dominated by the creditor economies would be unlikely to win the backing of the debtor countries.

Two recommendations dealt with creditor participation in reorganization proceedings (a) to limit the number of creditor committees to a single committee, except in extraordinary circumstances and (b) in smaller reorganization cases where creditors might have little interest in forming a committee, to provide for the appointment of a creditors' representative to monitor the case and negotiate a reorganization plan on behalf of unsecured creditors.

Argentina s interests and those of its creditors were thus aligned both wanted growth. It was the equivalent of a Chapter 11 restructuring of American corporate debt, in which debt is swapped for equity, with bondholders becoming new shareholders.

The principle is exactly the same when the holders of the national debt are foreigners (as with Greece), though the political opposition to repayment will be much greater.

Treatment of foreign creditors

A Korean negotiating team met with a steering committee of international creditor banks to negotiate a restructuring of the short term debt.

In the insolvency of a non grantor debtor, the creditor is an unsecured creditor with an unsecured claim against the non grantor debtor.

Member of the International Bar Association, Committees of Human Rights, Family Law and Human Rights Institute since 1993

Heavily indebted middle income countries must organize their efforts to arrive at joint agreements with the world's creditors.

Because healthy competition among all potential creditors is an effective way of reducing the cost of credit, the Guide recommends that the secured transactions regime apply equally to various creditors, including banks and other financial institutions, as well as domestic and non domestic creditors.

More recently, creditor countries have been concerned about the financial costs to member governments that have lent to Greece. But Latin America in the 1980s showed that creditor countries stand a better chance of being repaid (in expected value terms) when the debtor countries are actually able to grow.

When the European Union was created, it was the embodiment of an open society a voluntary association of equal states that surrendered part of their sovereignty for the common good. The euro crisis is now turning the EU into something fundamentally different, dividing member countries into two classes creditors and debtors with the creditors in charge.

Creditors have agreed to grant Congo a cancellation rate of 90 per cent (Cologne terms), as soon as the country reaches the decision point.

In the circumstances, it was reasonable to require special notification for foreign creditors, so as to ensure that all creditors, both local and foreign, had equal opportunity for filing their claims in the insolvency proceedings.

Sovereign debt restructurings with private creditors

His delegation accepted but did not support the provisions of the Model Law whereby recognition of a foreign proceeding must not create a more favourable situation for foreign creditors than for local creditors.

A note of caution was struck, however, in that regard, to the effect that such laws needed to strike an appropriate balance in the treatment of privileged, secured and unsecured creditors so as to become acceptable to States.

When a sovereign decides that its foreign debt is unsustainable, the government and its creditors have had to negotiate among themselves about what to do. For sovereign bonds held by other sovereigns, the Paris Club of creditor countries has developed procedures for handling the debt.

With respect to the question of establishing equal treatment between foreign and local creditors quot of the same priority quot , it was noted that definitions and classes of priority of creditors varied greatly from country to country and that it would not be feasible to require that the court of the enacting State should apply to foreign creditors the priority rules of their respective foreign laws.

The underlying idea was that notice to foreign creditors was required when such notice would have to be given to local creditors.

Finally, GDP indexed bonds and other tools for dealing sensibly with unsustainable debt could be applied exclusively to member states debt not covered by the program and in line with international best practices for sovereign debt management.

For both borrowers and creditors, the risks and costs are enormous. The borrower is cut off from international markets, and essential imports can no longer be purchased, while large scale defaults threaten to plunge creditors into insolvency.

As a result, these countries have condemned themselves to continued austerity, low growth, and high debt, while diminishing any future incentive for private lenders to impose fiscal discipline on sovereign borrowers. Only by shifting the burden of responsibility back onto private lenders can debtor countries escape this quagmire.

The solutions rely on the principle of the opening of main insolvency proceedings with universal scope in the Member State where the debtor has the centre of his main interests, while retaining the possibility of opening secondary local proceedings in another Member State where the debtor has an establishment.

However, the Working Group was urged to consider such protective measures in a manner that ensured the equality of creditors, rather than establishing a preferential treatment of local creditors to the detriment of foreign creditors.

The lessons learned point to the need to reach an international understanding on debt restructuring modalities (including voluntary code and international arbitration or mediation mechanisms) which would bring together official and private creditors in a collaborative and constructive dialogue with a view to resolving debt problems in an expeditious and timely manner and to equitably protecting the interests of debtors and creditors.

At the end of the day, debt forgiveness benefits creditors as much as it helps debtors. Creditors have known this since at least the sixteenth century, when Spain s King Philip II became the world s first known serial sovereign defaulter.

Possession by a third person constitutes sufficient dispossession only if the third person is not an agent or employee of the grantor and holds possession for or on behalf of the secured creditor.

9. Reiterates the request of the Commission on Human Rights to the United Nations High Commissioner for Human Rights to pay particular attention to the problem of the debt burden of developing countries, in particular the least developed countries, and especially the social impact of the measures arising from the foreign debt

The restructuring of debt owed to private creditors was also an important aspect of external debt crisis resolution. The introduction of collective action clauses and the development of a voluntary code of conduct by private creditors and sovereign debtors were the major ongoing initiatives in that area.

SIRC members contribute annually to the World Bank's Doing Business Report concerning the status and content of domestic insolvency laws of countries throughout the world.

To the extent that the value of the encumbered asset is insufficient to satisfy the secured creditor's claim, the secured creditor may participate as an ordinary unsecured creditor.

Clementino Dos Reis Amaral, member of the National Human Rights Commission

That arrangement would involve private creditors in negotiating terms of a restructuring the provision of financial support by IMF can improve the bargaining position of the debtor, and combined with the adjustment programme, can signal to the unpaid creditors that their interest is best served by quickly reaching an agreement with the debtor.

(v) Notification of foreign creditors Model Law article 14

Section 1514 provides for additional time to be given to foreign creditors with respect to notice and submission of claims.

recognition 67 71 16 Article 19.

The Commission on Human Rights also called on the United Nations High Commissioner for Human Rights to pay particular attention to the problem of the debt burden of developing countries, in particular of the less developed countries, and especially to the social impact of measures arising from foreign debt.

(b) Provide a temporal event for ordering priority among secured creditors and between a secured creditor and other classes of competing claimants.

The external debt of SSA amounts to roughly 10 per cent of the total debt owed by developing countries to official creditors.

Welcoming the call in the communiqué issued by the joint International Monetary Fund World Bank Development Committee on 22 September 2003 in Dubai, United Arab Emirates, urging all official and commercial creditors to participate in the Heavily Indebted Poor Countries Initiative,

The United Nations High Commissioner for Human Rights is available to assist Governments in drafting national plans of action for human rights, establishing human rights commissions, or implementing human rights objectives.

Table 3 Recent sovereign debt restructurings with private creditors main features