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Sovereign Debt Restructuring and English Governing Law

Whether or not their fault, nations sometimes borrow at levels that become unsustainable. Until resolved, the resulting debt burden hurts not only those nations but also their citizens, their creditors, and — by posing serious systemic risks to the international financial system — the wider economic community. The existing contractual framework for restructuring sovereign debt is inadequate, often leaving little alternative between a bailout, which is costly and creates moral hazard, and a default, which raises the specter of financial contagion and chaos. Although global organizations, including the United Nations and the International Monetary Fund, have tried to strengthen the sovereign-debt-restructuring framework through treaties, such a multilateral legal approach is highly unlikely to succeed in the near future. […]