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The Legal Contours of Sovereign Debt Restructuring under the UNCTAD Draft Principles: Antagonism and Convergence between Standards of Domestic Insolvency law and International Investment Protection Law

The present paper critically assesses the relationship between the UNCTAD Draft Principles on Responsible Sovereign Lending and Borrowing [hereinafter: UNCTAD Draft Principles] and their normative environment, and more specifically, the parallel universes of domestic insolvency law and international investment law, focusing on the issue of debt restructuring. The underlying aim of the paper is to surface both the antagonism and convergence between the Draft Principles and standards of domestic insolvency law and international investment law regarding the issue of sovereign debt restructuring. Our analysis is organized in a three-fold fashion: the paper first revisits domestic insolvency law and identifies the drawbacks of the statutory and the contractual approaches to sovereign insolvency by juxtaposing them with UNCTAD Draft Principles 7 (‘Debt Restructurings’), and 15 (‘Restructuring’), combined with Principle 9 (‘Binding Agreements’). Then, the discussion turns to the corpus of international investment protection law, which has dealt and continues to deal with claims from private lenders against sovereign borrowers. Finally, an attempt to put the UNCTAD Draft Principles to the test in concrete debt-crisis scenarios, such as the one faced in the Eurozone, is made.