10 September 2015: The UN General Assembly (UNGA) adopted a resolution on basic principles for sovereign debt restructuring (A/69/L.84), which had been identified by the UN Ad Hoc Committee on Sovereign Debt Restructuring.

The Ad Hoc Committee was established in late 2014 per UNGA resolution 69/247 and held its sessions on 3-5 February, 28-30 April and 27-28 July 2015 in New York, US, and the UNGA met to take action on the draft resolution on the Basic Principles for restructuring processes on 10 September 2015 in New York, US.

Noting inclusiveness, non-intrusiveness and voluntarism as the core values promoted by the Resolution, South Africa, for the Group of 77 and China (G77/China), said the basic principles identified are “an important outcome and a good basis for future discussions on foreign debt restructuring processes.” He explained that the ongoing work on sovereign debt restructuring will need “all hands on deck,” and stressed the need to reform and strengthen the international financial system in that regard.

Maldives for the Alliance of Small Island Sates (AOSIS), Jamaica for the Caribbean Community (CARICOM), Argentina, Bolivia, Brazil, Chile, Cuba, Iceland, India, Nicaragua, Paraguay, the Russian Federation, Venezuela and Uruguay welcomed the adoption of the resolution and expressed strong support for the basic principles identified.

CARICOM noted that its countries’ efforts to restructure their debt have been hindered by being catalogued as middle income countries (MICs), which reduces their access to debt relief. She said indebted countries have the opportunity to work out their debt and rehabilitate their economies. Stressing the need for a universal mechanism that applies to all types of debt, not only bonds debt, the Russian Federation expressed support for the creation of a UNGA special committee related to the legal aspects of sovereign debt.

Luxembourg for the EU recalled EU’s reservations to three related UNGA resolutions: ‘Towards the establishment of a multilateral legal framework for sovereign debt restructuring processes’ (A/RES/68/304); ‘Modalities for the implementation of resolution’ (68/304); and ‘Towards the establishment of a multilateral legal framework for sovereign debt restructuring processes’ (A/RES/69/247), which made it impossible for EU member states to participate in the work of the UN Ad Hoc Committee on Sovereign Debt Restructuring. Although the EU is not able to support the resolution ‘Basic Principles on Sovereign Debt Restructuring Processes’ because it contains statements that do not reflect international law and practices, she said, EU member states will continue to actively participate in joint efforts on sovereign debt restructuring, the International Monetary Fund (IMF) being the right place to discuss the issue.

Australia and the US said the proposed principles are problematic in several respects, and indicated that countries have the unilateral right to restructure their debt, when such a right does not exist and any restructuring efforts need to be a multilateral negotiation between the debtors and creditors. Supported by Singapore, they stressed that the UN is not the appropriate fora for discussing sovereign debt restructuring, which should be approached within the Group of 20, the IMF or the Paris Club.

Bolivia underlined that those who claim that the UN is not the right place to discuss sovereign debt restructuring want other countries to “play this game only when they control the arbitration.” He further noted that the IMF is part of the UN system, and it needs to be reformed in order to respond to UN principles.

The resolution was adopted with 135 votes in favor, 42 abstentions, and six votes against, from: Canada, Germany, Israel, Japan, the UK and the US.

Australia, the Czech Republic, Finland, Hungary, and Ireland – the other five countries which initially voted against resolution ‘Towards the establishment of a multilateral legal framework for sovereign debt restructuring processes’ (A/RES/68/304) on 9 September 2014 – this time abstained. [IISD RS Sources] [UN Webcast of Adoption Session] [IISD RS Story on Work of UN Ad Hoc Committee on Sovereign Debt Restructuring] [EU Explanation of Vote]