Argentina economic minister presents restructuring principles bill

By Caroline Salls

Pittsburgh, Oct. 1 – Republic of Argentina economic minister Axel Kicillof gave a presentation to the Committee on Foreign Affairs on a bill sent to congress by the executive branch regarding the basic principles of sovereign debt restructuring, according to a news release.

As previously reported, the Argentine initiative was approved by the United Nations General Assembly on Sept. 10.

Argentina said the proposal was received favorably by the committee and will be debated by the upper house in a session scheduled for Wednesday.

When a sovereign debt restructuring is approved by a large majority of bondholders, Kicillof said the principles ensure that the remaining minority must accept that approval.

“The problem of the vulture funds is a problem of the international financial system,” Kicillof said in the release.

“They are international financial cells prepared to extort countries to obtain better conditions than other creditors.”

Kicillof also called U.S. district judge Thomas Griesa’s interpretation of the law on equal treatment of creditors “absurd.” The minister said Griesa’s ruling “is true gibberish because it is unenforceable and violates the logic of [the entire] restructuring process.”

Restructuring principles

The principles approved by the United National provide that:

• A sovereign state has the right to develop its macroeconomic policies, including the restructuring of its sovereign debt, which should not be thwarted or hampered by abusive measures;

• Restructuring should be done as a last resort, preserving from the start the rights of the creditors, and that the principle of transparency should be promoted to increase the accountability of those concerned through timely sharing of data and processes related to sovereign debt workouts;

• The sovereign debtor and its creditors should act and negotiate in good faith;

• The principle of impartiality requires that all institutions and actors involved in the sovereign debt restructuring, even at the regional level, are independent and can refrain from exerting any undue influence in the process;

• The principle of equitable treatment imposes on states the obligation to refrain from arbitrarily discriminating against creditors. This principle provides that creditors have the right to receive the same treatment;

• The principle of sovereign immunity from jurisdiction and enforcement of sovereign debt restructuring is a right of states before the foreign domestic courts, and exceptions should be interpreted in a restrictive way;

• The principle of legitimacy implies that establishment of institutions and performance of operations related to the restructuring of sovereign debt must be respected at all levels. The terms and conditions of original contracts will remain valid until they are modified through a restructuring agreement;

• The principle of sustainability means that the sovereign debt restructuring must be performed in a timely and efficient manner and be designed to create a situation of stable debt, preserving from the start the rights of creditors and at the same time promoting sustained economic growth; and

• The majority restructuring principle implies that agreements of sovereign debt restructuring to be approved by a qualified majority of creditors of a state are not affected, harmed or impeded by other states or by an unrepresentative minority of creditors. The principle says the creditor minority must abide by the decisions taken by the majority of creditors.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.