The case for an international insolvency court

This article argues that the establishment of an International Insolvency Court (IIC) to deal with countries in extreme cases of sovereign debt is urgently required as existing mechanisms have failed to reduce the burden of debt with the scope and urgency required. These mechanisms, including HIPC have failed to ensure that the needs of the people most affected by the human cost of paying the debt are adequately represented.

The authors propose that the IIC be composed of a conciliation panel and an arbitration panel, both of whom would not be subject to political control nor influenced by any participant. The role of the conciliation panel would be to facilitate negotiated settlements and, in cases where parties failed to reach such a settlement, the arbitration panel would make a final ruling which would be legally binding.

The advantages of such a structure, they argue, would include:

• It satisfies the ethical imperative for bottom line protection for debtors. This goes some way towards restoring the rights and dignity of nations and their peoples.
• It provides a single forum for dealing with various kinds of foreign debt - official and commercial.
• It is more democratic in that it allows representation by government and civil society of both debtor and creditor states. This is consistent with the stress the IFIs and G7 have been placing on democratic governance.
• As a result there will be an improved communication and decision-making process.
• It provides a forum for the development of poverty-oriented debt relief plans. The international support for these programmes may well lead to a renewed sense of international solidarity to collectively move forward towards the achievement of poverty reduction targets.
• Enhanced ownership of debt relief plans by debtor nations and citizens will increase the likelihood of adherence to them.
• The IIC tackles head on the injustice which has allowed the debt problem drift on for years. Once established the institution should deal with the problem with the urgency required.

[authors]