Arbitration Mechanism for Sovereign Debts: A Last Chance for Millennium Development Goal 8

Abstract

This paper addresses the question whether it is necessary to establish an international arbitration proceeding to review sovereign debts owed to private and official creditors and to the International Financial Institutions. In this regard, an overview of the variety of creditors on the financial market as well as an analysis of the existing debt restructuring mechanisms is given. Further a range of possible legal and non-legal mechanisms is discussed and compared with an arbitration proceeding. It is argued that while arbitration is not the perfect fit, it does suit the situation better than other mechanisms. Here, a number of issues arise out of which the question of applicable substantive rules is addressed. Focus is thereby laid on the application and drafting of a framework on sovereign bankruptcy and the concept of odious debts.