The Global Debt Restructuring Architecture Debate and a Proposal for an Environmental Sovereign Debt Restructuring Mechanism (E-SDRM)

This paper provides an overview of the ongoing debate on the international Sovereign Debt Restructuring Mechanism (SDRM) architecture by highlighting two key aspects, the contractual and the statutory approach, while also alluding to alternatives that have been set forth, such as arbitration, state-contingent bonds and the proposal for a European Debt Restructuring Mechanism. A proposal for an Environmental Sovereign Debt Restructuring Mechanism (E-SDRM) is presented, involving the establishment of a new institution and mechanism for sovereign debt restructuring, incorporating progress towards Sustainable Development Goals (SDGs), as well as the application of mediation and arbitration. Voluntary pre-emptive restructurings by Advanced Economies are also permitted