Sovereign Debt Restructuring and U.S. Executive Power
UVA Law Faculty Affiliations
The sovereign debt problems of some countries may not be susceptible to a satisfactory resolution through the application of conventional sovereign debt restructuring techniques. Countries with large stocks of debt owed to multiple and mutually antagonistic groups of creditors may fall into this category. In one such case (Iraq, beginning in 2003), the U.N. Security Council encouraged the restructuring of a diverse Saddam-era debt stock by immunizing Iraq’s principal external assets against seizure by private creditors holding Saddam-era claims. With or without a covering U.N. Security Council Resolution, however, the Executive Branch of the U.S. Government has the legal power to facilitate a foreign sovereign debt restructuring in cases where an orderly resolution of the sovereign’s debt difficulties is in the national security and foreign policy interests of the United States. Venezuela, assuming a satisfactory change in the administration currently governing that country, may be a candidate for such official sector legal assistance. The sole purpose of such a measure would be to encourage prospective holdouts to join a negotiated, consensual restructuring of the sovereign’s debt; it would therefore have no application whatever to the legal enforceability of any new debt instruments issued by the sovereign as part of that restructuring.