This study explores the fragmented contemporary international legal instruments and practice relevant to sovereign defaults and has examined the question of whether and to what extent these instruments and practice can be reconceptualised as a regulatory framework for sovereign debt restructuring.

This study has pursued a balance between bondholder protection and respect for sovereign debt restructuring at various stages of litigation and arbitration proceedings. An appropriate balance inevitably depends on the context and circumstances of specific cases and cannot, by its nature, be articulated in a precise manner. Instead, the present study has pursued a framework within which an appropriate balance may be explored and attained in specific cases. Such a framework is constructed by applicable contract, statutory and treaty provisions to be interpreted in a manner that certain deference is paid to debtor sovereigns’ policy decision-making during debt restructuring and that the chance of checks and balances by courts or tribunals is ensured.

The pari passu clause in modern sovereign debt instruments may be interpreted and implemented in a manner that it constitutes part of the regulatory framework of sovereign debt restructuring. A careful reading of the NML saga revealed that US courts did not necessarily endorse the so-called ratable payment interpretation in rejecting the legal ranking interpretation; the US courts introduced ratable payment as a matter of injunctive relief for the violation of the pari passu clauses by Argentina and did not provide it as a proper interpretation of the clauses. Alternatively, this study has endorsed a third interpretation of the pari passu clauses according to which these clauses provide additional but limited protection from unfair discrimination among bondholders by the debtor sovereign in the process of debt restructuring. This interpretation may represent an appropriate balance between bondholder protection and respect for debt restructuring. In addition, the ratable payment as injunctive relief can be conceived as a regulatory implementation of pari passu clauses addressing a particular serious category of the breach of sovereign bond contracts.

The relevance of broader public policy considerations in the sovereign debt discourse cannot be ignored given the rise of the perception of sovereign default as a global concern. Recent literature tries to introduce a public law or policy perspective into the sovereign debt discourse, such as the theory of international public authority, l’ordre public de la dette souveraine and an incremental approach. As a matter of judicial interpretation, however, public policy arguments as such cannot override the text of the contract or treaty provisions in force. A better approach will thus be to examine whether and to what extent the applicable contract, statutory and treaty provisions afford such public policy considerations through interpretation in such a manner that practical solutions to holdout problems are deduced without losing the balance between bondholder protection and respect for sovereign debt restructuring.