Legal frameworks and general principles for indicators in sovereign debt restructuring Michael Riegner

1. Legal frameworks and general principles forindicators in sovereign debt restructuringMichael Riegner NYU School of Law/Giessen University UNCTAD DWM Working Group Meeting 19 March 2014, Buenos Aires

2. ‘…as long as we are unable to put our arguments into figures, the voice of our science … will never be heard by practical men. They are, by instinct, econometricians all of them, in their distrust of anything not amenable to exact proof.’ Joseph Schumpeter “The reduction of all qualities to quantities is nonsense” Friedrich Nietzsche

3. Outline • Indicators in international law • Lessonslearned: Existing legal contexts • Normative framework: General principles • Recommendationsfor DWM design • namely: Possiblewordingof GA resolution/UNCTAD principles

4. Main points • IndicatorsshouldbeusedforsignallingandguidingrestructuringBUT • Not in isolation • Subjectto legal framework • General principlesshouldguideindicatorframework • Derivedfromexistingsourcesoflaw • Sustainability, transparency, ownership, socialrights • Recommendationsforindicators in DWM • Multiple purposesofindicators • Cascadeofsourcesandauthors – namely: GA resolution • Applicationsubjecttoimpartiality, transparency, review et al.

5. Indicators in international law • DWM indicators: Economics – politics – law • IL contributestoeffectiveness, legitimacy, acceptanceof DWM indicators, namelythrough: • General principlesguidingrules, settingstandards, structuringinterplay • „Global administrative lawofinformation“

6. Existingframeworks

7. Existingframeworks • National law • Subnational debtrestructurings • Central governmentdebtconstraints • Statistical governance, dataquality • Private actors • Litigation, marketconditions • Coordinationbyindicators (cf. MDGs) • Governancebyindicators (cf. Doing Business)

8. Lessonslearned • Potential ofindicators • Evidence-basedpolicy, coordination, transparency/acceptance, socialconcerns • Enablingconditions • Technical quality, impartiality, acceptance/legitimacy, enforceability • Pitfalls • Obscuringvaluechoicesanduncertainty; deceptiveprecision; misguidingattentionandincentives; unchecked power -> Useindicators, but subjectto legal framework

9. General principles • Sourcesandmethodology • Sustainability • Output legitimacy • Costefficiency; restructuringtorestoresustainability • Dutytoconductnegotiationsbased on reliableevidence – qualitative and quantitative • Availability, impartiality, qualityofstatistics: capacity, scientificmethods, organizationalsafeguards, externalreview • Do not useone, but severalindicatorstoavoidmistakes, gamingetc

10. General principles • Transparency • Input, throughput, outputlegitimacy • Indicatorstomakerestructuringmore transparent andreasoned • Indicatorsthemselves transparent andreasoned • Disclosedata, Access to Information, transparent process, givereasonsforindicators

11. General principles • Ownership • Input legitimacy,self-determination, democracy • Measureofstatecontroloverrestructuring • Ownership overindicators, cf. Paris Declaration • Legitimatevaluechoices, uncertainty, IPA • State responseandrebuttalof DAS • Participation? • Equality?

12. General Principles • Human Rights/SocialProtection • Throughputandoutputlegitimacy • Respect, protect, fulfil, andmonitor (CESCR, OHCHR, indicators) • Human rightsimpactassessments • Monitor andmitigate • Distinguishinability / unwillingness • Floorforsocialspending – sizeofrestructuring/haircuts • Take intoaccount in negotiations (states, IOs, private creditors) • BUT caveatsapply

13. Recommendations: Howtouseindicators • Requirements for restructuring a) debtor state request b) IO finding that debt is unsustainable • Measure debt sustainability with set of indicators and reasoned and transparent qualitative assessment • Use to render restructuring negotiations and dispute settlement more efficient, coordinated and transparent • Use human rights indicators to monitor and mitigate social and human impact

14. Recommendations: Sourcesandcompetences • Recognize general principles in GA resolution on a DWM • Cascade of sources and competences • Define political competence and requirement for mandate • Lay down substantive principles • Define competence and procedure for impartial application

15. Recommendations: Application • Application by independent expert organ subject to impartiality safeguards • Procedure: mandatory government response, transparent and reason giving, public comment • Measures on data quality and good statistical governance • Periodic external expert review and political re-evaluation

16. Draftproposal The GA / thePrinciples on DebtRestructuringrecognizethefollowingprinciples on debtassessmentsandindicatorsandcall upon all actorsinvolved in restructuringstoimplementtheseprinciples in theirregulationsandpractice:

17. Draftproposal a) Principleofdebtsustainability: Restructuringsshouldbeconducted in a cost-efficientandevidence-basedmannerthatrestoresdebtsustainability. The evidencebaseincludesimpartialandreliablequalitative assessmentsaswellasstatisticalevidence (includingindicators), producedby an independentinstitutionwiththenecessaryexpertisesubjecttoperiodic outside review.

18. Draftproposal b) Principleoftransparency: Restructuringsshouldbeconducted in a transparent mannerandgivereasonsfortheiroutcomes. All relevant assessments, evidenceandindicatorsshouldbemadepublic, andtheirconstruction, applicationandunderlyingdatashouldbe transparent andexplained in an understandablemanner.

19. Draftproposal c) Principleofownership Self-determination requires a measureofstateownershipovertherestrucuringprocess, includingthepoliticalaspectsofassessments, statisticalevidenceandindicators. This includesnamelyunderlyingvaluechoices, thetreatmentofuncertaintyandexercisesof international publicauthority. Such ownershipcanbesatisfiedby an explicit mandatefromthepoliticalorgansof a competent international organization.

20. Draftproposal d) Principleofsocialprotection All actorsinvolved in a retructuring must cooperatetomonitorandmitigatethe human andsocialimpactoftherestructuring. This entailstheproductionof human rightsstatisticsandindicatorsasrequiredbyapplicable international law. Resultingevidence must betakenintoaccount in all restructuringnegotiationsanddecisions.

21. Discussion • Currentroleof DSAs? • Is HR principle/terminologyacceptable? • Can wedistinguishtechnical/political? • Draftproposals? • Global administrative lawofinformation?

22. Gracias porsuatención Michael Riegner NYU School of Law / Giessen University mcr449@nyu.edu