Question the Unquestionable Beauty of A Collective Proceeding for All Sovereign Debt Claims


  • This paper was prepared for the Annual Meeting of the Academic Forum of INSOL International (18–19 May 2013). It has won the Gold Medal in the International Insolvency Institute's 2013 Prize in International Insolvency Studies. Yanying Li is a PhD candidate funded by the Netherlands Organization for Scientific Research (NWO) under the supervision of Professor Bob Wessels at the Leiden Law School, University of Leiden, the Netherlands, and an Assistant Legal Counsel at the Permanent Court of Arbitration in The Hague. The opinions expressed in this paper are the personal views of the author. The author is very grateful to Professor Bob Wessels, Professor MituGulati, and Professor Rolef de Weijs for their helpful comments on an earlier draft.



The new challenges presented by the current Eurozone crisis and the NML Capital v. Argentina case are likely to shift the international community's attention from holdout behavior in foreign bonds restructuring to inter-creditor issues. In the past years, many academics, and nongovernmental organizations concerned with debt relief, have put forward proposals to create a bankruptcy regime for states. But none of these proposals has seriously examined what rules should apply to treatment among creditors. Moreover, all insist that there must be a collective proceeding for all sovereign debt claims, without explaining why. This approach is simply taken for granted, as it is one of the fundamental principles of bankruptcy law. The article questions this orthodoxy through examining the nature of sovereign debt crisis, the feature of the limited pool of sovereign assets, and the nonliquidable fact of the sovereign debtor. It also argues that the common pool problem does not exist in the sovereign debt context.