Sovereign Bonds: Just Another Lacunae in International Law?

During the last decade of 20th century, the liberalization of financial services and the progressive internationalization of capital markets were deemed to be the building blocks for a new international financial order in which inclusive economic growth and prosperity for all human beings would be achieved and financial stability would be well maintained. Instead, it paved the way for one of the biggest global financial crisis so far i.e. Sovereign Debt Crisis. This article argues that sovereign debt defaults, during the last two decades, in the absence of a global legal framework for orderly resolution of sovereign debt disputes, has provided ample evidence that the existing international financial order which is excessively fragmented, has failed in achieving both financial stability and growth and the contractual clauses have been proved to be inadequate and inefficient in restructuring sovereign bond debts. Therefore, resolving sovereign debt crisis is not achievable unless further developments in international law of finance occur. This could be done through establishing an international legal regime governing sovereign debt workouts with a view to balance the interests of the debtor State and its population on the one hand and the rights of the creditors on the other.