Legislation drafted by Dr Stephen Connelly and Professor Celine Tan from Warwick Law School with Dr Karina Patricio Ferreira Lima from University of Leeds School of Law to deal with the sovereign debt crisis in developing countries has been scheduled for debate in the UK Parliament.
The Debt Relief (Developing Countries) Bill proposes legal measures to cap recoverable debts owed by developing countries to private creditors and supports global efforts to resolve sovereign debt crises in developing countries. This follows the tabling of a private members' bill by Member of Parliament Bambos Charalambous in the House of Commons on 13 November 2024.
The Bill, scheduled for a second reading in the spring next year, seeks to address the challenges of securing private creditor participation in sovereign debt restructurings and ensuring fairer participation in multilateral debt relief initiatives, such the G20's Common Framework, designed to provide debt treatments to low-income countries facing severe debt distress.
The draft Bill builds on the legislative model of the Debt Relief (Developing Countries) Act 2010. It extends its principles to encompass debt treatments under the Common Framework and any other designated initiatives, ensuring that recoverable debt is limited to the amount a creditor would have received had it participated in these multilateral efforts.
Given the UK's prominence as a financial centre—where the enforcement of a significant proportion of sovereign debt contracts often takes place—the UK is uniquely positioned to contribute to strengthening multilateral efforts to address sovereign debt crises in developing countries through domestic legal measures. The Bill comes in the wake of attempts by New York senators to pass their own debt relief bill this year.
The proposal complements existing efforts to promote market-based and contractual innovations in sovereign debt management, such as majority voting provisions in syndicated loans and climate-resilient debt clauses in bilateral loans.
In response to the bill's tabling, the authors stated: 'We are delighted to see our bill introduced in the UK Parliament. This legislative proposal is designed to foster more effective sovereign debt restructuring negotiations and support global initiatives aimed at achieving sustainable development goals by facilitating coordinated and equitable restructuring processes. We strongly encourage MPs from across all parties to support this vital initiative'.
The original draft of the Debt Relief (Developing Countries) Bill and an accompanying policy briefing are available for download here. The authors' draft is now with the Public Bills Office for consideration and amendment as appropriate.
