Research On Several Legal Issues Of Sovereign State Insolvency

Recent years witness a frequent occurrence of the sovereign debt crises, which compel the sovereign states or regions concerned into incredible situation of threatened insolvency. In view of its significance, the theoretical research and practical innovation in regard to sovereign state insolvency and sovereign debt restructuring once again become the central points. The author chooses this thesis based on the reality of countries like Iceland, which has been immersed in sovereign state bankruptcy caused by the current international financial crisis. However, as present, China has paid its attention to sovereign state insolvency, but largely focused on economic issues. Thus, the legal research of sovereign state insolvency must go deep immediately, especially concerning the basic rules of international law. In the second place, whether from the perspective of the debtor or creditor, China can't avoid the issue of international debt. Especially in the current whole world, countries like Iceland which bear sovereign debt crisis may occur one after another like dominoes. How to deal with the sovereign state insolvency within the context of world economy is an urgent issue to be considered.Thus, this paper has linked theory with practice, and used comparative analysis, also be divided into three parts to discuss the several legal issues of sovereign state insolvency.The first section intends to illuminate the notion of sovereign state insolvency. Start from a definition of a state's motivation to borrow external debt, and then make an overview of the concepts and types of sovereign debt. Furthermore, this paper introduces the meaning of sovereign debt crisis, and also the previous world-shocked sovereign debt crisis, the recent Iceland and other countries facing the status of national bankruptcy hit by the global financial crisis and their profound consequences. This paper followed by rising two questions which are the crucial points of this paper:when a state can't pay its sovereign debt on due, can it be taken a sovereign state insolvency proceeding? If the answer is positive, then how to design the system and procedure? With the questions, the author further defines the concept of sovereign state insolvency, which means a country is lack of liquidity for a certain period of continuous because its foreign exchange reserves can't afford its foreign currency debt. Secondly, comparative analyze the national bankruptcy and the related system of domestic bankruptcy, reflect the special features of national bankruptcy with examples. Finally, concerning the three controversies toward the nation bankruptcy, this paper analyzes the dialectical nature of national economic sovereignty, as well as state immunity's exceptions, in order to clear the obstacles of national bankruptcy theory's feasibility. And also combines the Elliot Associates case to introduce the inevitable collective action plight in national bankruptcy. This section makes a theoretical base for the discussion below regarding the practice of sovereign state insolvency.The second section intends to analysis the existing countermeasures of sovereign state insolvency. Followed by introducing the instance of Iceland's way to alleviate crisis by using international assistance, this paper describes respectively the bailouts, rescue loans, traditional sovereign debt restructuring, the collective action clause and also unconstraint regulations. Eventually, the author reviews these measures one by one of their shortcomings and defects. There into, as represented by the International Monetary Fund, the bailouts could jeopardize the economic sovereignty of recipient countries, its reform measures actually worsened the crisis, its rescue efforts is little; the framework of the traditional sovereign debt restructuring can not adapt to the situation or advance with the times; selection and application of collective action clauses are inconsistent, and it doesn't have a unified and transparent procedures; soft measures are lack of binding and dispute resolution body. Considering there are quite a few shortcomings of the traditional strategies, the author observes it imperious and feasible to seek a valid fresh method to solve the sovereign debt crisis.The third section intends to expound the conception of building a "Sovereign State Insolvency Protocol". Based on the above, the author proposes that building a legal framework is the preferred choice, illuminates the superiority of the legal measure. And then discusses the feasibility of concluding a "Sovereign State Insolvency Protocol" under International Monetary Fund. Firstly, this paper analyzes the scope of the Protocol's application, as well as the application of the relationship with other methods. Then, set up a number of fundamental principles for the Protocol. Furthermore, this paper discusses the national bankruptcy's system, including terms of insolvency proceeding's initiation, international tribunal of sovereign state insolvency and also creditors committee. Finally, use the "Sovereign Debt Restructuring Mechanism" of International Monetary Fund for reference; establish the mechanism of sovereign state insolvency proceedings. Which includes the entire process: application and acceptance, claims registration, propose a new priority for repayment of the financing plan and restructuring plan, creditors vote, the international tribunal of sovereign state insolvency to confirm, termination of national insolvency proceedings.Eventually, the author concludes that, the "sovereign state insolvency protocol" will be able to prevent and resolve national bankruptcy, and to play a major role in improving the international financial system and promoting sound and rapid development of the global economy. The superficial conception about several legal issues of sovereign state insolvency contained in this paper is for the sake of acquiring a new propose, which will be applied to the recent and prospective sovereign state insolvency.