Washington, DC – The United Nations voted 128 to 16 to formally begin negotiations to create a global bankruptcy process. This resolution comes after the UN General Assembly voted in favor of a legal bankruptcy framework for countries in September. The UN legal framework could prevent global financial crisis, limit country defaults and stop predatory behavior. The 16 countries that voted against the resolution include the United States, Japan, Australia and much of the European Union. The United States, European Union, Australia and Japan all expressed support for improving debt restructuring and stopping predatory funds. However these countries that represent chief financial jurisdictions felt this conversation should take place at the International Monetary Fund (IMF) or the Paris Club rather than the UN.
“It’s incredibly exciting that this vote passed with such strong support,” shared Eric LeCompte, Executive Director of Jubilee USA, a religious group that supports financial reforms to protect poor people. “Even among the countries that voted no, there is universal agreement on the problems.”
The resolution calls for the UN to create a committee that will begin work on the process, with initial meetings set for late January. The committee would be based in New York and the UN Secretary-General would invite member states and other stake-holders to submit testimony to the committee. The resolution calls for the IMF and World Bank to participate as well. The President of the General Assembly would ensure that the committee completes its work before September 2015.
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“A global bankruptcy process is necessary to prevent global financial crisis,” said LeCompte, who serves on UN expert groups that work on these issues. “We applaud the UN for its leadership.”
The vote came in the wake of Argentina losing a major sovereign debt case to a group of so called “vulture funds.” The bankruptcy process could reduce litigation by requiring that hold-outs participate in debt restructuring processes. The Argentina case began after the country’s 2001 debt default. NML Capital and other funds refused to participate in Argentina’s debt restructuring deals and sued the country in US courts. A federal judge ruled that Argentina could not pay the 92% of its bond-holders that accepted the restructurings unless it paid the hold-outs in full. The Supreme Court allowed that ruling to stand. In addition to the UN vote in September, the IMF, the G20 and banks and investors all released proposals this year to address the issue.
“This is a global problem and requires a global solution” said LeCompte.
Read a timeline and history of the Argentina / NML case.