Debt Suspension Legislation

Durham Law School doctoral student Karina Patricio Ferreira Lima is working with Dr Stephen Connelly (Associate Professor in Law, Warwick Law School), Dr Celine Tan (Reader in Law, Warwick Law School) and Chris Tassis (PhD Candidate, Warwick Law School) to support civil society groups, led by Jubilee Debt Campaign UK and Oxfam GB, in proposing legislation in the UK that will have the effect of suspending debt owed to private creditors of countries eligible for the G20 Debt Service Suspension Initiative (DSSI). The DSSI commits G20 and Paris Club official creditors to a time-bound suspension of debt service for eligible countries that request such forbearance in order to free up resources for low-income countries to support health, humanitarian and social and economic measures during the COVID-19 pandemic. The aim of this proposal is to give legislative effect to the commitment made by private creditors for voluntary debt service suspension that mirrors the G20 deal.

The team is working under the auspices of the recently formed The IEL Collective Law and Finance Working Group to develop mechanisms for managing the sovereign debt of low and middle-income countries to meet the economic and financial challenges brought on by the COVID-19 pandemic. Under this legislative proposal, private creditors holding English law bonds issued by a qualifying country will be barred from pursuing legal or arbitral proceedings, including enforcement proceedings, against that qualifying country in any court of the United Kingdom during a determinate moratorium period. The current proposal is time-bound, does not interfere with the underlying contractual rights of parties to the contract and is contingent on the country subject to such claims to make such a request of suspension to the court.

Enshrining a standstill in law will demonstrate UK’s leadership in global COVID-19 responses and reinforce its commitment to ensuring low-income countries have access to all the financial resources they need to contain COVID-19 and recover from this unprecedented health, social and economic crisis. It is recognised that the current proposal is limited in resolving the longer-term debt burden of developing countries, but it is hoped that it will serve as an emergency measure to enable breathing space for countries while more comprehensive and sustainable mechanisms are being developed.

For further details on their proposal, please see the proposal briefing and Warwick Law School’s GLOBE Centre Policy Note.