1. Legal frameworks and general principles for indicators in sovereign debt restructuring Michael Riegner NYU School of Law/Giessen University UNCTAD DWM Working Group Meeting 19 March 2014, Buenos Aires

2. ‘…as long as we are unable to put our arguments into figures, the voice of our science … will never be heard by practical men. They are, by instinct, econometricians all of them, in their distrust of anything not amenable to exact proof.’ Joseph Schumpeter “The reduction of all qualities to quantities is nonsense” Friedrich Nietzsche

3. Outline Indicators in international law Lessons learned: Existing legal contexts Normative framework: General principles Recommendations for DWM design – namely: Possible wording of GA resolution/UNCTAD principles

4. Main points Indicators should be used for signalling and guiding restructuring BUT – Not in isolation – Subject to legal framework General principles should guide indicator framework – Derived from existing sources of law – Sustainability, transparency, ownership, social rights Recommendations for indicators in DWM – Multiple purposes of indicators – Cascade of sources and authors – namely: GA resolution – Application subject to impartiality, transparency, review et al.

5. Indicators in international law DWM indicators: Economics – politics – law IL contributes to effectiveness, legitimacy, acceptance of DWM indicators, namely through: General principles guiding rules, setting standards, structuring interplay „Global administrative law of information“

6. Existing frameworks IMFEU Debt Sustainability Framework/Assessment Fiscal governance Surveillance, exceptional access lending, conditionality Fiscal discipline, ESM lending, Commission surveillance Soft sources, risk-based indicators, discretion Hard law (treaty/secondary), 60% to GDP, semi-automatic enforcement procedure Performance +/-; flexbility +/-; (P) impartiality, limited scope Crisis Enforceability and (in)flexbility „Gaming the indicators“

7. Existing frameworks National law – Subnational debt restructurings – Central government debt constraints – Statistical governance, data quality Private actors – Litigation, market conditions – Coordination by indicators (cf. MDGs) – Governance by indicators (cf. Doing Business)

8. Lessons learned Potential of indicators – Evidence-based policy, coordination, transparency/acceptance, social concerns Enabling conditions – Technical quality, impartiality, acceptance/legitimacy, enforceability Pitfalls – Obscuring value choices and uncertainty; deceptive precision; misguiding attention and incentives; unchecked power -> Use indicators, but subject to legal framework

9. General principles Sources and methodology Sustainability – Output legitimacy – Cost efficiency; restructuring to restore sustainability – Duty to conduct negotiations based on reliable evidence – qualitative and quantitative – Availability, impartiality, quality of statistics: capacity, scientific methods, organizational safeguards, external review – Do not use one, but several indicators to avoid mistakes, gaming etc

10. General principles Transparency – Input, throughput, output legitimacy – Indicators to make restructuring more transparent and reasoned – Indicators themselves transparent and reasoned – Disclose data, Access to Information, transparent process, give reasons for indicators

11. General principles Ownership – Input legitimacy, self-determination, democracy – Measure of state control over restructuring – Ownership over indicators, cf. Paris Declaration Legitimate value choices, uncertainty, IPA – State response and rebuttal of DAS – Participation? – Equality?

12. General Principles Human Rights/Social Protection – Throughput and output legitimacy – Respect, protect, fulfil, and monitor (CESCR, OHCHR, indicators) – Human rights impact assessments Monitor and mitigate Distinguish inability / unwillingness Floor for social spending – size of restructuring/haircuts – Take into account in negotiations (states, IOs, private creditors) – BUT caveats apply

13. Recommendations: How to use indicators 1.Requirements for restructuring a) debtor state request b) IO finding that debt is unsustainable 2.Measure debt sustainability with set of indicators and reasoned and transparent qualitative assessment 3.Use to render restructuring negotiations and dispute settlement more efficient, coordinated and transparent 4.Use human rights indicators to monitor and mitigate social and human impact

14. Recommendations: Sources and competences 5.Recognize general principles in GA resolution on a DWM 6.Cascade of sources and competences – Define political competence and requirement for mandate – Lay down substantive principles – Define competence and procedure for impartial application

15. 7.Application by independent expert organ subject to impartiality safeguards 8.Procedure: mandatory government response, transparent and reason giving, public comment 9.Measures on data quality and good statistical governance 10.Periodic external expert review and political re-evaluation Recommendations: Application

16. Draft proposal The GA / the Principles on Debt Restructuring recognize the following principles on debt assessments and indicators and call upon all actors involved in restructurings to implement these principles in their regulations and practice:

17. Draft proposal a) Principle of debt sustainability: Restructurings should be conducted in a cost- efficient and evidence-based manner that restores debt sustainability. The evidence base includes impartial and reliable qualitative assessments as well as statistical evidence (including indicators), produced by an independent institution with the necessary expertise subject to periodic outside review.

18. Draft proposal b) Principle of transparency: Restructurings should be conducted in a transparent manner and give reasons for their outcomes. All relevant assessments, evidence and indicators should be made public, and their construction, application and underlying data should be transparent and explained in an understandable manner.

19. Draft proposal c) Principle of ownership Self-determination requires a measure of state ownership over the restrucuring process, including the political aspects of assessments, statistical evidence and indicators. This includes namely underlying value choices, the treatment of uncertainty and exercises of international public authority. Such ownership can be satisfied by an explicit mandate from the political organs of a competent international organization.

20. Draft proposal d) Principle of social protection All actors involved in a retructuring must cooperate to monitor and mitigate the human and social impact of the restructuring. This entails the production of human rights statistics and indicators as required by applicable international law. Resulting evidence must be taken into account in all restructuring negotiations and decisions.

21. Discussion Current role of DSAs? Is HR principle/terminology acceptable? Can we distinguish technical/political? Draft proposals? Global administrative law of information?

22. Gracias por su atención Michael Riegner NYU School of Law / Giessen University mcr449@nyu.edu