By Sophia Har
A United Nations committee adopted nine principles to create a global bankruptcy process for countries. Nobel Laureate Joseph Stiglitz addressed the final session of "The UN Ad Hoc Committee on Sovereign Debt Restructuring" that the UN General Assembly established last fall. Countries currently cannot access bankruptcy protection when they face economic crisis. The World Bank notes that 49 countries face worrying levels of debt distress and the International Monetary Fund notes debt is the root cause of inequality. In recent months, governments across the Caribbean, Greece and Argentina expressed an immediate need for a global bankruptcy process.
"With so many countries facing debt crises, we urgently need solutions to protect investors and poor people," noted Eric LeCompte, who is participating in the UN meetings. LeCompte is the executive director of the religious development organization Jubilee USA Network. "The UN's work is a step in the right direction, but we still have a lot of work to do if we want a legally binding process."
The principles aim to enhance "predictability and stability" in the global financial system. Similar to US Bankruptcy Chapter 9 or 11 laws, the UN principles include good faith engagement by borrowers and lenders, transparency, impartiality and equitable treatment for all investors. The International Monetary Fund is also discussing aspects of a bankruptcy system and laid out an agenda in 2013.