Last night I was delighted to welcome Jubilee Scotland to the Cross Party Group on International Development to speak about their work to develop an arbitration system to deal with sovereign debt disputes.
In some of the world’s poorest countries the level of debt is such that servicing interest and repayments comes at the expense of public services such as healthcare and education. That means some of the world’s poorest countries spend huge amounts dealing with the burden of dealing with debt rather than investing in health and education.
While previous initiatives to assist these countries have resulted in the cancelling of sovereign debt, they have been described as a sticking plaster. Because these systems were based purely on the ability to pay without consideration of the needs of the country to invest in services, the underlying issues facing these societies were not addressed and they have quickly found themselves back in the debt trap.
Jubilee Scotland is therefore leading the drive to make Scotland the seat of a fair and transparent arbitration process. Arbitration involves bringing two parties with a grievance together in front of a neutral arbiter who can listen to the arguments and make a decision that is binding on both parties.
Scotland has developed particular expertise in this area with the formation of the Scottish Arbitration Centre. This in turn has allowed Jubilee Scotland to develop ground-breaking Sovereign Debt Arbitration Rules which provide a framework which would allow for disputes to be settled here in Scotland.
The key principles which underpin these rules are that the process should be open and transparent and that decisions should be based on justice, fairness and equity with regard taken to human rights and the provision of basic needs and services in the debtor state.
This system would provide both debtor and creditor states with a degree of clarity and fairness that is currently lacking, leading to a system which could command international respect.
Jubilee Scotland’s presentation to the Cross Party Group was thought-provoking and led to an interesting discussion on the merits of the proposed system. It would suit some countries to be able to engage in resolving historic debt in a more transparent and fair process.
It could also help concentrate the minds of those considering lending about the fairness and value of the loan and whether it is in the interests of the receiving country in the longer term.