A Discourse Theoretical Approach to Sovereign Debt Restructuring: Towards a Democratic Financial Order
German Law Journal, Vol. 17, No. 5, pp. 709-746, 2016
38 Pages Posted: 29 Oct 2015 Last revised: 19 Oct 2016
Date Written: October 4, 2016
Abstract
In this paper, we study the role of law for squaring democracy with a market-based financial order. We approach this issue on the basis of Jürgen Habermas’ discourse theoretical understanding of the role of law in the welfare state. Accordingly, law needs to be enforceable; law-making and law-application need to be institutionally separated; and public law needs to be distinguishable from private law. The contemporary practice of sovereign debt restructuring reveals some empirical and normative challenges to this understanding of the law. These findings inform our proposals for conceptual and institutional improvements that might lead to a more harmonious relation between democracy and financial order. In particular, we argue that a discourse theoretical understanding should tap on the legitimating potential of existing transnational discourses that are characterized by cross-border cleavages in public discourse.
Keywords: democracy, finance, role of law, discourse theory, Habermas, sovereign debt, cleavages
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