Reprofiling Today for a Sustainable Tomorrow: A Unilateral Italian Debt Restructuring

16 Pages Posted: 24 May 2019

See all articles by Emma Cervantes

Emma Cervantes

Duke University, School of Law, Students

Victoria Dodev

Duke University, School of Law, Students

Shane Ellement

Duke University, School of Law, Students

Isabelle Sawhney

Duke University, School of Law, Students

Date Written: April 12, 2019

Abstract

Italy should unilaterally extend maturities for its domestic government securities to facilitate an orderly and streamlined restructuring that provides Italy with necessary debt relief.

Italy’s domestic government securities are issued as decrees under a 2003 Consolidated Act (the “Act”). Article 3 of the Act explicitly grants Italy the power to unilaterally extend maturities for all domestic government securities. To exercise this restructuring power, the Ministry of Economy and Finance (the “Ministry”) must issue a framework decree that authorizes the Treasury to unilaterally reprofile Italy’s debt.

In 2011, Edelen et al. first proposed that Italy had the authority under its existing laws to unilaterally reprofile its sovereign debt. The following proposal expands upon and updates the Edelen et al. proposal. It demonstrates that the inclusion of the Collective Action Clauses (“CACs”) in some of its bonds does not foreclose the use of Italy’s Article 3 power. The proposal also describes the mechanics by which Italy would exercise its right to extend maturities. Unilaterally extending maturities does not require any retroactive utilization of the local law advantage. Nor does it expose Italy to significant legal risks in its domestic courts or under European treaties and conventions.

Keywords: sovereign debt; Italy; collective action clauses; CACs; debt restructuring

Suggested Citation

Cervantes, Emma and Dodev, Victoria and Ellement, Shane and Sawhney, Isabelle, Reprofiling Today for a Sustainable Tomorrow: A Unilateral Italian Debt Restructuring (April 12, 2019). Available at SSRN: https://ssrn.com/abstract=3371964

Emma Cervantes

Duke University, School of Law, Students ( email )

Durham, NC
United States

Victoria Dodev

Duke University, School of Law, Students ( email )

Durham, NC
United States
4802903577 (Phone)

Shane Ellement

Duke University, School of Law, Students ( email )

Durham, NC
United States

Isabelle Sawhney (Contact Author)

Duke University, School of Law, Students ( email )

Durham, NC
United States

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