The Missing Mediator: Why Sovereign Debt Restructuring Still Has No Seat for the Profession That Could Save It

Look closely at six major sovereign debt restructuring cases of the past five years, namely those involving Zambia, Ghana, Sri Lanka, Ukraine, Suriname, and Ethiopia, and you see something curious. Each involved mutually suspicious creditor blocs, a government in or near fiscal collapse, an International Monetary Fund (IMF) programme casting a long shadow, and millions of citizens whose welfare depended on the speed and quality of the deal. Each resembled, in everything but its formal label, a multi-party mediation. Not one of them included a professional mediator in any defined role. This omission is not commonly discussed in the sovereign debt literature, which speaks the language of contracts, debt sustainability analyses, comparability of treatment, and collective action clauses (CACs). That silence is overdue for a challenge.

What the Common Framework Has Actually Delivered

The G20 Common Framework, adopted in November 2020, was meant to bring China and other non-Paris Club creditors into a single, IMF-anchored process for low-income countries. Nearly six years on, only four sovereigns, namely Chad, Zambia, Ghana, and Ethiopia, have applied, as of August 2026. Common Framework restructurings have reduced only a small fraction of the combined external debt stock of the high-risk lower-income countries in distress.

Zambia defaulted in November 2020 and did not complete its restructuring with bondholders until March 2024, after more than three years. Its Official Creditor Committee (OCC), co-chaired by China and France, twice rejected proposed bondholder terms on comparability of treatment grounds before a deal acceptable to the OCC, the IMF, and the bondholder Steering Committee was reached. Ghana, which defaulted in December 2022, moved more quickly: an Agreement in Principle with two bondholder committees in June 2024, a 37 per cent nominal haircut on US$13 billion of Eurobonds, and over 98 per cent participation by October 2024. Ethiopia, by contrast, entered the Common Framework in early 2021. The process remained protracted: a memorandum of understanding with the OCC was finalised in July 2025, and a January 2026 agreement in principle with bondholders was found by the OCC not to comply with the comparability of treatment principle. A revised agreement in principle reached on 29 June 2026 provided for a new US$880 million bond, a 12 per cent principal haircut, and a detachable New Money Warrant. In August 2026, the OCC confirmed that it considered the revised terms compliant with the comparability of treatment principle, bringing Ethiopia close to completing its bond restructuring, although the exchange documentation remained to be finalised at the time of writing. Outside the Common Framework, Sri Lanka concluded a US$12.55 billion bondholder deal in 2024 incorporating a novel macro-linked bond, while Ukraine restructured US$20.5 billion of international bonds in September 2024 with 37 per cent upfront principal relief, completed in three months. Suriname pioneered a value-recovery instrument linked to future oil royalties.

The pattern is unmistakable. Where stakeholders’ interests are aligned and a competent debtor has good advisers, restructurings can move. Where they are not, as in Ethiopia’s Common Framework process, which lasted more than five years and the early Zambia process, they stall for years on essentially relational and informational problems: who knows what about whom, who goes first, who feels betrayed by whose side deal. These are the textbook conditions under which mediation, properly conceived, adds value.

 Why the Architecture Has Resisted Mediation

The idea of giving sovereign debt restructuring a more neutral and structured process is not new. Kunibert Raffer’s Fair and Transparent Arbitration Process, modelled on US Chapter 9, was the earliest formal proposal. UNCTAD’s 2015 Sovereign Debt Workouts Roadmap built on it. UN General Assembly Resolution 69/319 of September 2015 endorsed nine principles, including impartiality and good faith, by 136 votes to six, with the United States, the United Kingdom, Germany, Japan, and others against or abstaining. Christoph Paulus and Steven T. Kargman have long advocated a sovereign debt tribunal. Steven Schwarcz has proposed a model-law approach that individual jurisdictions could enact, so that sovereign debt governed by their national laws could be restructured under a common statutory framework without a multilateral treaty. Skylar Brooks and Domenico Lombardi proposed regulatory standards through the Financial Stability Board. Richard Gitlin and Brett House sketched a Sovereign Debt Forum explicitly designed as a standing convener, rather than a court or an arbitration panel.

Most recently, Calliope Makedon Sudborough’s 2023 monograph Mediating Sovereign Debt Disputes makes the most sustained case. Sean Hagan and Brad Setser’s 2024 Peterson Institute Policy Brief calls for official and private creditors to negotiate in parallel rather than sequentially, supported by information sharing that allows each group to see the terms offered to the others. Lee Buchheit and Mitu Gulati have written extensively about the arthritic, near-paralytic character of restructurings involving three creditor groups: commercial lenders, Paris Club government creditors, and bilateral creditors outside the Paris Club such as China; they also examine how comparability of treatment can be enforced.

Why, despite this intellectual lineage, has mediation not arrived?

First, conceptual conflation. Most reform proposals collapse mediation into arbitration or into a quasi-bankruptcy court, precisely the elements creditors and powerful states have always rejected, from the IMF’s proposed Sovereign Debt Restructuring Mechanism, developed between 2001 and 2003, through the New York Sovereign Debt Stability Act, still pending and opposed by the New York City Bar’s Commercial Law and Uniform State Laws Committee. Mediation is not adjudication. It can sit alongside contract enforcement without displacing it.

Second, sovereign immunity and political optics. States fear that participating in a mediated process implies waiving immunity or accepting a non-state authority over fiscal policy. These concerns were intensified by the NML Capital v Argentina pari passu saga.

Third, enforceability ambiguity. The Singapore Convention on Mediation, in force since 12 September 2020, and the UNCITRAL Model Law on International Commercial Mediation of 2018 say nothing explicit about sovereign debt. Reservations under Article 8(1)(b) allow states to exclude themselves, and several already have.

Fourth, the political economy of the Global Sovereign Debt Roundtable (GSDR). Co-chaired by the IMF, the World Bank, and the G20 presidency, the GSDR's 6th Co-Chairs Progress Report and updated Restructuring Playbook, released at the April 2026 Spring Meetings, read as a careful, technocratic effort to standardise process, without admitting that process is a discipline with its own professionals.

 Where Mediation Could Be Embedded, Without Re-opening Old Wars

Mediation should not replace the Common Framework, the IMF’s role, CAC voting, or contractual remedies. It should be inserted at three identifiable choke-points where the existing architecture predictably breaks down.

Choke-point 1: information asymmetry between the OCC and bondholders. The Zambia experience showed that bondholders did not see official creditor terms, and that the OCC then judged bondholder proposals against undisclosed benchmarks. A confidential, technically literate mediator, empanelled by the GSDR, accountable to all stakeholders, and bound by mediator-style confidentiality, could perform the shuttle function that IMF staff cannot perform without compromising programme integrity, and that financial advisers and counsel cannot perform without compromising client loyalty.

Choke-point 2: the comparability of treatment dispute. The recurring rupture in Common Framework cases is the assertion that one creditor class is taking a softer hit than another. The IMF can compute net-present-value haircuts, but it cannot mediate the perception of fairness. A standing mediator panel, drawing on Richard Gitlin and Brett House's Sovereign Debt Forum design and the International Mediation Institute (IMI) Competency Criteria for Investor-State Mediators, could be commissioned, case by case, to facilitate comparability discussions before they harden into vetoes.

Choke-point 3: managing holdout creditors where CACs do not secure full participation. Single-limb aggregated CACs, in around half the outstanding stock since International Capital Market Association (ICMA)’s 2014 model, are powerful but blunt. They presume a binary vote. A legacy bond series that is not captured by an aggregated vote can remain outside the deal and complicate the wider restructuring. Mediation between the issuer and identified holdouts, short, time-boxed, and possibly mandatory before any cram-down vote under future CAC drafting, would not undermine creditor rights. It would honour them by giving the holdout a structured opportunity to be heard before a majority vote binds dissenting bondholders.

None of this requires a treaty. It requires the GSDR to add one line to its next Playbook: that mediation is a recognised, available process, and that the GSDR identify and maintain a roster of mediators with sovereign debt fluency who are available for appointment. Bondholder counsel, the Institute of International Finance, the Paris Club, and Beijing’s Ministry of Finance can all live with that. The dispute resolution profession should insist on it. The accumulated experience of three decades of sovereign debt restructuring teaches us that contract design, however elegant, cannot do alone what only a skilled third party in the room can do: change the conversation.