Sir, John Dizard's ("A bankrupt solution to sovereign debt", January 18) devil-take-the-hindmost approach to the collective action problem in international finance is beset by contradictions. He applauds speculators such as Elliott Associates for taking sovereigns to court and winning.

At the same time, he argues that domestic and sovereign bankruptcy differ precisely because judgments cannot be enforced against countries. The plain evidence is that countries do make great efforts to service their foreign debts.

The Sovereign Debt Restructuring Mechanism (SDRM) concept developed by the International Monetary Fund's Anne Krueger is no assault on creditor rights. There is a need to replace a process that can richly reward a few holdouts with one that is fair to all parties. It would avoid lengthy negotiation with debtors and lengthier litigation with the hold-outs. At present, a debtor country's economy may go from bad to worse while all this takes place, leaving everyone worse off.

Effective collective action requires that majorities, or at least qualified majorities, can reach decisions for the group. This principle underpins the SDRM concept. There are strong parallels between the SDRM and domestic bankruptcy procedures, yet no one argues that current bankruptcy law interferes with companies' ability to access financial markets.

To be sure, these are complex issues needing a thorough airing. There should be a discussion among all interested parties-Mr. Dizard and Elliott Associates are welcome to join in-on how these principles can be transformed into an effective workout procedure to safeguard the international financial system further.