Sovereign Defaults before International Courts and Tribunals (Cambridge Studies in International and Comparative Law)
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International law on sovereign defaults is underdeveloped because States have largely refrained from adjudicating disputes arising out of public debt. The looming new wave of sovereign defaults is likely to shift dispute resolution away from national courts to international tribunals and transform the current regime for restructuring sovereign debt. Michael Waibel assesses how international tribunals balance creditor claims and sovereign capacity to pay across time. The history of adjudicating sovereign defaults internationally over the last 150 years offers a rich repository of experience for future cases: US state defaults, quasi-receiverships in the Dominican Republic and Ottoman Empire, the Venezuela Preferential Case, the Soviet repudiation in 1917, the League of Nations, the World War Foreign Debt Commission, Germany's 30-year restructuring after 1918 and ICSID arbitration on Argentina's default in 2001. The remarkable continuity in international practice and jurisprudence suggests avenues for building durable institutions capable of resolving future sovereign defaults.
Argentina negotiated in good faith with its creditors. Argentina claimed that it was fully transparent about how much it could pay its creditors. Some creditors strongly disputed this claim, in particular in view of Argentina’s subsequent rapid increase in reserves and its strong economic growth.79 Bondholders, for instance, claimed that Argentina made ‘no good faith effort to reach a collaborative agreement’.80 One creditor representative described the initial offer as ‘barbarous’.81 At the
defaults was inimical to peaceful conduct of international relations, and gave rise to strong objections by affected debtor states: the most prominent of these critiques is the Drago Doctrine. The Drago Doctrine A central figure in this struggle to free debtor governments from creditor coercion was Luis Maria Drago, the Argentine foreign minister from 1902 to 1903. The military intervention by the United Kingdom, Germany and Italy in Venezuela prompted Drago to propose a new variant of the
Between the United States and Honduras and the United States and Nicaragua, AJIL, 5 (1911), 1044 (neither ever ratified); A. De la ˆle ame´ricain’, RGDIP, 17 (1911), Rosa, ‘Les finances de Saint-Dominique et le contro 401–49; 19 (1912), 499–583; 19 (1912), 72–121. K. Lissakers, Banks, Borrowers, and the Establishment: A Revisionist Account of the International Debt Crisis (New York: Basic Books, 1991), 167. J. A. Frieden, ‘Capital politics: creditors and the international political economy’,
municipal law. The PCIJ applied an autonomous pacta sunt servanda rule, without substantive recourse to either French or Serbian (or Brazilian) municipal law.14 The PCIJ neutralised the French abolition of gold clauses for international contracts. The court found that the debtor governments had accepted an express gold clause, as required by French law. These clauses protected holders against every form of devaluation. The Brazilian and Serbian construction, France argued, ran contrary to the
Case No. ARB/84/3, 3 ICSID Rep 131, (1991) 16 Ybk Comm Arb 28 RFCC v Morocco (Merits) 202, 258, 278, 279, 300 RSM v Grenada 229 Salini v Morocco 227–29, 231, 234, 235 Saluka v Czech Republic 236, 298, 300, 321, 326 Sempra v Argentina (Award on Merits) 223, 240, 280 Sempra v Argentina (Annulment) 100, 101, 240 SGS v Pakistan 226, 268, 269 SGS v Philippines 215, 249, 255, 257, 260, 261, 262, 269, 270, 272, 283, 294 SOABI v Senegal 220 SPP v Egypt (Jurisdiction) 202, 268, 272