The Financial Obligation in International Law

The Financial Obligation in International Law

The Financial Obligation in International Law

The Financial Obligation in International Law


This is the first volume to comprehensively and systematically study, describe, and theorize the financial obligations created and governed by public international law. Legal globalization has given rise to a number of financial issues in international law in areas as diverse as development financing, investment protection, compensation of human rights victims, and sovereign debt crises. The claims resulting from the proliferation of financial activity are not limited to those primarily involving financial obligations (e.g. loans and grants) but include secondary obligations resulting from the law on international responsibility. Among the many instances of financial obligation covered in this study, the reader will find inter-State financial transactions, inter-State sale of goods, transnational services such as telecommunications and post, the financial operations of multilateral institutions, loans, grants and guarantees provided by the various international financial institutions, certain financial relations between non-State actors(including natural persons) and States, intergovernmental organizations or other international legal actors, and government loans to international organizations. Rich in historical detail and systematic in its coverage of contemporary law, this book will be valued by all practitioners and scholars with an interest in the nature of international financial obligations.


I commenced the practice of law in Washington DC on 29 August 1976. Just fiftythree days later, at a location on Capitol Hill only a few blocks from my office, the United States Congress enacted the Foreign Sovereign Immunities Act of 1976. As far as I can tell, there was no connection between these two events.

The FSIA, and similar legislation two years later in the United Kingdom, the State Immunities Act (1978), marked a dramatic shift in private creditor relations with sovereign debtors. Until the middle of the twentieth century, lenders to sovereign borrowers had few or no judicial remedies against defaulting sovereigns. A doctrine of “absolute” sovereign immunity prevented a sovereign from being sued in foreign courts without its consent. An aggrieved private creditor was left to importune its Foreign Office or State Department in an effort to bring diplomatic pressure on the wayward sovereign borrower.

In the less than 40 years since the doctrine of “restrictive” sovereign immunity was codified in the laws of most creditor countries (sovereigns lose their jurisdictional immunity when they engage in commercial activities abroad), thousands of judicial decisions and a vast amount of legal commentary have defined the rights and remedies of private lenders to payment-challenged sovereigns. What has been noticeably missing from this literature, however, has been a thorough analysis of the status under public international law of the financial obligations that sovereigns owe to each other, or to the multilateral bodies such as the Bretton Woods institutions that they have created. The book you are now holding fills that gap.

A deep fog has long obscured the question of what it means to say that a financial obligation is governed by public international law. Is that law, as some have argued, merely a reflection of the corresponding rules of private commercial law, like the shadows cast in Plato’s cave? Is public international law as it relates to financial obligations merely an application by analogy of the doctrines of municipal law or, at best, comparative municipal law? Or is there an independent, sufficiently developed body of law— separate from the legal system of any individual state—by which financial obligations between and among the subjects of international law (states, their instumentalities, and international organizations) can be interpreted and, if necessary, adjudicated? Rutsel Martha makes a compelling case for the latter proposition.

But if we are to view public international law as adequate to this task, it must cover much the same ground as the commercial law of any domestic legal system. How and by whom are the obligations created? In what currency may they be discharged? Under what circumstances will the performance of otherwise valid and enforceable obligations be excused or deferred? In situations of financial distress, are any obligations to be given a legal or de facto seniority over any others? How, apart from full and timely payment, may such an obligation be extinguished or reduced?

These issues have a special poignancy today. Following the onset of the Eurozone debt crisis in early 2010, the policy of the official sector actors (principally the European Union and the International Monetary Fund) has been to lend the afflicted countries . . .

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