Max Planck Lecture Series: Max Planck Lecture Series: Prof. Robert Howse delivered a lecture on “Sovereign Debt Restructuring and International Law”

07 November 2016
Prof. Robert Howse's lecture marked the second event of the Max Planck Lecture Series on Sovereign Debt. His presentation completed the first set of lectures on the legal and economic foundations of sovereign debt.

On 26 October 2016, the MPI Luxembourg for Procedural Law welcomed Prof. Robert Howse (New York University) and Dr. Matthias Goldmann (Goethe University) for a lecture on “Sovereign Debt Restructuring and International Law.”

Robert Howse firstly introduced some fundamental notions of sovereign debt default and restructuring from a historical perspective. He pointed out that while sovereign debt restructuring negotiations used to be conducted under the auspices of the Paris and London Clubs, international law has evolved significantly since the 1980s. The way of conceptualising sovereign debt in international law has changed since as the traditional principle had used to be the full repayment of States’ obligations. Progressively, this obligation went balanced by other needs, such as the consideration of the social and political needs of the State. Subsequently, Prof. Howse reflected on some of the most important legal issues surrounding sovereign debt restructuring, such as whether sovereign bonds qualify as “investment” and the problems caused by holdout creditors. Furthermore, he addressed the different national and international initiatives aimed at tackling the holdout issue. Prof. Howse concluded his presentation with a positive note, pleading for a statutory approach and suggesting that international law could positively contribute to sovereign debt restructuring.

Matthias Goldmann tried to take a difference stance on the evolution of sovereign debt. In his point of view, the shift from private to public sphere clearly showed that there is more continuity than disruption. Whereas there used to be a purely contractual paradigm and bilateral negotiations, the sovereign debt framework evolved due to the emergence of syndicated loans and the effects of financial globalisation after 1980. From his perspective, has led to a change in the goal of sovereign debt restructuring from that of debt recovery to debt relief. He emphasised that the issue of sovereign debt sustainability emerged as a global concern only after the 1980s. The last part of his presentation addressed the impact of sovereign default on dispute settlement. He critically assessed the legal defenses raised by debtor states, including necessity, sovereign immunity and the principle of good faith and additionally raised the question whether human rights could be used as a basis of a sui generis defense.

The presentations of the two scholars, who both participated in the UNCTAD Working Group on a Sovereign Debt Workout Mechanism, were followed by a lively discussion during the Q&A session. Among the many issues covered, the discussion addressed the topics of sovereign immunity, the repudiation of odious debt and the possibility to make citizens reliable in the event of default.

The next lecture of the series will focus on the practical challenges raised by sovereign debt crises in Argentina and Greece.

For a picture gallery of the lecture, please click here.