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UC Law SF International Law Review

Ilias Bantekas

Abstract

Central to our understanding of sovereignty should be the competence of states to determine how their debts are restructured or denounced when the debts considered are odious or illegal. Sovereignty, in this sense, is tantamount to self-determination and the corresponding obligations of states that are absent on the part of creditors when entering into a debt agreement or restructuring process. States owe duties under international law to their own people. Hence, the sanctity of international agreements, whether treaties or contracts, entered by states cannot override these compelling and humancentered state obligations. Otherwise, such agreements would be valued more than human life and dignity. This does not, of course, mean that states are under no obligation to pay their debts or that they can, at will and without consequences, declare themselves insolvent or denounce their debts. This paper identifies several mechanisms through which states may lawfully denounce debt: (a) unilateral insolvency; (b) repudiation or non-enforcement of arbitral awards on public policy grounds; (c) denunciation on the grounds of executive necessity and/or the right to fiscal/tax sovereignty; (d) direct unilateral repudiation based on reports by national debt audit committees; (e) repudiation of contracts when creditor/investor violates human rights and of unconscionable concession contracts; (f) re-negotiation of bilateral investment treaties and concessions.

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