Sovereign Defaults before International Courts and Tribunals . By M ichael W aibel

Extract

Sovereign debt is not for the faint of heart. A wide-ranging term of finance, that few people fully understand; sovereign debt operates both internally and externally in the form of sovereign bonds, and bank debt expressed in foreign currency respectively. Defaulting on sovereign debt is a complex matter of state policy, market and inter-organisational responses, as well as third party settlement processes.

This description alone may be enough to deter financiers, politicians, and even international lawyers. Michael Waibel, however, has a keen, more conceptually astute understanding of the political, historical, and social role played by sovereign debt, as well its more obvious economic one. The manner in which sovereign debt has literally underwritten the rise and fall of both states and regions is explained compellingly by Waibel, and is a decided strength of this new monograph.

From this perspective, sovereign bonds are not merely ‘debt instruments issued by a state … , acknowledging indebtedness and promising repayment of principal and interest on an earlier advance of money’ (13), but an asymmetric, interest-bearing, long-standing instrument of both statecraft and market growth. Waibel has a strong awareness of this duality, and its increasingly blurred nature in contemporary finance. Accordingly, ‘public credit achieved for the power of the state [is] a revolution similar to the one caused by gunpowder’ (8). This alone would make an interesting thesis. The text then explores the resultant difficulties of resolving sovereign debt within international courts and tribunals. Waibel approaches this task in commendably methodical fashion by examining monetary reforms and sovereign debts (Chapter 4), and the role of financial necessity (Chapter 5) as dealt with via international courts (such as the PCIJ and ICJ) and other tribunals.