The Sanctity of Sovereign Loan Contracts and its Origins in Enforcement Litigation
George Washington International Law Review, Vol. 38, No. 251, 2006
76 Pages Posted: 15 Jun 2010 Last revised: 18 May 2020
Date Written: 2006
Abstract
This article is the first to examine sovereign debt enforcement litigation from the perspective of the sanctity of contracts doctrine. The sanctity of contracts doctrine has become the reigning paradigm underlying sovereign debt enforcement litigation since the mid-1980s. This doctrine provided for strong creditor rights provisions which permitted default to be used as a baseline creditor right, replacing the previous rule providing that renunciation or repudiation of a debt by a sovereign borrower was a precondition for accelerated payment.
The article argues that the doctrine is one of legal necessity which ignores the interests of sovereign interests in private contractual relationships such as through the principle of comity, the act of state doctrine, or other defenses traditionally available under domestic contract law. Essentially, the doctrine undid the previously available flexibility and policy of cooperative adjustment of debt.
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