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

See all articles by James Thuo Gathii

James Thuo Gathii

Loyola University Chicago School of Law

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.

Suggested Citation

Gathii, James Thuo, The Sanctity of Sovereign Loan Contracts and its Origins in Enforcement Litigation (2006). George Washington International Law Review, Vol. 38, No. 251, 2006, Available at SSRN: https://ssrn.com/abstract=1624864

James Thuo Gathii (Contact Author)

Loyola University Chicago School of Law ( email )

25 East Pearson
Chicago, IL 60611
United States

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