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For the Orphan, the Widow, the Poor: How to Curb Enforcing by Vulture Funds against the Highly Indebted Poor Countries


The dynamic of the secondary market for sovereign debt has been affected by the presence of a peculiar category of holders: vulture funds. These funds, specializing in purchasing the debt of sovereign states in distress at a discounted market price, stay aloof from restructuring processes and then enforce their claims in courts to secure the face value. For low revenue debtor countries, paying the claims may involve reducing the resources available for basic services to the population. For very poor countries this also involves a significant regression in terms of development. Against this background, the purpose of this work is to inquire whether and to what extent there exists a rule permitting the suspending and rescheduling of payments so as to pay dues without impairing services. In order to find such a rule, inquiry is to be made into general norms: necessity and public policy. It is under the umbrella of the truly international public policy that the duty of a state to provide certain basic services to its population can be subsumed and the corollary of the suspension and rescheduling of these payments consistently with this duty can be applied.

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1 The point is well underscored by the 1966 International Covenant on Economic, Social and Cultural Rights, (1967) 6 International Legal Materials 360, which stipulates that each party undertakes to take steps, individually and through assistance and co-operation, to the maximum of the available resources with the view of a progressive realization of the rights recognized in the Covenant (Art. 2(1)).

2 The most striking instance of how debt repayment may affect living conditions is constituted by the case of Malawi. In 2002 Malawi, one of the poorest countries in the world, decided to sell the maize from its food reserve agency in order to raise funds to pay loans. As a result, 7 million people out of a population of 11 million, were left facing serious food shortage. See Report of the independent expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, particularly economic, social and cultural rights, UN Doc. A/HRC/11/10 (2009), para. 30.

3 The vulture funds operate in this way: target sovereign debtors with distressed economies and weak capacity of legal defence; take advantage of lack of regulation in the secondary markets; refuse to take part in debt restructuring processes and wait until the financial situation of the debtor country has ameliorated to get a better deal (which debtor countries are inclined to concede in order to re-enter financial markets); sue the debtor country for full repayment of the face value of the bonds plus interest and delay penalties; seek enforcement of claims everywhere; secure huge profits; operate in jurisdictions where there is no obligation to disclose information on benefits or ownership. See Report of the Human Rights Council Advisory Committee on the activities of the vulture funds and the impact on human rights, UN Doc. A/HRC/33/54 (2016), paras. 6–8.

4 See R.C. Riddell, Does Foreign Aid Work? (2007), 99–101.

5 The International Monetary Fund (IMF) conditionality entailed deep interference in the domestic affairs of the borrowing states. See E. Denters, The Law and Policy of IMF Conditionality (1996). To appease this criticism, in 2002 the IMF adopted the new Guidelines on Conditionality which are based on the principles of country ownership and parsimony of conditions.

6 See Barnett, B.C., Galvis, S. and Gouraige, G., ‘On Third World Debt’, (1984) 22 Harvard Journal of International Law 83, at 88–90.

7 See Santos, A.G., ‘Beyond Baker and Brady: deeper debt reduction for Latin American sovereign debtors’, (1991) 66 New York University Law Review 66, at 84. At present, syndicate lending comes into play in the framework of co-financing facilities arranged by multilateral financial institutions. Co-financing may assume the form of joint financing, where all lenders share in responsibility for the whole project, or parallel financing, where each lender finances a specific part of the project. In this last case the multilateral institutions may guarantee the loans provided by the banks. See IEG, The World Bank Guarantee Instruments (2009), 8–9.

8 See W.R. Cline, International Debt Re-examined (1995), 426–7. Bonded loans were the primary private source of sovereign debt until the Great Crash of 1929.

9 See Buckley, R.P., ‘The Transformative Potential of a Secondary Market: Emerging Markets Debt Trading from 1983 to 1989’, (1998) 21 Fordham International Law Journal 1152.

10 See M. Giovanoli, ‘Virtual Money and the Global Financial Market: Challenges for Lawyers’, (1996) Yearbook of International Financial and Economic Law 3.

11 See Bratton, W.W. and Gulati, G.M., ‘Sovereign Debt Reform and the Best Interest of Creditors’, (2004) 57 Vanderbilt Law Review 79.

12 Before the Argentine Great Default (2001) many bond issues governed by New York law did not contain CACs. This picture precluded restructuring of the debt combined with modification of the crucial terms of the loan. To favour orderly debt workouts and minimize vulture funds’ activism, CACs were acknowledged worldwide. See M. Megliani, Sovereign Debt: Genesis, Restructuring, Litigation (2015), 354–60.

13 The decision of the Court is grounded on the following arguments: drawing resources from the IMF is a sovereign activity as only states can become members of the IMF and use its resources, the use of resources is aimed at preserving the stability of the international monetary system under a regulatory scheme providing for the exchange of currencies, the terms and conditions under which resources are drawn are encapsulated in the IMF Articles of Agreement and not in a contractual instrument, and the mechanism for drawing resources is specific to the IMF and is not available on the markets. EM Ltd et al. v. Republic of Argentina, 473 F.3d 463, 482–485 (2nd Cir. 2007).

14 In particular, the Swiss Bundesgericht rejected the argument that the transfer of the sums to the BIS could qualify as abusive behaviour by Argentina, holding that BIS immunity, as ensured by its Headquarters Agreement, could not be the object of an appraisal by the municipal judge, Bundesgericht, order of 30 July 2010, NML Capital et EM Limited c. Banque des règlements internationaux (para. 4.4). The point here is that international organizations enjoy a wider margin of immunity as compared to sovereign states. Devos, D., ‘Special Immunities: Bank for International Settlements’, in Lastra, R.M. and Buchheit, L.C. (eds.), Sovereign Debt Management (2014), 127 at 128–30.

15 NML Capital Ltd v. Spacefort Systems International and the Republic of Argentina, 788 F. Supp. 2d 1111, 1124 (2011). By contrast, the Court of Appeals for the Second Circuit found that the absence of profit motive in the purchase of scientific equipment in the United States did not make the funds held in New York for this purpose unattachable as that activity was commercial in nature, NML Capital Ltd v. The Republic of Argentina 680 F.3d 254, 258–260 (2nd Cir. 2012).

16 NML Capital Ltd v. The Republic of Argentina (judgment of 11 October 2012), available at

17 The Ara Libertad Case, Argentina v Ghana para 97, available at See Kraska, J., ‘The Ara Libertad (Argentina v. Ghana)’, (2013) 107 American Journal of International Law 404 .

18 UN Convention on Jurisdictional Immunities of States and Their Property, adopted by UN General Assembly Resolution 59/38 of 2 December 2004, UN Doc. A/RES/59/38, (2005) 44 International Legal Materials 801.

19 Société NML Capital Ltd v. La République Argentine (Cour de cassation, decisions No 394, 395, 396 of 28 March 2013), available at See El Sawah, S. and Vinuales, J.E., ‘L'immunité d'exécution dans l'affaire de l'Ara Libertad devant le TIDM’, (2013) 140 Journal de Droit International 867, at 883–5.

20 Vriesde v. The State of the Netherlands and the National Bank for Developing Countries, (1987) 17 Netherland Yearbook of International Law 307–9; the Dutch government opposed the request to issue a garnishee order and was victorious in all the degrees of the judgment.

21 Philipp Brothers v. Republic of Sierra Leone [1995] 1 Lloyd's Rep. 289 (CA).

22 Third ACP-EEC Convention of Lomé (Lomé III), (1985) 24 International Legal Materials 571.

23 ‘The arrangements were made between sovereign entities, and were plainly not intended either to give rise to private rights or to create any enforceable trust;’ accordingly, ‘[h]aving received the money under the international provisions of the Lomé Convention without recourse to English law, the State has an encumbered title to it’. Philipp Brothers v. Sierra Leone, supra note 21, at 292 (quoting Lord Leggat).

24 Sandri v. Repubblica Argentina, judgment of 24 March 2005, (2005-I) Foro italiano, 1582.

25 Debt relief to poor countries is given under the HIPC Initiative and the Multilateral Debt Relief Initiative (MDRI). The HIPC Initiative was launched in 1996 by the World bank and the IMF, with the aim of providing a debt reduction programme in favour of the eligible IDA-only countries. It was subsequently ameliorated in 1999 through the HIPC Enhanced Initiative, designed to lower the level of the economic targets to achieve and to connect debt reduction to poverty relief more effectively. See ‘IMF, Debt Relief Under the Heavily Indebted Poor Countries (HIPC) Initiative’ available at The MDRI involves the cancellation of 100 per cent of the claims held by three multilateral institutions – the IMF, the International Development Association, and the African Development Fund – against debts owed by countries that have granted relief under the HIPC Initiative. See IMF, ‘The Multilateral Debt Relief Initiative’, available at

26 It has been estimated that for HIPCs the potential cost of lawsuits constituted 18 per cent of their annual health and education spending, 59 per cent of debt service and 5 per cent of budget revenue. In 2008, the World Bank and IMF estimated that the potential impact of court awards ranged from less than 0.5 per cent of the debtor country's GDP to 49 per cent in the case of Liberia. See Report of the independent expert on the effects of foreign debt and other related international financial obligations of states on the full enjoyment of all human rights, particularly economic, social, and cultural rights, UN Doc. A/HRC/23/37 (2013), para. 50.

27 See Report of the independent expert on the effects of foreign debt and other related international financial obligations of states on the full enjoyment of all human rights, particularly economic, social, and cultural rights, UN Doc. A/HRC/14/21 (2010), paras. 15–16.

28 Donegal International v. Zambia [2007] EWCH 197 (Comm Ct), [2007] 1 Lloyd's Rep. 397.

29 UN Doc. A/HRC/14/21, supra note 27, para. 25.

30 See Waibel, M., ‘Elusive Certainty’, (2007-July) 26 International Financial Law Review 32.

31 Donegal International v. Zambia, supra note 28, [2007] 1 Lloyd's Rep., at 481. See Laryea, T., ‘Donegal v. Zambia and the Persistent Debt Problems of Low-Income Countries’, (2010) 73 Law and Contemporary Problems 193, at 195.

32 Ergoinvest DD. v Democratic Republic of Congo and Société Nationale d'Elétricité, 355 F. Supp. 2d 9 (SDNY).

33 UN Doc. A/HRC/33/54, supra note 3, para. 17.

34 Themis Capital LLC and Des Moines Investment Ltd v. Democratic Republic of Congo and Central Bank of the Democratic Republic of Congo, 35 F. Supp. 3d 457, 493 (SDNY 2014).

35 UN Doc. A/HRC/33/54, supra note 3, para. 64.

36 Report of the Independent Expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all rights, particularly economic, social, and cultural rights, UN Doc. A/HRC/20/23 (2011), para. 6.

37 UN Doc. A/HRC/20/23, supra note 36, para. 3. See also Černič, J.L., ‘Sovereign Financing and corporate Responsibility for Economic and Social Rights’, in Bohoslavsky, J.P. and Černič, J.L. (eds.), Making Sovereign Financing and Human Rights Work (2014), 139 at 144–5.

38 IMF, Assessing Sustainability (2002), 4.

39 See The Joint World Bank-IMF Debt Sustainability Analysis for Low-Income Countries, at

40 Supra note 25.

41 See L. Guder, The Administration of Debt Relief under the International Financial Institutions (2009), 44–5.

42 In the view of Jeffrey Sachs, the HIPC debt sustainability analysis should take into account the Millennium Developments Goals: J. Sachs, Resolving the Debt Crisis of the Low Development Countries (2002).

43 Cf. Riegner, M., ‘Legal Frameworks and General Principles for Indicators in Sovereign Debt Restructurings’, (2016) 41 Yale Journal of International Law Online 141, at 170–1. Cf. Section 5.2, infra.

44 Report of the independent expert on the effects of foreign debt and other related international financial obligations of states on the full enjoyment of all human rights, particularly economic, social, and cultural rights, UN Doc. A/71/305 (2016), para. 84.

45 The proposed French bill was modeled on Art. 1699 of the French Civil Code which forbids champertous litigation. See Wautelet, P., ‘Les Fonds Vautours’, in Audit, M. (ed.), Insolvabilite´ des Etats et Dettes Souveraines (2011), 99 at 120–1.

46 See Wautelet, supra note 45, at 124–5.

47 See D. Sookun, Stop Vulture Funds Lawsuits (2010), 90–1.

48 The Act, originally intended to remain in force for one year, was adopted after a public consultation strongly backed by the Jubilee Campaign. See Wautelet, supra note 45, at 124. The UK initiative induced two holdouts on Liberia to accept the terms on offer from the IDA managed Debt Reduction Facility; cf. IMF and IDA, Heavily Indebted Poor Countries (HIPC) Initiative and Multilateral Debt Relief Initiative (MDRI)—Status of Implementation and Proposals for the Future of the HIPC Initiative (2011).

49 See Waibel, M., ‘Debt relief to Poor Countries: Rules v Discretion’, (2010) 25 Butterworths Journal of International Banking and Financial Law 295 .

50 See Section 6.2, infra.

51 See Bismuth, R., ‘L’émergence d'un “ordre public de la dette souveraine” pour et par le contrat d'emprunt souverain? Quelques réflexions inspirées par une actualité très mouvementée’, (2012) 58 Annuaire Français deDroit International 489, at 502.

52 External debt sustainability and development, Resolution adopted by the General Assembly on 20 December 2010, UN Doc. A/RES/65/144 (2011), para. 3.

53 Available at The Principles constitute the outcome of the UNCTAD Project on Promoting Responsible Sovereign Lending and Borrowing.

54 See the comment sub Principle 7.

55 Abuse may be qualified either as a guiding principle or as a general principle of law. See von Bogdandy, A. and Goldman, M., ‘Sovereign Debt Restructurings as Exercises of International Public Authority’, in Esposito, C., Li, Y. and Bohoslavky, J.P. (eds.), Sovereign financing and international law (2013), 39 at 68.

56 See Brummer, C., ‘Why Soft Law Dominates International Finance – and not Trade?’, (2011) 13 Journal of International Economic Law 623 .

57 See Bohoslavsky, J.P. and Esposito, C., ‘Principles Matter: The Legal Status of the Principles on Responsible Sovereign Financing’, in Esposito, C. et al., supra note 55, 73 at 86.

58 The Principles have been derived by analogy from domestic legal systems. Only a few reflect customary law (corruption, necessity), while the rest of them may be classified as general principles of law (agency, authorization, bindingness), emerging principles (assessment of borrower's capacity, lender's due diligence), guiding principles (audits, disclosure of information), or structural principles (avoiding overborrowing). See M. Goldmann, Responsible sovereign lending and borrowing: the view from domestic jurisdictions (2012), 8.

59 Cf. Bohoslavsky, J.P. and Goldmann, M., ‘An Incremental Approach to Sovereign Debt Restructuring: Sovereign debt Sustainability as a Principle of Public International Law’, (2016) 41 Yale Journal of International Law Online 13, at 38–40.

60 UNCTAD, Sovereign Debt Workouts: Going Forward. Roadmap and Guide (2015), at

61 Emerging principles express more a trend that a settled conviction and are likely to be acknowledged in the international ad domestic jurisdictions, but still lack acceptance, Goldmann, supra note 58, at 8.

62 UNCTAD Roadmap, supra note 60, at 24.

63 This defence would be a sort of sanction for the lack of participation in restructuring processes. UNCTAD Roadmap, supra note 60, at 59–60.

64 The Guiding Principles are annexed to the Report of the Independent Expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all rights, particularly economic, social, and cultural rights, UN Doc. A/HRC/20/23 (2011), and endorsed by Human Rights Council Resolution, UN Doc. A/HRC/RES/20/10 (2012).

65 UN Millennium Declaration adopted by the UN General Assembly through Resolution UN Doc. A/RES/55/2 (2000). With particular reference to development and poverty eradication, the Declaration stresses the commitment to making the right to development a reality for everyone and to freeing the entire human race from want.

66 UN Doc. A/RES/69/L.84 (2015). These basic principles constitute the outcome of the (more) ambitious project carried out by the Ad Hoc Committee on Sovereign Debt Restructuring to create a sovereign debt restructuring mechanism. The project was supported by Bolivia and other developing countries with the aim of avoiding the problems originated on the trail of the vulture funds litigation before New York courts.

67 The point is that ‘the cut-and-dried lawyer's justice of the municipal court’ can be hardly overcome, cf. J.M. Keynes, ‘The Revision of the Treaty’, in The Collected Writings of John Maynard Keynes (1971), 6–7.

68 See Witthaker, S.J., ‘Introductory’, in Chitty on Contracts, vol. 1 (2012), 3 at 28–31. However, the rule of debt continuity in the event of succession of government may bend in the case of ‘odious debts’, i.e., debts incurred without the consent of the population and against its benefit. See O. Lienau, Rethinking Sovereign Debt (2014). For an overview of the odious debt doctrine see J. King, The Doctrine of Odious Debt in International Law (2016).

69 See G. Watrin, Essai de Construction d'un Contentieux de Dettes Publiques (1929), 210.

70 ‘Its first duty was to itself. Its own preservation was paramount. Its revenues were properly devoted to that end. The appeal of the company for funds came to an empty treasury, or to one only adequate to the demands of the war budget.’ French Company of Venezuelan Railroads Case, (1902) X RIAA 285, 353.

71 The Permanent Court of Arbitration incorporated in its decision the position expressed by the Russian government, under which ‘l'obligation pour un Etat d'exécuter les traités peut fléchir “si l'existence même de l'Etat vient a‘être en danger, si l'observation du devoir international est . . . self destructive”’, (‘the obligation for a State to execute treaties may be weakened if “the very existence of the State is endangered, if observation of the international duty is itself . . . self-destructive”’) Affaire de l'indemnite´ russe, (1912) XI RIAA, 421, 443.

72 See Watrin, supra note 69, at 36.

73 Société commerciale de Belgique, (1939) PCIJ Series C No 87, at 204–22, 236.

74 See J. Crawford, The International Law Commission's Article on State Responsibility (2002), 181.

75 See Sloane, R.D., ‘On the Use and Abuse of Necessity in the Law of State Responsibility’, (2012) 106 American Journal of International Law 447, at 464.

76 See Crawford, supra note 74, at 178–86.

77 In this latter case it is questionable that a state that has contributed to a certain situation is not entitled to invoke necessity when it is necessary to safeguard its population. See Salmon, J., ‘Faut-il Codifier l'Etat de Nécessitè en Droit International’, in Makarczyk, J. (ed.), Essay in Honour of Manfred Lachs (1984), 243 at 270.

78 See Heathcote, S., ‘Circumstances Precluding Wrongfulness in the ILC Articles on State Responsibility’, in Crawford, J., Pellet, A. and Olleson, S. (eds.), The Law of International Responsibility (2010), 491 at 496.

79 The claims brought against Argentina before the ICSID tribunals gave uncertain responses on the meaning of ‘sole means’. In CMS Gas Transmission Company v. The Republic of Argentina, the ICSID tribunal, admitting that there were more economic recipes to cope with the crisis, found that the defence could not be raised in the presence of viable alternatives ‘even if they may be more costly or less convenient’, CMS Gas Transmission Company v. The Republic of Argentina, Award, Case No. ARB/01/8, 12 May 2005, para. 324, available at By contrast, in LG&E Energy Corp et al. v. Argentine Republic, the ICSID tribunal held that ‘[a]lthough there may have been a number of ways to draft the economic recovery plan, the evidence before the tribunal demonstrates that an across-the-board response was necessary’, LG&E Energy Corp et al. v. Argentine Republic, Decision on liability, Case No. ARB/02/1, 3 October 2006, para. 257, available at In Enron Corporation Ponderosa Assets L.P. v. Argentine Republic, the ICSID tribunal distanced itself from LG&E Energy to reconcile itself with CMS Gas, holding that ‘[a] rather sad world comparative experience in the handling of economic crises shows that there are always many approaches to address and correct such critical events, and it is difficult to justify that none of them was available in the Argentine case’, Enron Corporation Ponderosa Assets L.P. v. Argentine Republic, Award, Case No. ARB/01/3, 22 May 2007, para. 308, available at

80 This suspension may be useful in the face of a liquidity crisis, but insufficient in relation to an overall economic crisis, see Waibel, M., ‘Two World of Necessity in ICSID Arbitrations: CMS and LG&E’, 10 (2007) Leiden Journal of International Law 637, at 641–2.

81 Budesverfassungsgerichthof, Judgment BvM 1–5/03, 1, 2/06 of 8 May 2007, available at The majority of the Court, adhering to a report submitted by Professor Reinisch, found that the lack of state practice did not tip the scales in favour of the existence of a customary norm in this regard and, in arguendo, underscored that the plea of necessity before the ICSID tribunals concerned wrongfulness under international law (Bilateral Investment Treaties) and not under a private law contractual relationship (investment agreements). In contrast, Judge Lubbe-Wolff, in her dissenting opinion, argued in favour of the applicability of necessity in this context, emphasizing that it was not only a customary law but also general principle of law as such applicable in a dispute between a state and foreign nationals.

82 Not all the BITS explicitly include governmental bonds among the investment: Art. 1(c) of the Bilateral Investment Treaty between Italy and Argentina enumerates bonds in the definition of investment, so does the Argentina-Germany BIT but not the Argentina-US BIT. See Waibel, M., ‘Opening Pandora's Box: Sovereign Bonds in International Arbitration’, (2007) 101 American Journal of International Law 711, at 729. Moreover, certain BITs (e.g., US-Peru Free Trade Agreement) and certain multilateral treaties, like the CETA (EU-Canada Comprehensive Economic Agreement) and the TPPA (Trans Pacific Partnership Agreement) contain clauses under which, if a public debt forms object of a ‘negotiated restructuring’, investors cannot bring claims based on fair and equitable treatment and expropriation (Annex 8-B CETA and 9-G TTPA). See Nakajima, K., ‘An Elusive Safeguard with Loopholes: Sovereign Debt and its “negotiated restructuring” in International Investment Agreements in the Age of Global Financial Crisis’, (2016) 3 International Review of Law 1, at 14–18.

83 See Art. XI of the Bilateral Investment Treaties between Argentina and the United States (signed 14 November 1991), (1992) 31 International Legal Materials 124.

84 ‘If the concept of essential security interests were to be limited to immediate political and national security concerns, particularly of an international character, and were to exclude other interests, for example major economic emergencies, it could well result in an unbalanced understanding of Article XI [of the BIT]’, CMS Gas v. The Republic of Argentina, supra note 79, at para. 359.

85 Cf. Sykes, A.O., ‘Economic “Necessity” in International Law’, (2015) 109 American Journal of International Law 296, at 312.

86 LG&E Energy Corp et al. v. Argentine Republic, supra note 79, para. 228. However, the clause cannot be self-judging; otherwise, ‘the Treaty would be deprived of any substantive meaning’, Sempra Energy International v. Argentine Republic, Award, Case No. ARB/02/16, 28 September 2007, para. 374, available at

87 Public policy may be understood as the ‘whole body of laws and legal instruments whose principles cannot be set at naught either by special conventions or by a conflicting foreign law’, Separate opinion of judge Moreno Quintana in the case for the Application of the Convention of 1902 Governing the Guardianship of Infants (Netherlands v. Sweden), [1958] ICJ Rep. 105. However, public policy remains a ‘conception the definition of which in any particular country is largely dependent on the opinion prevailing at any given time in such country itself’, Case Concerning the Payment of Various Serbian Loans Issued in France, [1929] PCIJ Series A No 20, at 46.

88 Vervaeke v. Smith, [1983] 1 AC 145, 164 (quoting Lord Simon).

89 ‘The courts are not free to enforce a foreign right at the pleasure of the judges, to suit the individual notion of expediency or fairness. They do not close their doors unless help would violate some fundamental principle of justice, some prevalent conception of good moral, some deep-rooted tradition of common weal’. Loucks v. Standard Oil Co., 224 NY 99, 111 (1918).

90 See Collins (gen. ed.), Dicey, Morris and Collins on the Conflict of Laws, vol. 2 (2012), 1874.

91 Regulation (EU) No 1215/2012 of the European Council and the Parliament of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, [2012] OJ L 351/1.

92 [1956] Ch. 323, 334 (quoting Upjohn J).

93 [1976] AC 249, 278 (quoting Lord Cross).

94 [2002] UKHL 19, 382 (quoting Brooke LJ).

95 See Dolinger, J., ‘World Public Policy: Real International Public Policy in the Conflict of Laws’, (1982) 17 Texas Journal of International Law 167 , and Forteau, M., ‘L'Ordre Public “Transnational” ou “Réellement International”’, (2011) 138 Journal de Droit International 3 .

96 Dolinger, supra note 95, at 172. See also H. Rolin, ‘Vers un ordre réellement international’, in Hommage d'une génération de juristes au président Basdevant (1960), 441 at 444.

97 See J.-B. Racine, L'Arbitrage Commercial et l'Ordre Public (1999), 353–431. The truly international public order was explicitly mentioned in two arbitral awards: ICC Case 1110 (1963) para. 20 and World Duty Free Company v. the Republic of Kenya, ICSID Case ARB/00/7 (award of 4 October 2006), paras. 138–57.

98 This duty reflects both the right of the population to a certain standard of living and the obligation of the state to ensure this standard. Cf. Arts. 2 and 11 of the International Covenant on Economic, Social and Cultural Rights, supra note 1.

99 See Villaroman, N.G., ‘Debt Servicing and its Adverse Impact on Economic, Social, and Cultural Rights in Developing Countries’, (2010) 9 Journal of Human Rights 487, at 493–4.

100 A court must recognize every foreign judgment it enforces but must not necessarily enforce every foreign judgment it recognizes. See Collins, supra note 90, at 664.

101 See Hartley, T.C., ‘Mandatory Rules in international Contracts: the Common Law Approach’, (1997) 266 Recueil des Cours 337, at 350–3, and Harris, J.H., ‘Mandatory Rules and Public Policy under Rome I Regulation’, in Ferrari, F. and Leible, S. (eds.), Rome I Regulation (2009), 269 at 297–8.

102 Cf. Art. 9(1), Regulation (EC) 593/2008 of the European Parliament and the Council of 7 June 2008 on the law applicable to contractual obligations (Rome I), [2008] OJ L 177/6. This notion reflects the judgment rendered by the European Court of Justice in Arblade under which ‘[t]he fact that national law rules are categorized as public order legislation does not mean that they are exempt from compliance with the provisions of the Treaty . . . . The considerations underlying such national legislation can be taken into account by Community law only in terms of the exceptions to Community freedoms expressly provided for by the Treaty and, where appropriate, on the ground that they constitute overriding reasons relating to public interest’, Arblade and Leloup, Judgment of the Court of 23 November 1999, joined cases C-369/96 and C-376/96, [1999] ECR I-8498, para. 31.

103 See A. Bonomi, ‘Article 9’, in U. Magnus and P. Mankowski (eds.), European Commentaries on Private International Law, Vol. II: Rome I Regulation (2017), 599 at 616.

104 Cf. Berendes, A.J., ‘Why Overriding Mandatory Provisions that Protect Financial Stability Deserve Special Treatment’, (2014) 61 Netherlands International Law Review 69, at 94–5. This point is well reflected by the Greek Bondholder Act 2012 (Law 4050/2012) which introduced retroactively CACs in bonds issued under Greek law, underscoring that this provision was of the highest public interest and amounted to an overriding mandatory provision (Art. 1(10)).

105 See A. Chong, ‘The Public Policy and Mandatory Rules of Third Countries In International Contracts’, (2006) 2 Journal of Private International Law 27, at 40–7.

106 See D.D. Prentice, ‘Illegality and Public policy’, in Chitty on Contracts, supra note 68, 1223, at 1227.

107 King v. Michael Faraday & Partners, [1939] 2 All ER 478.

108 See Section 5.1, supra.

109 The internal public policy is mainly focused on the contracting parties by providing them with a right of protection (‘public policy of protection’) or on the general interests of society by giving a direction upon the acts of individuals (‘public policy of direction’). See B. Fauvarque-Cosson, D. Mazeaud (eds.), European Contract Law (2008) 101, at 143.

110 Although the circumstance that a state is a party does not involve the submission of the transaction to its law (Case Concerning the Payment of Various Serbian Loans Issued in France, supra note 87, at 42), this fact does not exclude the possibility to apply the overriding mandatory rules of that state.

* Mauro Megliani is a tenured research fellow in International Law at the Catholic University of Milan where he also teaches International Development Law []. The Author would like to thank the LJIL reviewer for the useful comments.

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