•  
  •  
 

Emory International Law Review

Abstract

Despite the absence of a dedicated legal or institutional framework governing sovereign debt, the interests of government debtors and their creditors are balanced through a plethora of private and public ordering mechanisms. This Article examines “ultra vires” debt, or debt issued beyond the powers of the issuer, as a crucial element of the debtor-creditor relationship, and a potential source of tension. It describes a situation whereby a sovereign issues a financial obligation in violation of its own domestic laws. As recent high-profile lawsuits involving Venezuela and Ukraine have shown, the legal consequences of ultra vires sovereign debt issuance are far from certain and raise complex questions of private and public international law. With the aim of clarifying the epistemic uncertainty that pervades the topic, we look at the application of the ultra vires doctrine in New York and English courts. Despite the various contradictory labels and concepts used to analyze ultra vires debt, we argue that there is an emerging transatlantic tendency to interpret ultra vires debt through the common law doctrines of actual and apparent authority. Beyond offering a descriptive framework, we posit that this focus on agency law rightfully provides flexibility for sovereign debtors. Public debt transparency is a useful case study of how flexibility towards sovereigns in avoiding ultra vires debt can lead to better policy outcomes for both creditors and debtors. As proposed in the literature, integrating robust disclosure requirements into public debt management frameworks could boost debt transparency with the goal of fostering governments’ financial accountability vis-à-vis their own citizens. It could also discourage lenders from providing hidden finance by limiting the enforceability of undisclosed debt claims. However, while there is merit in strengthening domestic debt disclosure frameworks, foreign courts have the difficult role of striking an appropriate balance between recognizing domestic authorization procedures, and by extension promoting debt transparency, while respecting (foreign) investors’ rights. Against this backdrop, we review the macro, contract, and litigation strategies available to sovereigns in circumnavigating the treacherous waters of ultra vires sovereign debt.

Download

Share

COinS