In discussions of sovereign debt, some actors occasionally project the sensibility, implicitly or explicitly, that efforts to bring issues of justice and sovereign debt together are not entirely appropriate. In this view, questions of human rights, governmental accountability to citizens, and justice more generally fall into one legal and political arena, while sovereign debt belongs to another sphere—namely, to the hard-headed world of international finance, which has its own set of rules and market principles. This underlying assumption can ground the contention that, although it is possible for these areas to overlap to some degree, they should be understood as belonging to two separate worlds. Relatedly, this assumption also can undergird resistance to criticism of the existing sovereign debt regime and undercut efforts to change these practices.
But any background assumption about the separateness of financial issues and justice concerns is deeply problematic, particularly in the realm of sovereign debt. After all, at the center of any sovereign debt contract—or any discussion of sovereign debt—is the idea of a sovereign state. And the sovereign state is not a naturally existing entity; you do not meet one walking down the street, for example. It is an entity constructed, recognized, and formalized by an ultimately changeable series of laws, practices, and traditions, both domestic and international. The existence and activities of any sovereign state, including borrowing activities, ultimately depends upon this deeper theoretical edifice and set of assumptions about “sovereignty.”
So how should we (and do we) understand the conceptual framework of ‘sovereignty’? The contemporary trend, including in international law, is to think about sovereign states not just as a resource for the support or enrichment of particular rulers or elites, which is of course how they were considered at points in the past. Today, if you ask most people questions such as “what is a sovereign state?” or “what is a state for?” or “why support the idea of a state?,” I would argue that they are likely to mention the promotion of material well-being and security, the preservation of important practices or traditions, and other similar goals or justifications. These are the types of responses and understandings that construct, support, and legitimate sovereign statehood today. Our approach to sovereign debt contracts—which implicitly depend upon the existence and wide acceptance of some shared idea of sovereignty—should in turn be conditioned on and even constrained by these general sensibilities.
This insight may seem a bit theoretical. But it highlights how any attempt to divorce questions of sovereign debt from underlying questions about the broadly acknowledged nature of sovereignty and sovereign action—which may in turn implicate issues of governmental accountability, justice, and the material well-being of people on the ground—is analytically incoherent. Without this deeper conceptual apparatus, the possibility of lending to, or collecting from, a sovereign disappears altogether. Sovereign lending practices become incoherent without some idea of what a “sovereign” is, does, and should be doing. As such, the lens of justice is entirely appropriate for discussions of sovereign debt. It invites us to bring into the foreground issues and questions that too often stay hidden in the background in this important arena of international finance.
Odette Lienau is Associate Professor of Law at Cornell University. This post is drawn from comments made during a panel on issues of justice and sovereign debt at this year’s annual meeting of the American Society of International Law. A more complete version of the comments will be published as part of the meeting’s proceedings. Key themes are based on the author’s book, Rethinking Sovereign Debt: Politics, Reputation, and Legitimacy in Modern Finance.