When not all are created equal: Financial markets and some vexing public international law issues
Rutsel Martha, former Minister of Justice of the Dutch Antilles, former General Counsel of Interpol and alumnus of Universiteit Leiden, elaborated on the position of states and intergovernmental organizations (IGOs) in international financial law.
- Rutsel Martha
- 30 October 2015
On Thursday 30 October 2014, the eighth Hazelhoff Guest Lecture was held by an eminent speaker to an enthusiastic audience. Rutsel Martha, former Minister of Justice of the Dutch Antilles, former General Counsel of Interpol and alumnus of Universiteit Leiden, elaborated on the position of states and intergovernmental organizations (IGOs) in international financial law.
Sauce for the goose...
Mr. Martha discussed the widespread belief that all creditors are equal in that they have to pay their debts and that the capacity of a State or IGO does not change this. The speaker qualified this belief as a shortcoming of the law and out of touch with reality. He referred to the limited possibilities of private parties to recover a claim from a State when the latter is unable to pay its debts. The difficulties that have arisen during the recovery of debts from the Argentinian government proved an interesting point throughout this lecture.
.. But not for the gander
As another principle of international law a State is obliged to keep its debt-equity ratio on its balance sheet low and take sufficient actions to accomplish this. According to Martha, the State cannot ignore its special position, not even when it acts as a market participant and issues bonds. A State also distinguishes itself from a private party in its role as creditor. This distinction lies in the preferred creditor status of IGOs such as the IMF, which, according to Mr Martha, should be acknowledged. The absence of priority over other creditors would seriously undermine the NGOs abilities to rescue countries in need of financial support.
Distinctive character of the State
The conclusion of this Hazelfhoff Guest Lecture was that a dispute between citizen and State should not be settled without taking into account the State’s distinctive character. To avoid future problems like those of Argentina, Martha believes that the path recently chosen by the IMF is the correct one. This means that the special nature of the State has to be taken into account when it concludes (lending) agreements. This could be accomplished e.g. by changing the ‘pari passu’-clause, the clause which guarantees the equality of creditors, in a bond issuance by a State. This should be done in such a way that a minority of creditors (such as the so-called ‘vulture funds’ in the case of Argentina) are not able to obstruct the restructuring of State debts by insisting on payment in full.
Rutsel Martha specializes in public international law and international financial law. He currently works as a private consultant in London. From 2004 to 2008 he was General Counsel at INTERPOL in Lyon. He also held the position of Minister of Justice of the Dutch Antilles from 1998 to 2002.
Hazelhoff Centre for Financial Law
Previous Hazelhoff Guest Lectures were given by, inter alia, Jan Kees de Jager, former Dutch Finance Minister and Nout Wellink, former chairman of De Nederlandsche Bank. The Hazelhoff Guest Lectures are organized by the Hazelhoff Centre for Financial Law. The Hazelhoff Centre for Financial Law provides academic education and performs research in the field of financial law.