At the Hazelhoff Guest Lecture at the University of Leiden, Dr Martha spoke about the position of States and intergovernmental organisations (IGOs) within international financial law.

Dr Martha addressed the widespread belief that every debtor is equally bound to pay its debt(s) and that merely being a State or IGO does not change this. Qualifying this view as a failure of law to reflect reality, he pointed to the limited recourse a private party has if its debtor is a State and that State is unwilling or unable to pay. The thread running through his lecture was the current Argentinean problem, where the State is trying to use legislation to ensure that only part of its debts are paid to its creditors.

Also playing an important role is that States are obliged to keep their balance of payments in order. Therefore, according to Dr Martha, the State cannot detach itself from its function, even when acting as a market participant and issuing bonds. Even in its capacity as a creditor, a State or IGO differs from a private creditor. This distinction, according to Dr Martha, lies in the preferred creditor status that IGOs like the International Monetary Fund (IMF) should enjoy. If they no longer enjoyed preferential status over other creditors, it would seriously undermine the system because NGOs would then be unable to come to the aid of needy countries.

 Dr Martha concludes that a legal dispute between private parties and a State should not be settled without considering the distinctive nature of the State. To avoid future problems, such as Argentina’s, Dr Martha believes that the path recently chosen by the IMF is the right one. Under the IMF’s approach, the distinctiveness of the State or IGO must be taken into account as early as the formation of the contract underlying the relationship between private party and State or IGO.

 For Dutch, see here.