SUCCESSION TO PUBLIC DEBT AND THE
DISMEMBERMENT OF YUGOSLAVIA
By:
Georges R. Delaume
Washington, D.C.
The recent decision in YUCYCO, Ltd. v. Republic of Slovenia, 984 F. Supp. 209 (S.D.N.Y. 1997) illustrates the type of issues that may arise as a result of political events interfering with the discharge by a foreign state of its international debt obligations.
In this case, the event in question was the dismemberment of the former Socialist Federal Republic of Yugoslavia (Yugoslavia) into five successor states, including the Republic of Slovenia (Slovenia). Pursuant to arrangements made by Slovenia and creditors of the former Yugoslavia, Slovenia agreed to assume a share (around 18%) of Yugoslavia's debt and to issue new obligations in exchange for the earlier debt.
This could have been the end of the matter except for the fact that certain creditors (of which the plaintiff was one) were not permitted to participate in the exchange because they had been placed by the United States on a list of entities (identified with the Republic of Serbia-Montenegro) regarded as a threat to the foreign policy and national security of the United States.
Though he had been excluded from the arrangements between Slovenia and other creditors, the plaintiff argued that, because Slovenia had played an "integral role" in the restructuring of Yugoslavia's debt and assumed a portion of it, Slovenia should be regarded as a general successor to Yugoslavia. This contention failed. The Court held that Slovenia's limited involvement in the exchange of obligations could not be regarded as making it generally liable for the earlier debt of Yugoslavia. In agreeing to accept only a limited portion of that debt, Slovenia correspondingly excluded the assumption of any other obligations.
The Court also refused to entertain the plaintiff's argument that Slovenia was liable for an "equitable" share of Yugoslavia's obligations. Such an apportionment of responsibility among the five new republics was clearly not a matter of judicial discretion and required the consensus of all the republics concerned.
The issues involved in this case are to be distinguished from those which merely concern changes in the form of government of a particular state. It is a well-established principle of international law that changes in the form of government of a particular state do not affect the continuity of its existence and that of its international debt obligations. This is a principle which was acknowledged a few years ago in Jackson v. People's Republic of China, 550 F. Supp. 869 (N.D. Ala. 1982); 22 ILM 75 (1983), concerning claims brought against the People's Republic of China (PRC) by holders of bonds originally issued in 1911 by the then Imperial Chinese Government. However, following strong representations by the PRC (22 ILM 81 (1983)) and the filing of a statement of interest by the United States (22 ILM 1077 (1983)), this case was ultimately dismissed on the ground that at the time of issue the absolute doctrine of immunity prevailed and that neither the language nor the legislative history of the Foreign Sovereign Immunities Act evinced that it be retrospectively applied. The particular circumstances of this case, however, limited as they were to considerations of jurisdictional immunity, do not detract from the substantive rules concerning the lack of impact of govern-mental changes upon the international debt obligations of the particular state concerned.
