Aside from death and taxes, one of the certainties of world history is that governments – of all eras and all persuasions – will rack up enormous debts. Inevitably, when governments find themselves unable to pay those debts, they will explore a range of legal defences against their creditors' claims. One of the more controversial of these theories is the so-called odious debt doctrine, by which some governments have sought to disclaim debts incurred by discredited prior regimes. Though scholars continue to vigorously debate the issue, two recent New York federal cases, involving Salt Bonds issued by Nationalist China in 1913, offered a glimpse into an area of international law that remains highly topical.
Beginnings
Any new government, regardless of how it comes to power, will inherit a variety of legal issues from the past regime, of which past indebtedness is only one. In many situations, however, the incoming government will...