Conclusion

Abstract

Sovereign debt contracts are unique as they are concluded between parties who do not enjoy the same degree of legal immunity. Despite the lack of legal enforcement by a third party in the case of a default, debtor countries are still willing to repay their debt because of the relative costs of default, which emerge due to the ability of creditors to impose effective sanctions. IFC or foreign control over the revenues of the defaulting states was a commonly adopted form of enforcement in the Middle East and the Balkans before 1914. The justification for such a control over state finances in the eyes of contemporary creditors was relatively straightforward thanks to particular characteristics of sovereign debt contracts, which were secured with future revenues of debtor governments from certain resources.