Decolonization and Sovereign Debt: A Quagmire

The complex state succession cases arising from decolonization generated intense debates within legal circles. This chapter examines the tension between two stylized schools on state succession into debt: the universal succession and clean slate theories. Universal succession refers to the automatic and complete assumption of the colonial power’s rights and obligations by the newly independent state as they relate to its territory. According to the competing clean slate theory, the former colonial power’s obligations (including debts) as they relate to the territory of the newly independent state are extinguished on independence. Because these obligations are personal to a state, they lapsed on independence. The successor state thus starts life with a clean slate. This chapter provides historical insights into this legal controversy by focusing on the two scholars and practitioners of international law who embodied these two schools of thought, Judge Mohamed Bedjaoui and Professor Daniel Patrick O’Connell. We show how the fundamental disagreements between the two schools (and their radically different implications for the conditions under which colonial entities can achieve independence) have left the law on state succession in flux. Ultimately, the solutions adopted in the decolonization context and in later succession disputes remained highly case-specific and typically involved an agreement between the states concerned.