Market Practice and the Evolution of Foreign Sovereign Immunity

W. Mark C. Weidemaier; Mitu Gulati

doi:10.1111/lsi.12274

Market Practice and the Evolution of Foreign Sovereign Immunity

Published online by Cambridge University Press: 27 December 2018

W. Mark C. Weidemaier and

Mitu Gulati

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Abstract

The twentieth century witnessed a “tectonic” shift in international law, from absolute to restrictive theories of sovereign immunity. As conventionally understood, however, this transformation represented only a change in default rule. Under absolute immunity, courts could not hear lawsuits and enforce judgments against a foreign sovereign without its consent. Under restrictive immunity, foreign sovereigns were not immune to their commercial acts, regardless of consent. Using a two-century dataset of loan contracts, we show that market practice undermines this conventional understanding. For centuries, loan contracts were structured as if the rules of sovereign immunity could not be changed by contract. In the 1970s, however, market practice changed, seemingly in response to the codification of sovereign immunity law in the United States and United Kingdom. We explore why market practice conflicts with the conventional understanding of sovereign immunity, and we examine the association between codification and the structure of sovereign loan contracts.

Type: Articles
Information: Law & Social Inquiry , Volume 43 , Issue 2 , Spring 2018 , pp. 496 - 526

DOI: https://doi.org/10.1111/lsi.12274 [Opens in a new window]
Copyright: Copyright © American Bar Foundation, 2018

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