Appointment and Succession External Debts: SFR Yugoslavia

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APPORTIONMENT AND SUCCESSION OF EXTERNAL DEBTS: THE CASE OF THE SFR YUGOSLAVIA by
Mojmir Mrak*

I. Introduction

With the break-up of the Socialist Federative Republic of Yugoslavia (SFRY) in the early 1990s, both the newly established states on its territory and the international community in general were once again forced to confront the many problems of state succession. There is no customary international law that can be applied to different types of succession and, moreover, attempts to codify international law in this area have so far not been very successful (1). In the absence of established international legal rules, how the international community actually behaves in matters of state succession varies according to the circumstances of each individual case.

In the case of the SFRY, succession problems were further complicated by two facts. First, disintegration of the country was a violent process. It culminated in open armed conflicts involving Bosnia and Herzegovina, Croatia and the Federal Republic of Yugoslavia (FRY), and to a much lesser extent also Slovenia. Second, there remains no consensus among the successor as to states what actually happened on the territory of the SFRY. In contrast to the four successor states, namely Bosnia and Herzegovina, Croatia, Macedonia and Slovenia, and the international community as a whole, which argue that the predecessor state has ceased to exist and that consequently all five new states are its equal successors, the FRY continues to claim that it is the continuator of the predecessor state from which the other four countries seceded.

This article focuses on a specific issue of the SFRY’s dissolution, namely on the apportionment and succession of the state’s external debt obligations. Significant advancements have been made in this area since 1991, as both debtor countries and various groups of creditors have been keenly interested in entering into agreements ____________________

* Professor of International Finance, Faculty of Economics, University of Ljubljana and Chief External Debt Negotiator for Slovenia between April 1992 and June 1996. This article prepared in November 1998 will be published in the September 1999 issue of the ………………………………..

that reflect new political reality. For the successor countries, normalisation of foreign creditor relationship has been an important economic and political priority, as enhanced economic development of their newly created states has not be possible without access to foreign credit. Foreign creditors have also been interested in normalising their relationships with the successor states to the SFRY, as this has helped create the conditions for the servicing of debts incurred in the period before the SFRY’s dissolution. Within this context, it has to be mentioned that the SFRY was one of the most heavily indebted countries of all transition economies with access to international capital markets practically denied after the early 1980s,

Although this article aims to provide an analysis of the allocation and succession of the SFRY’s external debts from a general perspective, it nevertheless draws heavily on the case of Slovenia and its relationship with foreign creditors. There are several reasons for this. First, Slovenia has been by far the most active of the successor states to the SFRY in initiating and carrying out negotiations with foreign creditors. Second, Slovenia’s arrangements with official creditors and commercial banks have been used as a model for all the arrangements signed so far by the other successor states with these two groups of creditors. Last but not least, information on Slovenia’s case has been much more readily available to the author than information regarding the other successor states to the SFRY.

In addition to this Introduction and Conclusions, this article has five chapters. The second chapter provides an external debt profile of the SFRY, including evolution of the...
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