In recent years, sovereign debt crises have received much attention from the perspective of international public policy, but an effective legal solution to sovereign defaults has yet to coalesce within international law. Over the last two decades, private creditors have increasingly resorted to litigation in national courts, though without great success, in an effort to obtain payment on defaulted sovereign debt. Another, emerging option is arbitration —in particular, before the International Centre for Settlement of Investment Disputes (ICSID). Will ICSID be the new venue of choice for recovering on sovereign bonds? The conclusion reached here is that attempts to take defaulting countries to ICSID arbitration are unlikely to succeed.

This article explores the relevance of the law of international responsibility to the practice of domestic courts. In addition to proposing analytical distinctions that allow us to systematize and differentiate domestic case law pertaining to international responsibility, the article essentially advances three arguments. First, in certain circumstances domestic courts may find that a breach of an international obligation by the forum state constitutes an internationally wrongful act. Principles of international responsibility may be applicable to such a wrong. Second, domestic courts may contribute to the implementation of the international responsibility of states by ensuring that principles of cessation and reparation are given effect. Third, international law leaves much leeway to states and their courts in applying principles of international responsibility in a specific domestic legal and factual context. The application of such principles will be colored by their interaction with domestic law and will vary among states.

The state-based system of global governance has struggled for more than a generation to adjust to the expanding reach and growing influence of transnational corporations. The United Nations first attempted to establish binding international rules to govern the activities of transnationals in the 1970s. That endeavor was initiated by developing countries as part of a broader regulatory program with redistributive aims known as the New International Economic Order. Human rights did not feature in this initiative. The Soviet bloc supported it while most industrialized countries were opposed. Negotiations ground to a halt after more than a decade, though they were not formally abandoned until 1992.