Breakfast Briefing with Simon Hinrichsen
Incapacity to Pay as a Defense in the Context of War Reparations
Abstract
Is a state’s economic incapacity to pay war reparations a promising defense, or does it affect the debtor state’s obligation to pay only temporarily? In 1919, John M. Keynes wrote effectively that Germany’s incapacity to pay should be considered when drafting the peace settlement for WWI. How this defense operates is crucial for past, present and future reparation claims. Even though the capacity of a state to pay features in some pre-WWII peace treaties, the economic consequences of war reparations have only become an explicit factor in the practice of debtor and creditor states after 1945, particularly in lump sum agreements. State practice since then and decisions of the ICJ and the Eritrea-Ethiopia Claims Commission suggest that a lack of capacity to pay offers a defense to the country that owes war reparations. The practical implementation of peace treaties in lump sum agreements points in the same direction. One example is the London Agreement on German External Debts of 1953, which implemented the Potsdam Agreement’s general direction that ‘[p]ayments of reparations should leave enough resources to enable the German people to subsist without external assistance’. With war in Europe, this has gone from old history and theory to starkly relevant.
About the Speaker
Simon Hinrichsen is a Senior Advisor at the Department of Geopolitics at the Danish Ministry of Foreign Affairs (MFA). He previously spent 10 years working in the financial sector, focusing on sovereign debt investments in emerging markets. He holds a PhD in economic history from the London School of Economics and is an external associate professor at the University of Copenhagen (Economics Dept.). His academic research has focused on war finances and reparations, international economics, and sovereign debt. His published research can be found here. Simon will be speaking in his personal capacity and the views expressed during the event do not represent the position of the Danish MFA.
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