Legality of austerity memorandum imposed on Greeceby Alper Ali Rıza*

Legality of austerity memorandum imposed on Greeceby Alper Ali Rıza*

A man passes a plaque of a Greek one-Drachma coin, which was replaced by the Euro in 2002, in central Athens on May 22, 2012. (PHOTO AP, Petros Giannakouris)

May 22, 2012, Tuesday/ 17:20:00

A few years ago relations between Turkey and Greece improved dramatically overnight on account of the response of the two peoples to catastrophic earthquakes that struck both countries in quick succession.

The assistance that people gave selflessly across national boundaries was as spontaneous as it was heroic. At the moment, the equivalent of an earthquake is happening in Greece and a kind of Turkish view on the moral and legal issues arising may be helpful.

Focusing on the moral and legal issues of the economic crisis may seem self-indulgent in comparison to the plight of the people, but the Greeks are a proud people and it may be important to them practically and ethically to know that Greece can legitimately renege or seek to modify the recently negotiated international agreement on the grounds that the perils of compliance are unacceptable. Put another way, a state cannot be expected to persist with a treaty which its people roundly rejected and repeatedly condemn for sound existential reasons.

Of course the principle that treaty commitments by states are binding and must be performed in good faith is a fundamental principle of international law without which international relations would be impossible: pacta sunt servanda is its Latin tag and it has stood the test of time. However, that is a principle of law and the application of principle, as every law student knows, depends on all the circumstances. There are gray areas both in law and practice and express provision for exceptions can be found in treaty as well as in customary law.

Crucial to the power to negotiate and sign treaties is whether the persons representing a state in negotiations have full powers to give the consent of the state to be bound by a particular treaty. In the case of the cuts inflicted on Greece, there was apparently insistence by the EU that all the political leaders in the government and parliament of Greece sign the austerity memorandum as some EU states were unsure that the leadership conducting the negotiations had full plenipotentiary power, let alone legitimacy, to consent to the memorandum in a manner that would bind their successors.

The most democratic way to express consent to be bound by treaty is by ratification. The consent to a treaty by this device is the most democratic because it provides an opportunity for public opinion to be expressed and, if negative, for the treaty not to be ratified. Mr. George Papandreou, the previous prime minister of Greece, suggested a referendum before ratification of the austerity memorandum and was unfairly criticized at the time and forced to leave office. With the benefit of hindsight, it looks as though he was absolutely right to propose a referendum since the austerity memorandum was going to have an immediate, direct and deleterious effect on the quality of life of the people and it was only right and proper for them to be consulted before, and not after, ratification.

Any new government is bound by treaty obligations agreed by its predecessors under normal principles of state responsibility unless it can claim force majeure, necessity, fraud by other states, or coercion. Force majeure borne out of election results that rejected the austerity memorandum would be difficult to invoke. Serbia once sought to argue that the outbreak of war in 1916 made it impossible for it to repay a loan, but was unsuccessful.

The defense of necessity arises to safeguard against any “grave and imminent peril.” If the parties in Greece that are against the austerity memorandum are swept to power after the Greek elections in June 2012 and form a government, Greece could renege on the austerity memorandum if it were able to show that implementing the austerity memorandum would gravely imperil its society to the core, provided it were also able to show that other contracting parties would not suffer commensurately as a result of Greece’s failure to implement the memorandum. To this end, it may be helpful for the EU to accurately evaluate the deleterious effect of the economic earthquake shaking Greece and its ripple effects on other states in close geographical or economic proximity.

EU dealing with parties with compromised past

Equitable fraud that does not involve dishonesty is also a possible defense if it can be shown that some EU states were bluffing and misled the Greeks about what would happen if they did not agree to the austerity memorandum. Such a defense may provoke protests from the EU that not only must one “beware of Greeks bearing gifts,” one must also “beware of bearing gifts to Greeks.” But the fact is that to its knowledge the EU was dealing with political parties with a compromised past which made them less able to resist and easier to mislead and coerce into signing the austerity package.

But even if it is not possible for Greece to lawfully renege on the austerity memorandum, its amendment or modification is a process recognized in international treaty law as perfectly normal. When the facts change, a state may justifiably wish to change an international agreement -- for example, to deal with circumstances that are so overwhelming that its existence as a society is in peril. Tony Blair, the former British prime minister, once famously said, albeit in a very different context, “When the facts change, we change with the facts.” His logic was that there is nothing inherently wrong in changing policy because change is fact-sensitive and therefore morally and legally neutral.

And if all else fails, it is as well to remember that is a fundamental principle of law and morals recognized since ancient times that ultimately human beings do not have to obey laws that are manifestly bad or evil. In 1967 Britain was forced, under economic pressure, to devalue the pound contrary to the strict regime imposed by the International Monetary Fund (IMF), in order to make British exports more competitive abroad. Britain and other states were able to devalue according to their needs on the basis that the IMF regime was too rigid. There was something wrong with the legal framework which was subsequently changed and made more flexible. In other words, it was a bad law and could lawfully be sidestepped.

Unlike domestic law, international law has no mechanism to deal with what happens when a state is unable to repay its debts in the middle of a great economic crisis, and if something good is capable of coming out of this crisis, it might be the creation of such a mechanism. In the meantime, people in other states of the EU should remember that it is only “by the grace of God” that they are not in the same boat as the people of Greece and resist any feelings of Schadenfreude.


*Alper Ali Rıza, QC of Goldsmith Chambers, London, is a barrister and freelance writer.