STATE SUCCESSION AND ITS EFFECTS ON STATE PROPERTY, ASSETS AND DEBTS Introduction State succession is one of the

most complex legal issues of the modern time. It is primarily associated with the emergence of new states as subjects of international law and the need to address complex issues regarding international treaties, state property, debts, archives etc. It should be noted that the issue of State succession is by far one of the most controversial topics, not uniform, but rather contradictory involving tons of opposing views among legal specialists. This complexity can be associated with the emergence of a new state, a relatively rare phenomenon in international law that has its own characteristics. Until recently, the process of the emergence of new states could be classified into three phases and three different geographical regions: Latin America in the early 19th century; Eastern Europe after the First World War; as well as Asia and Africa in the mid-20th century. During these periods of time dozens of countries with a total population of more than 1.4 bln people became independent. Independence was won by many countries such as India, Burma, Iraq, Jordan, Syria, Lebanon, Morocco, Tunisia, Ghana and several other formerly colonized countries. However, the recent phase of State succession is mainly associated with the collapse of the Socialist Commonwealth and individual States of Central and Eastern Europe in the early 1990s. As a result of which three federations ceased to exist: USSR (1991), Czech and Slovak Federal Republic (1993), the Socialist Federal Republic of Yugoslavia (1991-1992) and a single unitary State of East Germany (1990). International law, being a regulatory body that oversees the behavior of states as members of international relations cannot remain on the sidelines in the event of a change in their fortunes. This is especially true in the event of states territorial changes,

which is an early sign that usually leads to State succession. Its beyond argument that the disappearance, appearance, territorial modifications of a state is the result of political, social, economic or other similar reasons. Therefore, the task of the international law is to assess the lawfulness of such events, and determining the significance of changes from a legal perspective. The Two Conventions Within the framework of international law two major legal acts on State succession had been developed, the Vienna Convention on Succession of States in Respect of Treaties of 1978 (in force since 1996), signed by 20 states and ratified by 15 only, and the 1983 Vienna Convention on Succession of States in Respect of State Property, Archives and Debts. On January 1, 1998 the Vienna Convention of 1983 was only signed by signed 5 countries: Algeria, Argentina, Egypt, Peru and Yugoslavia, and ratified by Georgia, Ukraine, Macedonia, Croatia and Estonia. Pekka Talari, a Finnish scholar thinks that these documents hardly can be considered as widely accepted in international lawi, whereas, Prof. Rein Mllerson of Estonia remarked that the two conventions on succession of states contain provisions more relevant to the progressive development of the existing customary international law than to its codification.ii The reason is that these rules reflect international custom in the sight of inter-state relations. Its a known fact that the process of the formation of int ernational custom is composed of two elements: 1) a uniform practice of subjects of international law and 2) recognition of a legally binding code of conduct, better known as opinio juris. The practice of State succession is often viewed as sporadic and claims to be rather unique than common. This makes emergence of a broad set of customary rules in

this area quite problematic, unlike other areas of international relations such as the international law of the sea and international space law, diplomatic or consular law. In this regard, Prof. Degan of Croatia remarked: There is evidence that at least some of the rules embodied in the two Vienna Conventions on specific situations of territorial changes, reaffirm previous practice that was transformed in the customary rules of general international law. But the main problem is that the existing rules were not sufficient to form a system that could offer a solution to all individual issues that could likely emerge in the event of State succession.iii Due to explicitness, and more often the uniqueness of the succession of states, one can hardly count on creating a system that is capable of dealing with such private issues that arise during implementation of the process. However, the binding contracts of certain rules could eliminate number of problems related to the State succession, or at least reduce their relevance. In this respect, the experience of the Vienna Conventions of 1978 and 1983 will be useful and at the same time requiring further development. In accordance with article 2 (l)(b) of the Vienna Convention on Succession of States in Respect of Treaties of 1978, and article 2 (1)(a) of the Vienna Convention on Succession of States in Respect of State Property, Archives and Debts of 1983 the notion of "succession of States" means the replacement of one State by another in the responsibility for the international relations of territory. In other words, State succession occurs when the border changes between countries. Challenges In Practices The territorial change caused by the collapse of the Soviet Union and the formation of new States is one of the good examples of succession of States. In this case, the Commonwealth of Independent States gained all the rights and obligations of the predecessor State, the USSR. As was mentioned earlier the problem of succession of
3

States is one of the complex matters in international law; however, in the event of the collapse of the USSR it had become particularly complex and challenging. There are number of reasons that affected this complexity such as: The unprecedented scale of the territorial changes. Never before in the modern history there has been a case where the collapse of a big country led to the formation of more than dozen countries that were varying from each other with level of development and geopolitical locations. It was collapse of a country with very distinctive property a Weapon of Mass Destruction, nothing of this kind has happened before. The State succession with regards to such property touches one of the fundamental issues in the system of the modern international relations, including international peace and security, which is the nuclear non-proliferation regime. It is for these reasons, as it seems to me that the issues of State succession in the CIS have received much attention and due to these circumstances the severity and magnitude of the problem of State succession is beyond any doubt. Therefore it is more important to reassess, understand, and develop possible solutions and approaches to issues relating to the succession of States, the effectiveness of which can have a direct impact on the peace and stability among successor countries. Succession Of States In Respect To Debt And Property Vienna Convention on Succession of States in Respect of State Property, Archives and Debts of 1983 was drafted on the basis of thirteen reports elaborated by Dr. Mohammed Bedjaoui, an Algerian diplomat and jurist. The Convention was adopted with 54 votes in favor, with 11 votes against and 11 abstentions. It has not entered into force, as it obtained only 6 accessions out of the fifteen required - Croatia, Estonia, Georgia, Slovenia, the Former Yugoslav Republic of Macedonia and Ukraine. Six other
4

countries have signed the Convention. Significantly, States having deposited their instrument of accession are all emerged from the disintegration of the USSR and the SFRY.iv General provisions of Convention correspond with the respective provisions of the Vienna Convention of 1978 on the succession of States in respect of treaties. Substantive provisions of the Convention can be divided into two groups: general provisions concerning all the types of succession, and specific regulations dealing with particular types of succession. The State property was defined as all kinds of property, rights, and interests that, at the date of the succession of States, belonged to the predecessor State in accordance with its domestic law. During the codification conference a special provision such as Article 13 was added in order to guarantee the integrity of the predecessors property before its transfer to the successor State.v The effects of the transfer of State property were defined in Article 9 of the Convention, according to which the property rights of the predecessor State expire and they are replaced by the equal rights of the successor State. The transfer of the property cannot influence any possible rights and interests of third party. The predecessor State is not entitled to any compensation. Finally, a general rule providing for the priority of an agreement between the predecessor State and successor State as to the partition of State property was confirmed. In all the kinds of State succession the transfer of a fixed property to the successor is confirmed. Specific regulations concern a destiny of mobile property in particular types of succession. In the case of cession, the successor State acquires the part of the mobile property connected with the predecessors activities in the ceded part of the territory. In the case of the uniting of States, clearly and manifestly logical solution provides that the successor State acquires the whole property of the

predecessor State. According to Articles 17 and 18 of the Convention, in cases of separation and dissolution of States the successor State acquires the immobile property situated in its the territory, the mobile property related to the activities of the predecessor State in the respective part of the territory, and -in the case of dissolution only- an equitable share of the remaining mobile property as well as of the property of the predecessor State situated abroad. Finally, special provision of Article 15 deals with the position of the newly independent States. Those States should receive not only the whole property of the predecessor State situated in the territory of the new State, but also property having belonged to the territory of the successor State situated outside of it and having become property of the predecessor State during the period of dependence. In particular, the provision of Article 15, paragraph 4, as well as Article 38, paragraph 2, with regard to debts, establishes that the devolution agreements with newly independent States shall not infringe the principle of the permanent sovereignty of every people over its wealth and natural resources. This led to the rejection of the Convention by the Western States. Article 19-31 of the Convention deals with the succession in respect of State archives and contains special legislation in relation to the provisions concerning the State property. General provisions of that chapter correspond with the regulations concerning the State property. Specific regulations relating to the respective types of succession provide for the primacy of the devolution agreement. If no agreement was concluded, in the case of cession the successor State should receive the part of the archives necessary for an efficient administration of the acquired territory, as well all the documents relating mostly to the ceded territory. Other documents should be reproduced upon request, at the expense of the successor State. The provisions concerning secession and dismemberment provide for the partition of the archives of

the predecessor State in accordance to the model elaborated in the case of cession. Finally, in the case of the unification of States the successor State acquires all the archives of the predecessor State. Special provisions guaranteed also a privileged position of the newly independent States, which should obtain a part of all the archives of the former state. The solution would seem contrary to Article 25 of the Convention, proclaiming the principle of the unity of archives. Nevertheless, the fact that part of the archives obtained is closely related to the newly independent State, in particular to its territory, explains that choice. According to Article 33, the Convention regulated the succession of financial obligations of States towards other States, international organizations and other subjects of international law, then excluding private parties. The Convention did not refer to any classification of debts mentioned above. Another important provision of the Convention reads that the succession of States itself does not infringe any rights of the creditor. That clause is important in the light of the general provision that the succession cannot infringe rights and duties of third parties. The rights of the creditor cannot be changed by a mere devolution agreement. In all cases in which a partition is required, the criteria generally adopted by the Convention was that the debt passes to the successor State in an equitable proportion. The exception was the situation of the newly independent States, for which no debts pass to them, unless an agreement provides otherwise, provided that this agreement does not infringe the principle of sovereignty of peoples over wealth and natural resources. Again, this solution was one that provoked the rejection of the Convention by Western States. As to other particular types of succession, in the case of the cession the primacy of the agreement between the parties was emphasized. If there was no such agreement, the successor State should pay an equitable share of the debt of the predecessor State

debt. Similar solutions were applied in cases of secession and dismemberment of the predecessor State - the debt should be divided into proportional shares. With the exception that the property, rights and interests that pass to the successor State shall be taken into consideration for the determination of an equitable proportion, the Convention did not indicate any other criteria of equitable partition. Finally, in the case of unification of States, the debt should be paid by the successor State. Succession Of States To Assets And Debts The primary rule with regard to the allocation of asset including archives and debts in succession situations is that the relevant parties should settle issues by agreement. Virtually all of the rules that are formulated in the second convention are deemed to operate only where such agreement has not taken place. In addition the Yugoslav Arbitration Commission declared in Opinion No. 9 that the successor States to the SFRY must together settle all aspects of the succession by agreement vi and reinforced this approach in Opinion No. 14, declaring that the first principle applicable to State succession is that the successor States should consult with each other and agree a settlement of all questions relating to succession.vii The public debt (or national debt) is that debt assumed by the central government in the interests of the State as a whole. It constitutes a particularly sensitive issue since third parties are involved who are often reluctant to accept a change in the identity of the debtor. Article 40 of the second Vienna Convention of 1983 provides that where part of a state separates to from another state, unless otherwise agreed, the state debt of the predecessor State passes to the successor State in an equal proportion taking into account in particular the property, rights and interests which pass to the successor State in relation to that debt. It is doubtful that this proposition constitutes a codification

of customary law as such in view of the confused and disparate practice of States to date, but it does reflect a viable approach. It follows from what has already been said that the successor State has a right to take up fiscal claims belonging to the former state, including the right to collect taxes due. Prof. Karl Zemanekviii likened succession to the situation where prior independence an autonomous political dependency has contracted a localized debt through the agency of the metropolitan power, which is automatically attributed to the new state after separation. In practice municipal courts will enforce obligations of the predecessor State against the successor only when the latter has recognized them. When the successor State is a newly independent state, no state debt shall pass, except by agreement, and only if certain conditions are satisfied. According to Article 2 (I)(e) a newly independent state means a successor State the territory of which has been a dependent territory for the international relations of which the predecessor State was responsible. Public debts may be divided into national debts, being debts owned by the State as a whole; local debts, being debts contracted by a sub-governmental territorial unit or other form of local authority, and localized debts, being debts incurred by the central government for the purpose of local projects or areas. Local debts clearly pass under customary international law to the successor State, since they constitute arrangements entered into by sub-governmental territorial authorities now transferred to the jurisdiction of the successor State and a succession does not directly affect them, in effect, they continue to constitute debts borne by the specific territory in question.ix Similarly, localized debts, being closely attached to the territory to which the succession relates, also pass to the successor State in conformity with the same territorial principle.
9

In truth, one cannot provide a concrete answer to the question as the allocation of the national debt as such. In the case of secession or separation where the predecessor State continues to exist, it would appear that the presumption is that the responsibility for the general State after the succession.x Conclusion An issue requiring attention is the definition of State debt, enshrined in Article 33 of the Vienna Convention of 1983, in which, inter alia, noted that State debt means any financial obligation of a predecessor State arising in conformity with international law towards another State, an international organization or any other subject of international law. The lack of mentioning such private entities, especially private banks and transnational corporations is, in my personal opinion, a major drawback in practical terms because to date, economic power and influence of these organizations on world politics are undeniable. Transfer of State property was defined in Article 9 of the Convention, according to which the property rights of the predecessor State expire and they are replaced by the equal rights of the successor State. As was mentioned above, the Articles 17 and 18 of the Convention, in cases of separation and dissolution of States the successor State acquires the immobile property situated in its the territory, the mobile property related to the activities of the predecessor State in the respective part of the territory, and -in the case of dissolution only- an equitable share of the remaining mobile property as well as of the property of the predecessor State situated abroad. Finally, special provision of Article 15 deals with the position of the newly independent States.
10

In the case of the unification of States the successor State acquires all the archives and debts of the predecessor State. This is clearly stated in the Article 40 of the second Vienna Convention of 1983 provides that where part of a state separates to from another state, unless otherwise agreed, the state debt of the predecessor State passes to the successor State in an equal proportion taking into account in particular the property, rights and interests which pass to the successor State in relation to that debt. Finally, if the successor State is a newly independent state, no state debt shall pass, except by agreement, and only if certain conditions are satisfied. According to Article 2(e) a 'newly independent state' means a successor State the territory of which has been 'a dependent territory for the international relations of which the predecessor State was responsible'. Local debts clearly pass under customary international law to the successor State, since they constitute arrangements entered into by sub-governmental territorial authorities now transferred to the jurisdiction of the successor State and a succession does not directly affect them, in effect, they continue to constitute debts borne by the specific territory in question.

List of References
i

State Succession in Respect of Debts the Effect of State Succession in the 1990 on the Rules of Law. The Yearbook of International Law. 1996. Vol. VII. The Hague, 1997. P. 135.

11

ii

The Continuity and Success of States, by Reference to the Former USSR and Yugoslavia. International and Comparative Law Quarterly, July 1993. Vol. 42. Part 3. P. 473.
iii

Degan V.D. State Succession. Especially in Respect of State Property and Debts. The Finish Yearbook of International Law. 1993. Vol. IV. Helsinki, 1993. P. 140.
iv

"International Law Association, Berlin Conference (2004), Aspects of the Law of State Succession." N.p., n.d. Web. 2 Jan. 2013.
v

"The Factory At Chorzow (Claim for Indemnity) (The Merits), Germany v. Poland, Judgment, 13 September 1928, Permanent Court of International Justice (PCIJ)." N.p., n.d. Web. 3 Jan. 2013.
vi

Turk, Danilo. Recognition of States: A Comment. N.p.: European Journal of International Law, n.d. Web. 7 Jan. 2013.
vii

Hoeflich, M. H. Through a Glass Darkly: Reflections upon the History of the International Law of Public Debt in Connection with State Succession. Champaign: University of Illinois, 1982. 39. Print.
viii

Recueil Des Cours (1965/III). 1st ed. Vol. 116. New York: Springer, 1968. 225. Print.

ix

O'Connell, D. P. The Law of State Succession. Vol. 1. Cambridge: Cambridge UP, 1956. 416. Print.

"Ottoman Public Debt Arbitration". Encyclopaedic Dictionary of International Law. 3rd ed. N.p.: Oxford UP, 2009. Print.

12