A/70/275 37. It is acknowledged that any contract between two or more parties is usually subject to the rules of the broader community. Thus, contracts will not be enforced if they violate the laws and values of the larger group, even if the contracting parties originally agreed to the terms. This is true whether the relevant contracting party is an individual, a corporation or any other entity bound by these broader rules. In the Independent Expert’s view, there is no reason to suppose that this same limitation is any less relevant when the contracting party is a sovereign State. Hence, it appears that the pacta sunt servanda principle, in the debt restructuring context of this discussion, may have some built-in boundaries set by larger norms, such as international human rights law, as described in the paragraphs below. 38. Sovereignty of the State adds an additional layer of analysis to the conditional element present in any contract. Unlike an individual person who might sign a debt contract, the sovereign State itself is not a “natural” entity that exists in the world — one does not meet a sovereign State walking down the street, for example. Rather, it is an entity ultimately recognized, formalized, even created through a series of laws, traditions and practices, including both international law as well as domestic laws and the traditions of the State itself. As such, the existence and activities of a sovereign State ultimately and necessarily remain intrinsically embedded in this broader legal framework. Or, in other words, any State’s debt agreement with creditors implicitly rests upon the legal framework that defines and limits the sovereign State itself. 19 39. This introduces the question of the appropriate way to understand sovereignty and sovereign obligations with respect to debts. Any legal definition of sovereignty seems to be a characterization of the relationship between a country’s Government and its people — between the officials who enter into a debt contract and the population (taxpayers) who ultimately must pay for that contract. Although there are multiple approaches to sovereignty that have developed through different historical periods, contemporary understandings of sovereign statehood often recognize a form of “agency relationship” between government actors (the agent) and the population of the sovereign State (the principal, on whose behalf and in whose interests Government officials must act). This allows for a broad array of governmental forms and does not justify unwarranted interference in internal affairs. Nowadays, it seems clear that a State’s population is not merely a resource available for exploitation by the Government. Governments, no matter how they ar e organized, ultimately have responsibility for and obligations to their population. 40. This agency relationship is already accepted in the context of domestic contracts for corporations and other similar entities. A legal system specifies the conditions under which an action taken by the agent (a company official, for example) can be attributed to and then imposed upon the underlying principal (the company and its shareholders). Only contracts that fall within the scope of the principal-agent relationship, no matter how it is defined by the applicable laws, will __________________ 19 15-12541 The Independent Expert wishes to thank Professor Odette Lienau, with whom he has consulted for this section of the report (see, in particular, her publication, Rethinking Sovereign Debt: Politics, Reputation, and Legitimacy in Modern Finance (Harvard University Press, 2014): for a detailed consideration of the ways in which sovereign debt and reputation are intr insically linked to different conceptions of sovereign statehood, see especially pp. 5 -10 and pp. 20-24. Although Professor Lienau refers to illegitimate debt as an example, her arguments can be applicable to sovereign debt more generally). 11/18