By Utku Kirklar

One of the main functions of the World Bank, a financial institution mandated with fostering the reconstruction and development of sovereign nations after the Second World War, is to extend loans to the governments (and government-owned entities) of such sovereign nations. Acting through the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), the World Bank plays a critical role often operating as a lender of last resort for developing countries in need of financing for important infrastructure projects. In doing so, the World Bank does not require any security from its borrowers and instead relies on the credit of the sovereign as a matter of policy. This act of good faith, however, needs to be balanced by the need of the World Bank to protect the World Bank’s interests, in particular, the priority of its debt claims in respect of the claims of other third party creditors.