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Odious debt

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Odious debt

In international law, odious debt, also known as illegitimate debt, is a legal theory that holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, should not be enforceable. Such debts are, thus, considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state. In some respects, the concept is analogous to the invalidity of contracts signed under coercion.[1]

Contents

  • History 1
  • Reception 2
  • Application 3
  • See also 4
  • References 5

History

The doctrine of odious debt was formalized in a 1927 treatise by Alexander Nahum Sack, a Russian émigré legal theorist. It was based on two 19th century precedents—Mexico's repudiation of debts incurred by Emperor Maximilian, and the denial by the United States of Cuban liability for debts incurred by the Spanish colonial regime.[2]

Sack wrote:

When a despotic regime contracts a debt, not for the needs or in the interests of the state, but rather to strengthen itself, to suppress a popular insurrection, etc, this debt is odious for the people of the entire state. This debt does not bind the nation; it is a debt of the regime, a personal debt contracted by the ruler, and consequently it falls with the demise of the regime. The reason why these odious debts cannot attach to the territory of the state is that they do not fulfil one of the conditions determining the lawfulness of State debts, namely that State debts must be incurred, and the proceeds used, for the needs and in the interests of the State. Odious debts, contracted and utilised for purposes which, to the lenders' knowledge, are contrary to the needs and the interests of the nation, are not binding on the nation – when it succeeds in overthrowing the government that contracted them – unless the debt is within the limits of real advantages that these debts might have afforded. The lenders have committed a hostile act against the people, they cannot expect a nation which has freed itself of a despotic regime to assume these odious debts, which are the personal debts of the ruler.[3]

There are many examples of similar debt repudiation.[4]

Reception

Patricia Adams, executive director of Probe International, a war on terror and the cause of world peace will be better served."[5] In a Cato Institute policy analysis, Adams suggested that debts incurred by Iraq during Saddam Hussein's reign were odious because the money was spent on weapons, instruments of repression, and palaces.[6]

A 2002 article by economists Seema Jayachandran and Michael Kremer renewed interest in this topic.[7] They propose that the idea can be used to create a new type of economic sanction to block further borrowing by dictators.[8] Jayachandran proposed new recommendations in November 2010 at the 10th anniversary of the Jubilee movement at the Center for Global Development in Washington, D.C.[9] Thereupon, the loan sanctions model has been adapted by the Centre for Global Developments [10] and has been the base for a number of further suggestions.[11]

Application

In December 2008, Ecuadorian President Rafael Correa attempted to default on Ecuador's national debt, calling it illegitimate odious debt, because it was contracted by corrupt and despotic prior regimes.[12] He succeeded in reducing the price of the debt letters before continuing paying the debt.[13]

After the overthrow of action alerts around the Haiti Debt Cancellation Resolution, and a Congressional letter to the U.S. Treasury,[16] including Jubilee USA, the Institute for Justice & Democracy in Haiti and Pax Christi USA.

See also

References

  1. ^
  2. ^ Graeme Smith (20 November 2011), "A new euro crisis strategy: Deny the debt", The Globe and Mail
  3. ^ Jubileeiraq.org
  4. ^
  5. ^
  6. ^ Patricia Adams, "Iraq's Odious Debt", Cato Institute
  7. ^
  8. ^
  9. ^ http://www.cgdev.org/content/article/detail/1424565
  10. ^ http://www.cgdev.org/working-group/prevention-odious-debt-working-group
  11. ^
  12. ^
  13. ^ "'Avenger against oligarchy' wins in Ecuador", The Real News, 27 April 2009.
  14. ^ Haiti Debt Action
  15. ^ "Congresswoman Maxine Waters Introduces Legislation to Cancel Haiti’s Debt"
  16. ^
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