The Doctrine of Odious Debt

[Phoenix]

<a href="http://www.jubileeusa.org/truth-about-debt/dont-owe-wont-pay/the-concept-of-odious-debt.html">The Concept of Odious Debt</a>

Odious debt is an established legal principle. Legally, debt is to be considered odious if the government used the money for personal purposes or to oppress the people. Moreover, in cases where borrowed money was used in ways contrary to the people’s interest, with the knowledge of the creditors, the creditors may be said to have committed a hostile act against the people. Creditors cannot legitimately expect repayment of such debts.

The United States set the first precedent of odious debt when it seized control of Cuba from Spain. Spain insisted that Cuba repay the loans made to them by Spain. The U.S. repudiated (refused to pay) that debt, arguing that the debt was imposed on Cuba by force of arms and served Spain’s interest rather than Cuba’s, and that the debt therefore ought not be repaid. This precedent was upheld by international law in Great Britain v. Costa Rica (1923) when money was put to use for illegitimate purposes with full knowledge of the lending institution; the resulting debt was annulled.

"Odious debt" is a narrow legal term that refers only to a very specific category of debt. However, some debt that is not odious may nevertheless be illegitimate.

What makes debt illegitimate? Jubilee South, our primary partners in Asia, Latin America and Africa, have long proclaimed the debt burden of their countries illegitimate based on the historical context of the debt.

Why should the people of the South endlessly pay for bad loans that never benefited the people? Jubilee South also argues that debt continues to be used as a tool of domination that ensures easy access by creditor nations and institutions to the resources of the South.

Jubilee USA Network supports the arguments Jubilee South makes about illegitimate debt, and agrees that the chains of debt have become a new form of slavery.

Beyond the powerful arguments offered by Jubilee South, we might also consider much of the Global South's debt illegitimate for the following reasons:

1. Creditors made loans irresponsibly. When the price of oil increased dramatically in the early 1970s, banks were suddenly awash with the petrodollars the oil-producing nations were depositing. In an effort to have those petrodollars earn interest, creditors pushed loans on developing countries.
2. During the Cold War era, loans were often made more for ideological and political reasons than for reasons of assisting development. Dictatorial and corrupt governments often had no problem obtaining loans, as long as they were anti-Communist.
3. Creditors have often continued to extend loans to countries even when they knew that corrupt government leaders were siphoning off the money. Jubilee USA Network believes it is unjust for the South to continue paying these debts as the majority of the population cannot meet even their most basic needs.

[Phoenix]

<a href="http://www.cisdl.org/pdf/debtentire.pdf">Advancing the Odious Debt Doctrine</a>

As we are concerned with making a legal argument, the very definition of the doctrine is tailored to suit the requirements of a judicially enforceable claim. The activist may well want to adopt a less restrictive definition, but would be advised to keep the comprehensive one offered when considering legal avenues. In defining the doctrine, I have read all of the relevant accessible legal literature on the doctrine, and synthesized the relevant comments such that the views of each of the authors are taken into account. Therefore, the definition is not my own, but rather a synthesis of existing ‘legally recognizable’1 opinions. That investigation yields the following conclusion:

‘Odious debts are those contracted against the interests of the population of a state, without its consent and with the full awareness of the creditor.’

This requires three conditions:

1. Absence of Consent: The population must not have consented to the transaction in question. This is so because it is unlikely that the law would forbid a person from willingly entering into a contract that is detrimental to him or her. With dictatorial regimes this requirement presents few problems, while with democratic ones it could pose one. That issue is considered in Section IV.

2. Absence of Benefit: According to the applicable writings, there must be absence of benefit to the population in two ways: (1) in the purpose of the transaction and (2) in fact. The purpose requirement refers to the fact that creditors should not be

1 By ‘legally recognizable’ I mean that the sources are the kinds that may be cited before tribunals.
There is an informal hierarchy of such sources, which roughly amounts to (1) treaties, (2) state practice,
(3) judicial decisions, (4) writings of recognized publicists, namely, those writing recognized legal texts
or in recognized academic journals, and (5) the general principles of law common to many nations.


punished for good faith loans that were misspent by corrupt governments, and the fact requirement refers to the principle that populations that benefit in fact from bad faith loans are still required to repay them (unjust enrichment).

3. Creditor Awareness: This requirement stipulates that the creditor must be aware of the absence of consent and benefit. There are several standards that may be employed for measuring ‘awareness’, and luckily domestic law provides a sufficiently broad definition of ‘awareness’ to capture those creditors that shut their eyes to the obvious. That issue is discussed in Section IV.

A. Types of Odious Debts

Three types of odious debts have been identified by the authors:

1. Hostile Debts: debts that are actively aggressive against the interests of a population (e.g. conquest, colonisation, war, suppressing secessionist attempts). ["homeland security" debts - p]

2. War Debts: debts contracted by a state for the purpose of funding a war, which it eventually loses. The victor is not considered obliged to repay.

3. Third-World Debts Not in the Interests of the Population: This title refers to the new category of debts that were neither hostile nor war debts, but were simply harmful burdens assumed by a state but for which the population received no benefit.

[Phoenix]

<a href="http://www.globalresearch.ca/index.php?context=va&aid=17580">The U.S "Odious Debts" used to Finance Illegal Wars</a>

The U.S "Odious Debts" used to Finance Illegal Wars
Refuse to Pay Government Debt Incurred for Unlawful and Oppressive Purposes ...

by Washington's Blog

Global Research, February 13, 2010
Washington's Blog - 2010-02-12

It Is the Personal Debt of Those Who Ordered It

There is an established legal principle that people should not have to repay their government's debt to the extent that it is incurred to launch aggressive wars or to oppress the people.

These "odious debts" are considered to be the personal debts of the tyrants who incurred them, rather than the country's debt.

Wikipedia gives a good overview of the principle:

In international law, odious debt is a legal theory which holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, such as wars of aggression, 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.

The doctrine was formalized in a 1927 treatise by Alexander Nahum Sack, a Russian émigré legal theorist, based upon 19th Century precedents including Mexico's repudiation of debts incurred by Emperor Maximilian's regime, and the denial by the United States of Cuban liability for debts incurred by the Spanish colonial regime. According to Sack:

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.

Patricia Adams, executive director of Probe International (an environmental and public policy advocacy organisation in Canada), and author of Odious Debts: Loose Lending, Corruption, and the Third World's Environmental Legacy, has stated that:

by giving creditors an incentive to lend only for purposes that are transparent and of public benefit, future tyrants will lose their ability to finance their armies, and thus the war on terror and the cause of world peace will be better served.

A recent article by economists Seema Jayachandran and Michael Kremer has renewed interest in this topic. They propose that the idea can be used to create a new type of economic sanction to block further borrowing by dictators.

Jubilee USA notes that creditors may lose their rights to repayment of odious debts:

Odious debt is an established legal principle. Legally, debt is to be considered odious if the government used the money for personal purposes or to oppress the people. Moreover, in cases where borrowed money was used in ways contrary to the people’s interest, with the knowledge of the creditors, the creditors may be said to have committed a hostile act against the people. Creditors cannot legitimately expect repayment of such debts.

The United States set the first precedent of odious debt when it seized control of Cuba from Spain. Spain insisted that Cuba repay the loans made to them by Spain. The U.S. repudiated (refused to pay) that debt, arguing that the debt was imposed on Cuba by force of arms and served Spain’s interest rather than Cuba’s, and that the debt therefore ought not be repaid. This precedent was upheld by international law in Great Britain v. Costa Rica (1923) when money was put to use for illegitimate purposes with full knowledge of the lending institution; the resulting debt was annulled.

The launch of the Iraq war was an unlawful war of aggression. It was based on false premises (weapons of mass destruction and a connection between Iraq and 9/11; see this, this, this, this, this and this). Therefore, the trillions in debts incurred in fighting that war are odious debts which the people might lawfully refuse to pay for.

The Bush and Obama administrations have also oppressed the American people through spying on us - even before 9/11 - harassment of innocent grandmothers and other patriotic Americans criticizing government action, and other assaults on liberty and the rule of law. See this. The monies borrowed to finance these oppressive activities are also odious debts.

The government has also given trillions in bailouts, loans, guarantees and other perks to the too big to fails. These funds have not helped the American people. For example, the giant banks are still not loaning. They have solely gone into speculative investments and to line the pockets of the muckety-mucks in the form of bonuses. PhD economist Dean Baker said that the true purpose of the bank rescues is "a massive redistribution of wealth to the bank shareholders and their top executives". PhD economist Michael Hudson says that the financial “parasites” have killed the American economy, and they are "sucking as much money out" as they can before "jumping ship". These are odious debts.

Bush, Cheney, Paulson, Geithner, Summers and others who ordered that these debts be incurred must be held personally liable for them. We the American people are not responsible to creditors - such as China, Saudi Arabia - who have knowingly financed these illegal and oppressive activities which have not benefited the American people, but solely the handful of corrupt politicians who authorized them.

[palani]

Lot of words to say what section 4 of the 14th amendment did in a paragraph


But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

Said amendment creating an insurgent de facto government intended to fail ... as they gave public notice there.