Sovereign Finance and the Poverty of Nations

Sovereign Finance and the Poverty of Nations

Odious Debt in International Law

Yvonne Wong

This important and timely book explains the legal principles and politics involved in the issue of odious debts, and sovereign debt arrangements more generally.

Chapter 7: Current Ideas for How the Odious Debts Doctrine Could Apply in Practice

Yvonne Wong

Subjects: development studies, law and development, law - academic, finance and banking law, international economic law, trade law, law and development, public international law


Since the odious debt doctrine was catapulted into the sovereign finance arena circa 2003, it has attracted a surge in commentary and scholarship. While it is generally agreed that the doctrine has no legal status, this has not deterred academics, NGOs, and commentators from debating how the doctrine could best operate if it were to be elevated to legal status. The main proposals that have emerged are discussed here. To provide some analysis, each proposal is considered against the justifications for odious debt discussed in Chapter 6, and in particular how apt it would be if applied to the case of Iraq. THE TRADITIONAL APPROACH The so-called Traditional Approach was favored by the doctrine’s earliest proponents (including Sack himself). This approach prescribes a familiar standard: It advocates an ex post tribunal to assess whether certain criteria have been met, and if so, to allow cancellation of odious debt parcels. Accordingly, this approach requires substantive determination of a set of agreed elements that constitute the definition of odious debt, by an ex post adjudicator. This kind of adjudication process is common in law, being the model of adjudication typically adopted by courts. If we accept the definition of odious debt as according with the current consensus, then an odious debt is one which meets three criteria: 1. 2. 3. lack of popular consent, lack of popular benefit, creditor awareness of 1 and 2. Under the traditional approach the adjudicator must substantively decide whether the debt parcel in dispute satisfies all three...

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