Chapter 8: The New Approach Odious Debts Doctrine (NAODD)
We now arrive at the unveiling of the new approach to odious debts. To recap how we got to this juncture: In Chapter 1 the origins of the concept were discussed, along with the ideas of Alexander Sack, and the conclusion that there is currently no legally recognizable doctrine of odious debt. Accordingly, a blank slate exists for the present-day design of a law against such debts. Moving to Chapter 2, we reviewed the various sources of sovereign funds and the different investment incentives driving the myriad of sovereign lenders. We noted the absence of a comprehensive legal framework for sovereign debt. General principles such as pacta sunt servanda govern, and informal, ad hoc negotiations are currently used for resolving debt disputes. In Chapter 3 the history of sovereign finance was canvassed, and a snapshot of Iraq’s Saddam-era debts was presented. While the numbers could give a general picture of Iraq’s debt story, for instance who the largest lenders were, numbers were all in the aggregate, and lacked specific detail. It was difficult to determine what monies loaned had actually been used for. In Chapter 4 the unique features of sovereign debt were discussed, and the link between sovereign debt and the poverty of nations was considered. Because sovereign debt is intergenerational, and often contracted for extracommercial reasons, it can grow rapidly on a country’s balance sheet. Since there is no bankruptcy mechanism to alleviate unsustainable sovereign debt, a country that cannot repay its debts must seek either relief or...
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