Break the Taboo on Odious Debts and their Repudiation

7 January by Eric Toussaint

This English version of the interview originally published in French by the independent online journal Le Vent Se Lève (LVSL) has been fully revised and complemented by Eric Toussaint. The original French version is available here.

Éric Toussaint has a PhD in Political Sciences and is spokesperson for the CADTM (Committee for the Abolition of Illegitimate Debts). He coordinated the work of the Truth Committee on the Greek public debt which had been created by the President of the Greek Parliament Zoe Konstantopoùlou on 4 April 2015 and was shut down by the new president of the Greek Parliament on 12 November 2015. His latest book The Debt System. A History of Sovereign Debts and their Repudiation (Haymarket, 2019) discusses the several instances in history when debts were repudiated. This was one of the issues we talked about.

LVSL – Do you consider that debt is not sufficiently covered in mainstream media? And if so, why do you think this is the case?

Éric Toussaint – It is often mentioned, but never in the sense in which the CADTM conceives of it. The discourse in mainstream media and by governments consists of repeating that there is too much public debt, too much public expenditure, that States must pay their debts and reduce their expenditure. With the CADTM, we are raising the questions of where those debts come from, whether the objectives for which debts were contracted were legitimate and whether they were contracted in a legal and legitimate manner. This is our approach, and yes, absolutely, this way of looking at things is not present in the mainstream media. They claim it is not related to their reality.

Alexandre Nahum Sack (1890 - 1955)

LVSL – Yes, you classify debts according to whether they are illegitimate and possibly odious. Can you tell us about the characteristics of these types of debts?

E.T.: First of all, a doctrine of odious debt was developed by Alexander Nahum Sack, a conservative Russian jurist and professor of Law at the University of Saint Petersburg under the Tsarist regime (Petrograd was the capital of the Russian Empire at the time). He developed the doctrine in reaction to the Soviets’ repudiation of debt in 1918. He was not in agreement, and went into exile in France and then began compiling a list of all claims involving sovereign debts between the end of the 18th century and the 1920s. He studied the international arbitrations, the jurisprudence, the unilateral acts. Based on all that he created a doctrine of international law [1] that is partly applicable today. It establishes a general principle that holds that even in the case of a change of government, of regime, there is a continuity of international obligations.

Where do these debts come from? Were the goals being pursued legitimate? Were they contracted in a legitimate and legal way?

Nevertheless, the doctrine includes one fundamental exception: the concept of odious debt, which is based on two criteria. The first criterion is fulfilled if it can be demonstrated that the debts claimed against a State were contracted against the interests of the population of that State. The second criterion is met if the lenders were aware of that fact or cannot demonstrate that it was impossible for them to know that these debts were contracted against the interests of the population. If these two criteria are met, then these debts contracted by a previous government are odious, and the new regime and the population cannot be required to repay them. For the CADTM, this doctrine has to be brought up to date because the concept of what is against the interests of a given population has evolved since the 1920s, simply because international law has evolved. That is true above all after the Second World War, when constraining legal instruments like the ICESCR (International Covenant on Economic, Social and Cultural Rights) and the ICCPR (International Covenant on Civil and Political Rights) were put in place and make it possible to determine what is or is not in the interests of a population.

As for illegitimate debt, it can be defined in less constraining terms. Such debt is qualified as illegitimate beause it has been accumulated to promote the interests of privileged minorities and does not respect the general interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. . For example, that is the case when public debt is contracted to bail out the major shareholders of banks, when in fact it is these same banks that are responsible for the economic stagnation resulting from a banking crisis. In that context, the debts accumulated since the banking crisis of 2007-2008 in countries like France and the USA are illegitimate debts. Research conducted by the CAC (Collectif pour un Audit Citoyen de la dette publique – Collective for a Citizen Audit of Public Debt) in fact determined that 59% of the debt claimed against France is illegitimate (see [in French] this article and this document). This debt mass corresponds in part to the banking bailout, but also to a whole series of fiscal gifts given to major corporations which do not conform to the principles of fiscal and social justice. Further, the Eurozone States’ refusal to finance state debt through the central bank Central Bank The establishment which in a given State is in charge of issuing bank notes and controlling the volume of currency and credit. In France, it is the Banque de France which assumes this role under the auspices of the European Central Bank (see ECB) while in the UK it is the Bank of England.

and the marketing of that debt forces the States to pay higher interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…

The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation.
than they would pay if they were able to get financing from the central bank. Therefore the amount of the accumulated debt resulting from that difference in interest rates should be deducted from the total.

LVSL – Regarding repudiation, how are debts repudiated? In your book you cite many examples of debt repudiation. Is there a continuity in the political contexts that encourage these repudiations?

E.T.: First of all, in general, a change of regime or government leads to the debt accumulated up to the time of the change being called into question. For example, in 1837 in the USA, there was a citizen rebellion in four States (Mississippi, Arkansas, Florida and Michigan) that led to the overthrow of their governors, whom the people accused of corruption, of having made agreements with bankers to finance infrastructures that were never built. The new governors repudiated debts and the bankers affected by the repudiations brought suit in federal court. But they lost their case! It’s a very interesting one. The repudiation was the result of a citizen mobilisation and a denunciation of the behaviour of certain authorities by an outraged population who rebelled against repayment of these debts. The creditors were mainly British. Alexander Nahum Sack writes in this regard: “One of the main reasons justifying these repudiations was the squandering of the sums borrowed: they were usually borrowed to establish banks or build railways; but the banks failed and the railway lines were never built. These questionable operations were often the result of agreements between crooked members of the government and dishonest creditors.” (p. 158). Creditors who attempted to prosecute the States that had repudiated their debts in a US federal court had their suits thrown out. To justify its rejection of the actions, the Federal justice system used the Eleventh Amendment to the Constitution of the USA, which stipulates that “The judicial power of the United States shall not be construed to extend to any suit in law or equity Equity The capital put into an enterprise by the shareholders. Not to be confused with ’hard capital’ or ’unsecured debt’. , commenced or prosecuted against one of the United States by citizens of another state, or by citizens or subjects of any foreign state.” Consequently this unilateral act of repudiation was a success. [2]

In the USA, the repudiation was the result of a citizen mobilisation and a denunciation of the behaviour of certain authoritiesAs another example, in Mexico, the government of president Benito Juárez – which was liberal in the 19th-century sense, that is, it favoured separation of church and state and free, compulsory secular public education – was overthrown in 1858 by the French in league with the local Conservatives. They borrowed from French, Swiss and Mexican bankers to finance their illegal government. In 1861 when Benito Juárez returned to power with the support of the people, he repudiated the debts contracted by the Conservatives. In January 1862, the French government of Bonaparte declared war on Mexico under the pretext of obtaining repayment of the debt owed to the French bankers. A French expeditionary corps of 35,000 soldiers put the Austrian prince Maximilian I on the throne as Emperor of Mexico. But Benito Juárez returned to power once again, with popular support, and decided to repudiate the debts contracted by Maximilian of Austria’s regime between 1862 and 1867. The results were very positive for the country. All the major powers recognized the Benito Juárez regime and signed commercial agreements with it, including France after the fall of Bonaparte in 1870.

Finally, we can mention the Russian Revolution, where the population was opposed to the expenditures of the Tsarist regime and to the wars it waged. And when the Soviets took power in October 1917, one result was the adoption of decrees that first suspended repayment and then repudiated the debt. [3]

These are examples of acts that can be referred to as unilateral.

William H. Taft, president of United States of America (1909-1913).

Other examples of international intervention could be cited. In 1919, in Costa Rica, an anti-democratic regime was overthrown and there was a return to a democratic regime, associated with a decision by Costa Rica’s parliament to repudiate debts contracted by the previous regime. Faced with the threat of British intervention, Costa Rica requested neutral arbitration. The two countries agreed to designate the former President and Chief Justice of the Supreme Court of the USA, William Howard Taft, as arbitrator, and the court ruled in favour of Costa Rica! It’s an interesting case in terms of jurisprudence, and it served as a reference for Alexander Sack, since he was an admirer of the USA. In fact Taft ruled that the debt claimed against Costa Rica by a British bank, the Royal Bank of Canada, was a debt accumulated by President Federico Tinoco for his personal benefit and against the interests of the population. The bank was not able to demonstrate that it did not know that the money was borrowed by Tinoco for purely personal ends. And above all, at no point in his ruling does Taft refer to the despotic nature of the Tinoco regime, and Sack applied that principle in his doctrine: he affirmed that the nature of the preceding regime is unimportant and that what matters in judging the debt is the use to which the borrowed money was put. And from my point of view this is fundamental, because for years there was an erroneous interpretation of Sack’s doctrine which limited the applicability of repudiation of odious debt to dictatorial regimes. Sack’s doctrine is based on the notion of a “regular government” of a given territory, a regime exercising real power, and whether it is legitimate or not is not the question. Sack defines a regular government as follows: “By a regular government is to be understood the supreme power that effectively exists within the limits of a given territory. Whether that government be monarchical (absolute or limited) or republican; whether it function by ‘the grace of God’ or ‘the will of the people’; whether it express ‘the will of the people’ or not, of all the people or only of some; whether it be legally established or not, etc., none of that is relevant to the problem we are concerned with.” (p. 6).

According to Sack, what are the two criteria that establish a debt as odious?

There is no doubt about Sack’s position: that a regime be despotic is not a sine qua non condition that makes debts odious and susceptible to repudiation. [4] According to Sack, all regular governments, whether despotic or democratic of some kind, may be accused of having agreed to odious debts.

What are the two criteria that establish a debt as odious?
Consequently, for a debt, regularly incurred by a regular government to be considered incontestably odious with all the consequences that follow, the following conditions must be fulfilled:
1. — The new government must prove and an international tribunal recognise that the following is established:
a) that the purpose which the former government wanted to cover by the debt in question was odious and clearly against the interests of the population of the whole or part of the territory, and
b) that the creditors, at the moment of the issuance of the loan, were aware of its odious purpose.
2. — once these two points are established, the burden of proof that the funds were used for the general or special needs of the State and were not of an odious character, would be upon the creditors
.” (p. 170)

Sack clearly mentions the interests of the population, in particular in the context of a very specific case: the Treaty of Versailles of June 1919. The treaty says that the debts contracted by Germany to colonise Poland cannot be claimed against Poland once it was restored to its existence as an independent State, since the debt was contracted precisely for the purpose of colonising Poland and is therefore counter to the interests of the Polish people. In the same treaty it is stated that the people of the former German territories in Africa (Namibia, Tanganyika, Cameroon, Togo, Ruanda-Urundi) cannot be held responsible for debts contracted by Germany to colonise those territories. Sack cites an extract of the reply that the Allies made to Germany, which was not inclined to accept forgiveness of the debt of its ex-colonies, because Germany would have to continue the repayments itself. The Allies replied: “The colonies should not bear any portion of the German debt, nor remain under any obligation to refund to Germany the expenses incurred by the Imperial administration of the protectorate. In fact, it would be unjust to burden the natives with expenditure which appears to have been incurred in Germany’s own interest(…). [5]

This is where the notion of the interest of the people, which took on meaning beginning with that period, comes to the fore. The president of the USA at the time, Woodrow Wilson, published a declaration in January 1918 proclaiming the right of peoples to self-determination. According to that principle, a debt accumulated to colonise a given population calls the right of that people to self-determination into question.

It would be unjust to burden the natives with expenditure which appears to have been incurred in Germany’s own interest

This evolution of law justifies my position, which is that we should use the criteria Sack developed on the basis of jurisprudence, but also take into account the evolution of international law.

LVSL – How do you explain the fact that when dealing with economic history, in particular in universities, the issue of debt is rarely if ever mentioned?

Yes, it’s never brought up, simply because it’s a taboo. That’s really quite astounding, when in fact it’s not only non-mainstream authors who write about debt. For example there are people like Kenneth Rogoff, who was chief economist at the IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
, and Carmen M. Reinhart, former Senior Policy Advisor and Deputy Director at the IMF and researcher at the NBER (National Bureau of Economic Research), who co-wrote a book called This Time Is Different: Eight Centuries of Financial Folly (Princeton University Press, 2009), in which they discuss the issue of sovereign debt Sovereign debt Government debts or debts guaranteed by the government. in depth. There is extensive literature on debt from classical and neo-classical economists, but as you point out it’s rarely taught in the universities – in European universities in any case, despite its being a vital issue from a socio-economic and legal point of view. However it’s beginning to be taught in the Law faculties in American universities, for example by major figures like Mitu Gulati, who is a professor at Duke University, and Odette Lienau, an associate professor of Law at Cornell University, who has written a monograph entitled Rethinking Sovereign Debt: Politics, Reputation, and Legitimacy in Modern Finance. [6] But as public debt again becomes a central issue, the dinosaurs and conservatives in the universities will no longer be able to avoid debate on subjects such as odious debt, suspension of payment and debt repudiation.

Often disparaged and widely avoided or ignored in university courses, the doctrine of odious debt has nevertheless been the topic of hundreds of articles and dozens of specialised books by a range of experts. They include:
The United Nations International Law Commission, [7] the IMF, [8] the World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

, [9] the UN Conference on Trade and Development, [10] the UN independent expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, [11] Ecuador’s Commission for the full audit of public debt set up in 2007 by President Rafael Correa, [12] the Committee for the Abolition of Third World Debt, now known as the Committee for the Abolition of Illegitimate Debt (CADTM) [13] and the Greek Debt Truth Commission set up by the president of the Hellenic Parliament in 2015 [14] have published documents, taken a stand and organised seminars on the topic, as debts whose legitimacy and validity may be questioned are constantly under discussion in the field of international relations.

Recent academic publications on the subject include: Salomon, Margot E. Salomon and Robert Howse, « Odious Debt, Adverse Creditors, and the Democratic Ideal » (November 27, 2018), London School of Economics Legal Studies Working Paper No. 20/2018, available at SSRN ; Ilias Bantekas and Renaud Vivien, « The Odiousness of Greek Debt in Light of the Findings of the Debt Truth Committee » Vol. 22 European Law Journal (July 2016) 539 at 542 ; Ilias Bantekas, ‘The Right to Unilateral Denunciation of Odious, Illegal and Illegitimate Sovereign Debt’, in I. Bantekas and C. Lumina (eds.), Sovereign Debt and Human Rights (Oxford UP, 2018) 536-554; Pierre Pénet, “Rethinking Odious Debt” - Books & ideas 19 March 2018. ISSN : 2105-3030. URL : Jeff King, The Doctrine of Odious Debt in International Law. A Restatement, University College London, 2016; Stephania Bonilla, Odious Debt: Law-and-Economics Perspectives, Gabler publishers, Wiesbaden, 2011; Michael Waibel, Sovereign Defaults before International Courts and Tribunals, University of Cambridge, 2013; Michael Waibel, Sovereign Defaults before International Courts and Tribunals, University of Cambridge, 2013; Odette Lienau, Rethinking Sovereign Debt: Politics, Reputation, and Legitimacy in Modern Finance, Harvard, 2014; Juan Pablo Bohoslavsky, Sabine Michalowski, “Ius Cogens, Transitional Justice and Other Trends of the Debate on Odious Debts: A Response to the World Bank Discussion Paper on Odious Debts” (2009-2010), Columbia Journal of Transnational Law, Vol. 48.

In conclusion, the doctrine of odious debt is a robust one that has evolved and continues to evolve over time, and governments need to find the courage to organise, with the active participation of their citizens, an audit of debt in order to set in motion the process of repudiating debts identified as being odious.

Translated by Snake Arbusto


[1Les effets des transformations des Etats sur leurs dettes publiques et autres obligations financières : traité juridique et financier, (The Effects of the Transformation of States on their Public Debt and other Financial Obligations: a Legal and Financial Treatise), Paris, Sirey 1927. All translations by the CADTM. The almost complete document (in French) can be downloaded free from the CADTM Web site. Also see, in English, “The Doctrine of Odious Debt: from Alexander Sack to the CADTM

[2Source: Sarah Ludington, G. Mitu Gulati, Alfred L. Brophy, “Applied Legal History: Demystifying the Doctrine of Odious Debts”, 2009

[3Eric Toussaint, “The Soviets and Tsarist Debt”. See also : Odette Lienau, Rethinking Sovereign Debt: Politics, Reputation, and Legitimacy in Modern Finance, Harvard, 2014

[4Another quote from Sack clearly confirms that he was opposed to the despotic nature of a regime being a condition sine qua non to identify an odious debt: “Applying other conditions than those we have established (p. 6-7) would, through arbitrary, differing and contradictory judgements, bring about the paralysis of the whole international public credit system and so (if such judgements were to have real weight on questions of recognising or of not recognising debts as State debts) would deprive the World of the advantages of public credits.” (p. 11).

[5Source: Treaty Series, no. 4, 1919, p. 26. quoted by Sack, p. 162.

[7Yearbook of the International Law Commission 1977 Volume II Part One - ILC 1977, v2, p1.pdf,; see also the report for 1979

[8IMF, Michael Kremer and Seema Jayachandran, “Odious Debt”, Finance & Development, June 2002, Vol. 39 no. 2. See also Michael Kremer and Seema Jayachandran, “Odious Debt”, Presented at the Conference on Macroeconomic Policies and Poverty Reduction, April 2002,
IMF, Raghuram Rajan, “Straight talk: odious or just malodorous?”, Finance & Development, December 2004

[9Vikram Nehru and Mark Thomas, 2008, “Odious Debt: Some Considerations” at:, World Bank, Odious Debt Roundtable, Washington D.C., 14 April 2008,
See the CADTM’s reaction to the round table organised by the World Bank: “CADTM Belgium’s position on the doctrine of odious debt and its legal strategy for debt cancellation”,,3515, published 4 July 2008.

[10Robert Howse, The Concept of Odious Debt in Public International Law, UNCTAD, 2007

[11UN, Cephas Lumina, Report of the independent expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, particularly economic, social and cultural rights, 2009

[12See the final report on the findings of the commission, in which I took part representing the CADTM. The report, in English and Spanish, can be downloaded here

[13See “CADTM – Topicality of the odious debt doctrine”, Position of the CADTM, published 8 August 2008

[14Greek Debt Truth Commission, Preliminary Report of the Greek Debt Truth Commission, especially chapters 8 and 9, published 18 June 2015.
See also Greek Debt Truth Commission, “Illegitimacy, Illegality, Odiousness and Unsustainability of the August 2015 MoU and Loan Agreements” published 25 September 2015

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012 (see here), etc.
See his bibliography:
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. Since the 4th April 2015 he is the scientific coordinator of the Greek Truth Commission on Public Debt.



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